UEPS Net 1 Ueps Technologies Inc

JOHANNESBURG, South Africa, May 10 /PRNewswire-FirstCall/ -- Net 1 UEPS Technologies, Inc. ("Net1" or the "Company") (NASDAQ:UEPS) today announced results for the third quarter of fiscal 2007. Results Three months ended March 31, 2007 and 2006 GAAP and GAAP Fundamental GAAP Fundamental Fundamental Variance Variance Q3 2007 Q3 2007(1) Q3 2006 % % Net income (US$'000) 18,253 19,323 16,576 10% 17% Earnings per share, basic (US cents) 32.1 33.9 29.2 10% 16% Revenue (US$'000) 61,275 61,275 54,584 12% 12% (1) - Fundamental net income and earnings per share is GAAP net income and earnings per share excluding the effects related to the amortization of acquisition-related intangible assets, net of deferred taxes, and stock-based compensation charges. Since the Company's reporting currency is the U.S. dollar ("USD") but its functional currency is the South African rand ("ZAR"), and due to the significant impact of currency fluctuations between the USD and the ZAR on the Company's results of operations, the Company also analyzes its results of operations in ZAR to assist investors in understanding the changes in the underlying trends of its business. During the three and nine months ended March 31, 2007, the ZAR was significantly weaker against the USD than during the same periods in the prior year. The impact of these changes on results of operations is shown under the column "Change" in the tables of key metrics included at the end of this press release. In addition, results for the three and nine months ended March 31, 2006, were favourably impacted by hardware sales to Nedbank Limited of $4.4 million (ZAR 27.4 million) and $10.9 million (ZAR 69.6 million), respectively. GAAP and GAAP Fundamental GAAP Fundamental Fundamental Variance Variance Q3 2007 Q3 2007 Q3 2006 % % Net income (ZAR'000) 131,586 139,300 102,289 29% 36% Earnings per share, basic (ZAR cents) 231.1 244.7 180.2 28% 36% Revenue (ZAR'000) 441,731 441,731 336,834 31% 31% Nine months ended March 31, 2007 and 2006 GAAP and GAAP Fundamental GAAP YTD Fundamental Fundamental Variance Variance 2007 YTD 2007 YTD 2006 % % Net income (US$'000) 46,148 50,720 43,687 6% 16% Earnings per share, basic (US cents) 81.1 89.1 77.4 5% 15% Revenue (US$'000) 163,772 163,772 147,900 11% 11% GAAP and GAAP Fundamental GAAP Fundamental Fundamental Variance Variance YTD 2007 YTD 2007 YTD 2006 % % Net income (ZAR'000) 334,255 367,392 279,706 20% 31% Earnings per share, basic (ZAR cents) 587.2 645.4 495.60 18% 30% Revenue (ZAR'000) 1,186,218 1,186,218 946,922 25% 25% Use of Non-GAAP measures On July 3, 2006, the Company acquired Prism Holdings Limited ("Prism") and has combined its results with those of the Company. Effective October 1, 2006, Prism acquired the remaining 25.1% of EasyPay (Pty) Ltd ("EasyPay"). Under United States generally accepted accounting principles ("GAAP"), the Company is required to fair value all intangible assets on the date of acquisition and amortize these intangible assets over their expected useful lives. In addition, under GAAP, the Company is required to measure the fair value of options granted to Prism employees and other employees and recognize a stock- based compensation charge over the requisite service period. The Company's results for the three and nine months ended March 31, 2007 also include expenses relating to a potential acquisition that the Company ultimately determined not to pursue. The Company's net income and earnings per common share and linked unit for the three and nine months ended March 31, 2007 includes the expenses related to this potential acquisition, amortization of Prism and EasyPay intangibles acquired as well as the stock-based compensation charge related to options granted to Prism employees and other employees. Attachment C presents a reconciliation between GAAP net income and earnings per common share and linked unit and measures of fundamental net income and fundamental earnings per common share and linked unit. Management believes that these adjustments to net income and earnings per common share and linked unit enhance the Company's evaluation of its performance. Therefore, the Company excludes these items from GAAP net income and earnings per common share and linked unit in calculating fundamental net income and earnings per common share and linked unit. Financial results excluding Prism The Company's consolidated financial results excluding Prism's consolidated financial results are attached as Attachment B. Third Quarter Highlights -- $238.0 million in transactions were processed through the Company's merchant acquiring system in the third quarter of fiscal 2007, compared to $187.8 million in the third quarter of fiscal 2006. During the three months ended March 31, 2007, 3,517,338 grants were paid through the Company's terminal base, compared to 2,518,296 during the three months ended March 31, 2006; -- 4,179 terminals were in use at 2,511 participating UEPS retail locations as of March 31, 2007, compared with 3,905 terminals in use at 2,352 locations as of March 31, 2006. These numbers were comparable to June 30, 2006. The number of transactions processed per terminal increased from 643 during the three months ended March 31, 2006, to 845 during the three months ended March 31, 2007; -- UEPS transaction-based activities effected 11.4 million payments during the third quarter of fiscal 2007, a 6% increase over the number of payments effected during the third quarter of fiscal 2006; -- A total of 3,803,150 UEPS smart card-based accounts were active at March 31, 2007, compared to 3,601,076 active accounts at March 31, 2006; -- The receipt of a settlement payment of approximately $6.9 million from the South African Social Security Agency related to contract deviations and contractual inflation price increases; and -- EasyPay processed 108,803,479 transactions and generated an average fee per transaction of $0.03. Comments and Outlook "In line with our expectations, we achieved a great financial result for the third quarter, setting the standard for our fourth quarter and year end and establishing a solid base for fiscal 2008," said Dr. Serge Belamant, Chairman and CEO of Net1. "We are very satisfied with the performance of the Company in general, but more specifically with the enormous effort invested in a number of business development initiatives. On the local front, our banking initiative with Grindrod Bank is progressing well as the executive team has been appointed, the product set defined, the marketing and sales plan constructed and, more importantly, numerous customers identified who are eagerly awaiting the official launch. We have also submitted a comprehensive, competitive and progressive response to the SASSA tender. Internationally, our existing SmartSwitches are performing well by launching new products, signing up new customers and gaining market share through acceptance and credibility. We remain confident that we will continue to sign new country deals at an average rate of one per quarter and that these deals will further enhance our annual growth rate, allow us to geographically diversify our business and minimize intrinsic currency risks. We expect our full year results to be at the upper end of the previous guidance given and we firmly believe that the company, through its various current initiatives, will unlock significant value for its loyal shareholders in the near future," he concluded. Conference call Net1 will host a conference call to review third quarter results on May 11, 2007 at 9:30 a.m. Eastern Daylight Time. To participate in the call, dial 1-800-860-2442 (U.S. only), 1-866-519-5086 (Canada only), 0-800-028-0531 (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 May 31, 2007. 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 cardholders 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. The Company also focuses on the development and provision of secure transaction technology, solutions and services. The Company's core competencies around secure online transaction processing, cryptography and integrated circuit card (chip/smart card) technologies are principally applied to electronic commerce transactions in the telecommunications, banking, retail, petroleum and utilities market sectors. These technologies form the cornerstones of the "trusted transactions" environment of Prism, a South African based subsidiary of the Company, and provide the Company with the building blocks for developing secure end-to-end payment solutions. This announcement contains 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 implementation of the Company's Prism strategy, 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. DATASOURCE: Net 1 UEPS Technologies, Inc. CONTACT: William Espley of Net1 Investor Relations, +1-604-484-8750, Toll Free, +1-866-412-NET1 (6381) Web site: http://www.net1ueps.com/

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