UEPS Net 1 Ueps Technologies Inc

JOHANNESBURG, South Africa, Nov. 3 /PRNewswire-FirstCall/ -- Net 1 UEPS Technologies, Inc. ("Net1" or the "Company") (NASDAQ:UEPS) today announced results for the first quarter of fiscal 2006. Results The Company reported an increase in net income of 29% to $13.2 million for first quarter 2006, from $10.2 million for first quarter 2005. Earnings per common share and linked unit increased 27% to $0.238 for first quarter 2006, compared to $0.187 for first quarter 2005. Revenue increased 6% from $43.2 million for the first quarter of 2005 to $45.9 million for the first quarter of 2006. First Quarter Highlights * $118.6 million in transactions were processed through our merchant acquiring business in the first quarter of fiscal 2006, compared to $3.6 million in the first quarter of fiscal 2005 and $147.3 million during the entire fiscal 2005 year. During September 2005, 566,000 beneficiaries transacted at merchant locations, compared to 450,000 in June 2005 and only 17,000 a year ago, during September 2004; * During the first quarter fiscal 2006, 724 POS terminals were installed at 423 retail locations, compared with 340 POS terminals installed at 265 retail locations during the first quarter of fiscal 2005; * UEPS transaction-based activities effected 10.1 million payments during the first quarter of fiscal 2006, a 6.3% increase over the number of payments effected during the first quarter of fiscal 2005; * A total of 3,398,516 UEPS smart card-based accounts were active at September 30, 2005, compared to 3,372,665 active accounts at September 30, 2004; * In September, the Company made a 50% investment in equity and loans, totaling $1.9 million in SmartSwitch Namibia, a Namibian company. The Company expects to sell hardware and software to this company totaling approximately $4.6 million over the first three quarters of fiscal 2006; * In September, the Company received an order to provide Nedbank Limited with an additional 7,280 POS terminals and 9,080 pin-pads. Delivery is expected to commence in the second quarter of fiscal 2006 and be completed in the third quarter of fiscal 2006; * International initiatives are progressing according to our expectations; Paul Edwards and Florian P. Wendelstadt were appointed as two additional independent directors; and * In August, we completed our public offering and listing on the Nasdaq National Market. In the offering, the selling shareholders sold 10,258,625 shares of the Company's common stock at a public offering price of $22.00 per share and the underwriters exercised their over- allotment option which resulted in net proceeds to the Company of $31.5 million. The impact of changes in the exchange rate between the U.S. dollar and the South Africa rand ("ZAR") on results of operations is shown under the column "Change" in the table of key metrics included at the end of this press release. In addition, during the first quarter, the Company incurred approximately $1,477,000 in expenses related to the public offering and Nasdaq listing. Comment and Outlook Serge Belamant, Net1's Chairman and Chief Executive Officer, stated, "The first quarter of fiscal 2006 has set a solid foundation for the rest of the year. With our successful listing on Nasdaq complete, we can now focus on growing our current business and take full advantage of the new opportunities that we have been presented with. The signing of the Namibia contract during the quarter further expands our footprint within the African market place. Based on our results, we are well-positioned to achieve our previously announced earnings per share expectations for the full fiscal year of $0.93 to $0.98 per share, assuming an exchange rate of ZAR6.5:$1" Conference call Net1 will host a conference call to review first quarter results on November 4, 2005 at 9:30 a.m. EST. To participate in the call, dial 1-800-860-2442 (U.S. only), 1-866-519-5086 (Canada only), 0-800-917-7042 (U.K. only) or 0-800-200-648 (South Africa only) five minutes prior to the start of the call. The passcode is "Net1". The call will also be webcast on the Net1 homepage, http://www.net1ueps.com/. Please click on the webcast link at least 10 minutes prior to the call. A replay of the call may be accessed through the Net1 website through November 18, 2005. About Net1 (http://www.net1ueps.com/) Net1 provides its universal electronic payment system, or UEPS, as an alternative payment system for the unbanked and under-banked populations of developing economies. The Company believes that it is the first company worldwide to implement a system that can enable the estimated four billion people who generally have limited or no access to a bank account to enter affordably into electronic transactions with each other, government agencies, employers, merchants and other financial service providers. To accomplish this, the Company has developed and deployed the UEPS. This system uses secure smart cards that operate in real-time but offline, unlike traditional payment systems offered by major banking institutions that require immediate access through a communications network to a centralized computer. This offline capability means that users of Net1's system can enter into transactions at any time with other card holders in even the most remote areas so long as a portable offline smart card reader is available. In addition to payments and purchases, Net1's system can be used for banking, health care management, international money transfers, voting and identification. This announcement may contain forward-looking statements pursuant to the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, implied or inferred by these forward-looking statements, such as product demand, market and customer acceptance, the effect of economic conditions, competition, pricing, development difficulties, foreign currency risks, costs of capital, the ability to consummate and integrate acquisitions, and other risks detailed in the Company's SEC filings. The Company undertakes no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events. Contact William Espley at Net1 Investor Relations at: Telephone: (604) 484-8750 Toll Free: (866) 412-NET1 (6381) NET 1 UEPS TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Operations Three months ended September 30, 2005 2004 (In thousands, except share data) REVENUE $ 45,887 $ 43,223 EXPENSE COST OF GOODS SOLD, IT PROCESSING, SERVICING AND SUPPORT 11,819 14,801 GENERAL AND ADMINISTRATION 10,656 10,276 DEPRECIATION AND AMORTIZATION 1,538 1,575 COSTS RELATED TO PUBLIC OFFERING AND NASDAQ 1,477 - LISTING OPERATING INCOME 20,397 16,571 INTEREST INCOME, net 903 655 INCOME BEFORE INCOME TAXES 21,300 17,226 INCOME TAX EXPENSE 8,411 7,208 NET INCOME FROM CONTINUING OPERATIONS BEFORE EARNINGS FROM EQUITY ACCOUNTED INVESTMENT 12,889 10,018 EARNINGS FROM EQUITY ACCOUNTED INVESTMENT 290 209 NET INCOME $ 13,179 $ 10,227 Net income per share Basic earnings, in cents - common stock and linked units 23.8 18.7 Diluted earnings, in cents - common stock and linked units 23.5 18.4 NET 1 UEPS TECHNOLOGIES, INC. Condensed Consolidated Balance Sheets Unaudited Audited September 30, June 30, 2005 2005 (In thousands, except share data) ASSETS CURRENT ASSETS Cash and cash equivalents $ 152,201 $ 107,749 Pre-funded social welfare grants receivable 13,115 11,567 Accounts receivable 21,982 15,293 Finance loans receivable, net of allowances of - September: $4,053; June: $3,636 8,465 7,760 Deferred expenditure on smart cards 2,118 3,014 Inventory 1,987 1,927 Deferred income taxes 4,328 3,354 Total current assets 204,196 150,664 LONG TERM RECEIVABLE 1,100 969 PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF - September: $22,520; June: $20,624 6,037 6,216 EQUITY ACCOUNTED INVESTMENTS 3,528 1,325 GOODWILL 15,078 14,636 INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF - September: $5,666; June: $4,919 7,608 7,944 TOTAL ASSETS 237,547 181,754 LIABILITIES CURRENT LIABILITIES Accounts payable 24,610 20,315 Income taxes payable 11,052 14,038 Total current liabilities 35,662 34,353 DEFERRED INCOME TAXES 13,357 10,399 TOTAL LIABILITIES 49,019 44,752 SHAREHOLDERS' EQUITY COMMON STOCK Authorized: 83,333,333 with $0.001 par value; Issued and outstanding shares - September: 41,429,199; June: 28,548,269 42 29 SPECIAL CONVERTIBLE PREFERRED STOCK Authorized: 50,000,000 with $0.001 par value; Issued and outstanding shares - September: 15,241,381; June: 26,733,521 15 27 B CLASS PREFERENCE SHARES Authorized: 330,000,000 with $0.001 par value; Issued and outstanding shares (net of shares held by the Company) - September: 112,304,927; June: 196,983,841 18 31 ADDITIONAL PAID-IN-CAPITAL 104,191 71,960 ACCUMULATED OTHER COMPREHENSIVE INCOME 13,442 7,314 RETAINED EARNINGS 70,820 57,641 TOTAL SHAREHOLDERS' EQUITY 188,528 137,002 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 237,547 $ 181,754 NET 1 UEPS TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Cash Flows Three months ended September 30, 2005 2004 (In thousands) Cash flows from operating activities Cash received from customers $ 38,229 $ 28,627 Cash paid to suppliers and employees (20,778) (22,785) Cash generated by operations 17,451 5,842 Interest received 2,815 3,584 Finance costs paid (1,891) (2,933) Income taxes paid (9,152) (6,181) Net cash provided by operating activities 9,223 312 Cash flows from investing activities Capital expenditures (542) (943) Proceeds from disposal of property, plant and equipment 4 16 Acquisition of equity interest in and advance of loans to equity accounted investment (1,851) - Net cash used in investing activities (2,389) (927) Cash flows from financing activities Proceeds from issue of share capital, net of share issue expenses 32,219 - Repayment of bank overdrafts - (19) Net cash provided by (used in) financing activities 32,219 (19) Effect of exchange rate changes on cash 5,399 (2,046) Net increase (decrease) in cash and cash equivalents 44,452 (2,680) Cash and cash equivalents - beginning of period 107,749 80,282 Cash and cash equivalents at end of period $ 152,201 $ 77,602 Net 1 UEPS Technologies, Inc. Key metrics and statistics at and for the three months ended September 30, 2005 and 2004: Three Three months months Year ended Change ended ended September 30, Constant June 30 June 30 2005 2004 Exchange 2005 2005 US$ US$ Actual Rate(1) US$ US$ Key statement of operations data, in '000, except EPS Revenue $45,887 $43,223 6% 8% $41,405 $176,290 Operating income 20,397 16,571 23% 25% 16,326 71,303 Income tax expense 8,411 7,208 17% 19% 7,132 29,666 Net income $13,179 $10,227 29% 31% $10,142 $44,562 Earnings per share, in cents Basic 23.8 18.7 27% 29% 18.5 81.4 Diluted 23.5 18.4 28% 30% 18.3 79.6 Key segmental data, in '000, except margins Revenue: Transaction-based activities $27,818 $24,429 14% 16% $26,115 $103,653 Smart card accounts 8,552 8,221 4% 6% 8,569 34,931 Financial services 4,274 5,080 (16)% (14)% 4,573 20,215 Hardware, software and related technology sales 5,243 5,493 (5)% (3)% 2,148 17,491 Total consolidated revenue $45,887 $43,223 6% 8% $41,405 $176,290 Consolidated operating income (loss): Transaction-based activities $14,132 $9,682 46% 49% $12,604 $44,233 Smart card accounts 3,887 3,737 4% 6% 3,895 15,878 Financial services 1,844 2,402 (23)% (22)% 1,737 9,316 Hardware, software and related technology sales 4,067 2,035 100% 104% (114) 5,689 Corporate/ Eliminations (3,533) (1,285) 175% 180% (1,796) (3,813) Total operating income (loss) $20,397 $16,571 23% 25% $16,326 $71,303 Operating income margin (%) Transaction-based activities 51% 40% 48% 43% Smart card accounts 45% 45% 45% 45% Financial services 43% 47% 38% 46% Hardware, software and related technology sales 78% 37% (5)% 33% Overall operating margin 44% 38% 39% 40% Sept. 30, June 30, 2005 2005 Key balance sheet data, in '000 Cash and cash equivalents $152,201 $107,749 41% Total current assets 204,196 150,664 36% Total assets 237,547 181,754 31% Total current liabilities 35,662 34,353 4% Total shareholders' equity $188,528 $137,002 38% (1) This information shows what the change in these items would have been if the U.S. dollar/ ZAR exchange rate that prevailed during the first quarter of fiscal 2006 also prevailed during the first quarter of fiscal 2005. Three Three months months Year ended ended ended September 30, June 30 June 30 2005 2004 Change 2005 2005 Additional information: Transaction based activities: Total number of grants paid: KwaZulu-Natal 4,308,365 4,009,441 7% 4,280,023 16,774,940 Limpopo 2,694,168 2,618,226 3% 2,622,807 10,635,232 North West 776,963 798,887 (3)% 787,567 3,153,868 Northern Cape 389,575 369,639 5% 377,845 1,459,264 Eastern Cape 1,970,171 1,739,493 13% 1,929,356 7,410,272 10,139,242 9,535,686 6% 9,997,598 39,433,576 Average revenue per grant paid: ZAR ZAR ZAR ZAR KwaZulu-Natal 19.21 18.51 4% 18.09 17.85 Limpopo 15.33 15.24 1% 15.62 15.34 North West 18.13 16.65 9% 16.29 16.43 Northern Cape 19.02 19.39 (2)% 19.18 19.41 Eastern Cape 12.19 12.49 (2)% 12.30 12.35 UEPS merchant acquiring system: Terminals installed during the quarter 724 340 113% 829 3,235 New participating retail locations 423 265 60% 439 1,880 Value of transactions processed through our merchant acquiring system (US$ '000) 118,585 3,563 nm 87,643 147,331 Smart card accounts: Total number of smart card accounts 3,398,516 3,372,665 1% 3,353,603 3,353,603 Hardware, software and related technology sales: Ad hoc significant hardware sales (US$ '000) Nedbank POS's, pin pads, smart cards and other hardware 2,000 4,100 (51)% - 10,400 Smartswitch Namibia hardware and software (before consolidation adjustments) 1,200 - nm - - Financial services: (US$ '000) Traditional based lending: Finance loans receivable - gross 8,039 12,129 (34)% 7,212 7,212 Allowance for doubtful finance loans receivable (4,053) (8,259) (51)% (3,636) (3,636) Finance loans receivable - net 3,986 3,870 3% 3,576 3,576 UEPS based lending: Finance loans receivable - net and gross (i.e., no provisions) 4,479 5,149 (13)% 4,184 4,184 nm - Statistic not meaningful DATASOURCE: Net 1 UEPS Technologies, Inc. CONTACT: William Espley of Net1 Investor Relations, +1-604-484-8750, or Toll Free: +1-866-412-NET1 (6381) Web site: http://www.net1ueps.com/

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