Net 1 UEPS Technologies, Inc. (NASDAQ:UEPS)(JSE:NT1) today
announced results for the third quarter fiscal 2013.
Summary Financial Metrics
Three months ended March 31,
------------------------------------
% change % change
2013 2012 in USD in ZAR
------------------------------------
(All figures in USD '000s except per
share data)
Revenue 111,141 90,664 23% 32%
GAAP net (loss) income (4,681) 7,766 nm nm
Fundamental net income(1) 2,362 12,450 (81%) (80%)
GAAP loss earnings per share ($) (0.10) 0.17 nm nm
Fundamental earnings per share ($)(1) 0.05 0.28 (82%) (80%)
Fully-diluted shares outstanding
('000's) 45,609 45,375 1%
Average period USD/ZAR exchange rate 8.47 7.85 8%
Nine months ended March 31,
------------------------------------
% change % change
2013 2012 in USD in ZAR
------------------------------------
(All figures in USD '000s except per
share data)
Revenue 334,265 282,648 18% 28%
GAAP net income 4,692 52,628 (91%) (90%)
Fundamental net income(1) 21,897 51,769 (58%) (54%)
GAAP earnings per share ($) 0.10 1.17 (91%) (90%)
Fundamental earnings per share ($)(1) 0.48 1.15 (58%) (54%)
Fully-diluted shares outstanding
('000's) 45,588 45,140 1%
Average period USD/ZAR exchange rate 8.46 7.82 8%
(1) Fundamental net income and earnings per share are non-GAAP measures and
are described below under "Use of Non-GAAP Measures-Fundamental net income
and fundamental earnings per share." See Attachment B for a reconciliation
of GAAP net (loss) income to fundamental net income and earnings per share.
Factors impacting comparability of our Q3 2013 and Q3 2012
results
-- Unfavorable impact from the strengthening of the US dollar: The US
dollar appreciated by 8% against the ZAR during Q3 2013 which negatively
impacted our reported results;
-- SASSA implementation costs: We substantially completed the
implementation of our South African Social Security Agency ("SASSA")
contract during Q3 2013 and incurred additional implementation and staff
costs;
-- DOJ and SEC investigation-related expenses: We incurred U.S. Department
of Justice ("DOJ") and Securities and Exchange Commission ("SEC")
investigation-related expenses of $4.2 million; and
-- Bad debt provision for amounts due under expired Iraqi contracts: We
have provided $2.3 million related to the expired NUETS Iraqi customer
contracts.
Comments and Outlook
"We are very pleased with the commitment demonstrated by the
Net1 team to complete bulk enrollment for our SASSA implementation
on schedule despite having to register nearly 40% more
beneficiaries than originally planned," said Dr. Serge Belamant,
Chairman and Chief Executive Officer of Net1. "By April 30, 2013,
we had registered over 20 million beneficiaries and issued more
than 9.1 million cards. We are also delighted that a full bench of
the Supreme Court of Appeal unanimously ruled in favor of Net1 and
SASSA. We can now focus exclusively on providing best-in-class
service to SASSA and the citizens of South Africa. Meanwhile, we
continue to cooperate with the DOJ and SEC on their investigations,
but as a result of these investigations, we continue to experience
some adverse impact from the damage caused to our reputation,
including our ability to execute certain aspects of our strategic
plan," he concluded.
"The successful implementation for SASSA is a one-off event and
integral for the smooth transition and operation of South Africa's
social welfare program. Given the critical importance of this roll
out, and the higher number of beneficiaries required to be enrolled
in the same time frame, our implementation costs have been
materially but proportionally higher than anticipated," said Herman
Kotze, Chief Financial Officer of Net1. "In the fourth quarter of
fiscal 2013, we expect fundamental earnings per share of at least
$0.20, which includes approximately $7 - $9 million of further
implementation and smart card costs, and also assumes a constant
currency base of ZAR 7.72/$1 and a share count of approximately 45
million shares," he concluded.
Progress of second phase of our SASSA contract
implementation
We commenced the second phase of the enrollment process in early
July 2012 and substantially completed bulk enrollment by March 31,
2013, in accordance with the implementation plan agreed with SASSA.
Under our agreement with SASSA, we have to enroll both the grant
recipients as well as their dependents. While the number of grant
recipients on a national basis has consistently been quantified by
SASSA at approximately 9.4 million individuals, the number of
beneficiaries was revised higher by SASSA from an initial estimate
of approximately 15.5 million, to the current estimate of
approximately 21.6 million. In order to complete the second phase
of the implementation on time, and given the significantly higher
number of beneficiaries, we increased the number of temporary
employees that we hired in the second quarter of fiscal 2013 from
2,500 to approximately 5,500 and retained the higher employee base
through all of the third quarter of fiscal 2013. Our temporary
employee headcount has since declined to approximately 3,000 at
April 30, 2013. During the third quarter of fiscal 2013, we
enrolled a further 5.8 million grant recipients and an additional
6.7 million beneficiaries, for a total of 12.5 million
citizens.
During the third quarter of fiscal 2013, we incurred direct
implementation expenses of approximately $16.1 million (ZAR 140.5
million), including staff, travel, temporary infrastructure hire,
fixed premises hire for enrollment and stationery costs. We are
unable to quantify the value of time spent by our executives and
pension and welfare operations managers and staff that service the
five provinces in which we operated under the previous contract and
that have assisted in the implementation of the national contract.
We also expensed $4.5 million (ZAR 39.3 million) related to the
cost of the UEPS/EMV smart cards issued during the quarter, which
is not included in the $16.1 million (ZAR 140.5 million) of direct
implementation expenses described above.
We also incurred approximately $1.4 million in capital
expenditures related to the implementation during the third quarter
of fiscal 2013. Since inception of the implementation we have
incurred cumulative capital expenditures of $26.6 million. We do
not expect any further significant capital expenditures related to
this implementation and expect our cumulative capital expenditure
to remain below our prior estimate of $30 million.
During March 2013, the Minister of Social Development and SASSA
announced that the deadline for the enrollment of grant recipients
would be extended to April 30, 2013. We therefore continued with
the enrollment process for the month of April 2013 and expect no
further extensions to be granted by the Minister and SASSA. Those
beneficiaries who have not presented themselves for enrollment at
the end of April 2013 will receive grant cancellation notices. This
may result in the final total number of enrolled grant recipients
and cardholders being less than the numbers provided in the
original database.
Our total cash outlay through March 31, 2013 has been $96
million for direct implementation expenses, smart card costs and
capital expenditures. We would have been in-line with the mid-point
of our initial total cash outlay range assuming the volume of
enrollments had not changed. Having to register the incremental
beneficiaries and therefore employ our temporary staff for longer,
should result in our total cash outlay for the implementation being
between $100 and $105 million.
Update on Government Investigations, SASSA Tender Award
Litigation and Suit Against AllPay
Government investigations
We are continuing to cooperate with the investigations being
conducted by the DOJ and SEC that we have previously disclosed. We
have produced documents and information to the DOJ and the SEC
relating to their investigations and expect to continue to produce
documents over the coming months. We also expect that the DOJ and
the SEC will conduct interviews of some of our personnel as part of
their investigations. See also Part II, Item 1A-"Risk Factors."
In addition, on February 14, 2013, we filed an application
pursuant to Section 34 of the South African Prevention of Corrupt
Activities Act in South Africa with the South African Police
Service. Section 34 deals with the reporting of suspected fraud,
theft, extortion and forgery. Matters reported under Section 34 are
usually referred for investigation to the South African Directorate
for Priority Crime Investigation, known as the Hawks. We filed the
Section 34 application to prompt the Hawks to conduct an
investigation into who may have made corruption allegations that
appeared in the South African media after we were awarded the SASSA
tender in January 2012. The Hawks have confirmed to us that our
Section 34 application has been accepted for investigation. We have
provided certain electronic information to the Hawks at their
request and we will cooperate with the Hawks in their
investigation.
SASSA tender award litigation
On March 27, 2013, a full bench of the South African Supreme
Court of Appeal dismissed the appeal by AllPay Consolidated
Investment Holdings (Pty) Ltd ("AllPay"), against the earlier
ruling by the North Gauteng High Court that the award to us of the
tender by SASSA would not be set aside. The Supreme Court also
upheld our and SASSA's appeal against the High Court's orders that
the process conducted in awarding the contract was illegal and
invalid and that we and SASSA pay AllPay's costs occasioned by the
court proceedings. The Supreme Court also ordered AllPay to pay our
and SASSA's costs occasioned by the court proceedings, including
the cost of three counsel. The judges presiding at the Supreme
Court hearing unanimously ruled that there were no unlawful
irregularities in the tender process followed by SASSA.
Accordingly, our SASSA contract to distribute social welfare grants
to ten million South Africans every month, for a period of five
years, remains in full force and effect. On April 18, 2013, AllPay
applied for leave to appeal to the South African Constitutional
Court, the highest court in the country, against the judgment of
the Supreme Court. We and SASSA have opposed AllPay's application.
AllPay's previous approach to the Constitutional Court, before the
Supreme Court hearing and ruling, was rejected at that time. We
cannot predict if AllPay's leave to appeal will be granted or if it
is granted, when or how the Constitutional Court would rule on the
matter.
Suit against AllPay
In December 2012 we sued AllPay. In our lawsuit we are alleging
that AllPay wrongfully and unlawfully and with the intention of
injuring our reputation, infringing our goodwill and reducing our
share price, competed unlawfully with us. We are seeking damages in
the aggregate amount of ZAR 478 million (approximately $55 million
based on the ZAR/US dollar exchange rate on December 11, 2012) plus
interest and costs. The damages claimed may increase as we quantify
the continued impact of AllPay's actions. A trial date will be
applied for after the exchange of the required pleadings and
finalization of any interlocutory issues which may arise. It is
unlikely that the matter will go to trial before June 30, 2013, the
end of our current financial year.
Results of Operations by Segment and Liquidity
Our frequently asked questions and operating metrics will be
updated and posted on our website (www.net1.com).
South African transaction-based activities
Segment revenue was $59 million in Q3 2013, up 27% compared with
Q3 2012 in USD and up 37% on a constant currency basis. In ZAR, the
increases in segment revenue were primarily due to higher revenues
earned under our new SASSA contract. Segment operating income
margin was (7%) and 19%, respectively, and declined primarily due
to SASSA implementation costs. Excluding amortization of
acquisition-related intangibles, Q3 2013 segment operating income
margin was (5%), compared to 23% during Q3 2012.
International transaction-based activities
KSNET continues to contribute the majority of our revenues and
operating income in this operating segment. Segment revenue was
$33.1 million in Q3 2013, up 17% compared with Q3 2012 in USD and
27% on a constant currency basis and was modestly impacted by ISC
in Iraq notifying NUETS that it would not renew its contracts upon
their expiration. Operating margin for the segment is lower than
most of our South African transaction-based businesses and was
negatively impacted by the expiration of the Iraqi contracts with
ISC and the related bad debt provision required as well as on-going
competition in the Korean marketplace, but was partially offset by
increased revenue contributions from KSNET. Excluding the
amortization of intangibles, Q3 2013 operating income margin was 6%
compared to 12% during Q3 2012.
Smart card accounts
Segment revenue was $8.6 million in Q3 2013, up 15% compared
with Q3 2012 in USD and 23% on a constant currency basis. Q3 2013
segment operating income margin was 29%, compared to 45% during Q3
2012. We have reduced our pricing for smart card accounts after
taking into consideration the lower price and higher volumes of the
new SASSA contract.
Financial services
UEPS-based lending contributes the majority of the revenue and
operating income in this operating segment. Segment revenue was
$1.6 million in Q3 2013, down 28% compared with Q3 2012 in USD and
22% lower on a constant currency basis, principally due to a
decrease in lending activities. Q3 2013 segment operating income
margin was 69% compared with 55% during Q3 2012 primarily as a
result of an improved margin in our UEPS-based lending book
resulting from a better loss experience, offset by start-up
expenditures related to Smart Life and other financial services
offerings. Smart Life did not contribute to operating income in the
third quarter of fiscal 2013 and is currently unable to issue new
insurance policies as a result of the suspension of its
license.
Hardware, software and related technology sales
Segment revenue was $8.7 million in Q3 2013, up 40% compared
with Q3 2012 in USD and 51% on a constant currency basis. In
constant currency, the increase in revenue resulted primarily from
an increase in royalty fees and ad hoc hardware sales, offset by a
lower contribution from most other major contributors to hardware
and software sales. Excluding amortization of all intangibles,
segment operating income margin was 20% compared to (21%) during Q3
2012.
Corporate/eliminations
The increase in our corporate expenses resulted primarily from
legal fees we incurred in connection with the DOJ and SEC
investigations, stock-based compensation and other corporate head
office-related expenses.
Cash flow and liquidity
At March 31, 2013, we had cash and cash equivalents of $43
million, up from $39 million at June 30, 2012. The increase in our
cash balances from June 30, 2012, was primarily from cash generated
from operations, offset by implementation costs and capital
expenditures incurred to implement our SASSA contract, a scheduled
repayment of our Korean debt and the acquisition of Pbel and
SmartSwitch Botswana. For Q3 2013, net cash provided by operating
activities was $12.2 million compared with $22.0 million in Q3
2012.
Excluding the impact of interest received, interest paid under
our Korean debt and taxes paid, the decrease in cash provided by
operating activities resulted from significant implementation costs
related to our SASSA contract, partially offset by cash generated
from operations. Capital expenditures for Q3 2013 and 2012 were
$5.1 million and $13.9 million, respectively, and have decreased
primarily due to lower capital expenditures related to our SASSA
contract and the purchase of fewer payment processing terminals in
Korea in Q3 2013.
Use of Non-GAAP Measures
US securities laws require that when we publish any non-GAAP
measures, we disclose the reason for using the non-GAAP measure and
provide reconciliation to the directly comparable GAAP measure. The
presentation of fundamental net income and fundamental earnings per
share and headline (loss) earnings per share are non-GAAP
measures.
Fundamental net income and fundamental earnings per share
Fundamental net income and earnings per share is GAAP net income
and earnings per share adjusted for (1) the amortization of
acquisition-related intangible assets (net of deferred taxes), (2)
stock-based compensation charges and (3) unusual non-recurring
items, including the amortization of KSNET debt facility fees, as
well as (a) in fiscal 2013, DOJ and SEC investigations-related
expenses and acquisition-related costs; and (b) in fiscal 2012, the
effects of a change in South African tax law and the creation of a
valuation allowance related to foreign tax credits, the profit on
liquidation of SmartSwitch Nigeria and loss on sale of 10% of Smart
Life. Management believes that the fundamental net income and
earnings per share metric enhances its own evaluation, as well as
an investor's understanding, of our financial performance.
Attachment B presents the reconciliation between GAAP and
fundamental net income and earnings per share.
Headline loss per share/ headline earnings per share
("HEPS")
The inclusion of HEPS in this press release is a requirement of
our listing on the JSE. HEPS basic and diluted is calculated using
net (loss) income which has been determined based on GAAP.
Accordingly, this may differ to the headline (loss) earnings per
share calculation of other companies listed on the JSE as these
companies may report their financial results under a different
financial reporting framework, including but not limited to,
International Financial Reporting Standards.
HEPS basic and diluted is calculated as GAAP net (loss) income
adjusted for the loss (profit) on sale of property, plant and
equipment, net of related tax effects, the loss attributable to the
sale of 10% of Smart Life and the profit on liquidation of
SmartSwitch Nigeria. Attachment C presents the reconciliation
between our net (loss) income used to calculate (loss) earnings per
share basic and diluted and HEPS basic and diluted.
Conference Call
We will host a conference call to review Q3 2013 results on May
10, 2013, at 8:00 Eastern Time. To participate in the call, dial
1-866-652-5200 (U.S. only), 1-855-669-9657 (Canada only),
0808-162-4061 (U.K. only) or 0-800-200-648 (South Africa only) ten
minutes prior to the start of the call. Callers should request
"Net1 call" upon dial-in. The call will also be webcast on our
homepage, www.net1.com. Please click on the webcast link at least
ten minutes prior to the call. A webcast of the call will be
available for replay on our website through June 2, 2013.
About Net1 (www.net1.com)
Net1 is a leading provider of alternative payment systems that
leverage its Universal Electronic Payment System, or UEPS, to
facilitate biometrically secure, real-time electronic transaction
processing to unbanked and under-banked populations of developing
economies around the world in an online or offline environment.
Net1's UEPS/EMV solution is also completely interoperable with
global EMV standards that seamlessly permit access to all the UEPS
functionality in a traditional EMV environment. In addition to
payments, UEPS can be used for banking, healthcare management,
payroll, remittances, voting and identification.
Net1 operates market-leading payment processors in South Africa,
Republic of Korea, and Ghana. In addition, Net1's proprietary
Mobile Virtual Card technology offers secure mobile payments and
banking services in developed and emerging countries while its
MediKredit and XeoHealth subsidiaries provide its proprietary 5010
and ICD-10 compliant real-time claims adjudication system.
Net1 has a primary listing on the Nasdaq and a secondary listing
on the JSE Limited.
Forward-Looking Statements
This announcement contains forward-looking statements that
involve known and unknown risks and uncertainties. A discussion of
various factors that cause our actual results, levels of activity,
performance or achievements to differ materially from those
expressed in such forward-looking statements are included in our
filings with the Securities and Exchange Commission. We undertake
no obligation to revise any of these statements to reflect future
events.
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
Three months ended Nine months ended
--------------------- ---------------------
March 31, March 31,
-------------------- --------------------
2013 2012 2013 2012
--------- --------- --------- ---------
(In thousands, except (In thousands, except
per share data) per share data)
REVENUE $ 111,141 $ 90,664 $ 334,265 $ 282,648
EXPENSE
Cost of goods sold, IT
processing, servicing and
support 51,461 32,493 143,789 99,605
Selling, general and
administration 53,846 36,368 149,854 92,297
Depreciation and amortization 10,560 9,325 31,051 27,194
--------- --------- --------- ---------
OPERATING (LOSS) INCOME (4,726) 12,478 9,571 63,552
INTEREST INCOME 2,515 2,164 8,195 5,981
INTEREST EXPENSE 2,023 2,244 6,117 7,215
--------- --------- --------- ---------
(LOSS) INCOME BEFORE INCOME TAX
EXPENSE (4,234) 12,398 11,649 62,318
INCOME TAX EXPENSE 472 4,611 7,172 9,785
--------- --------- --------- ---------
NET (LOSS) INCOME BEFORE EARNINGS
(LOSS) FROM EQUITY-ACCOUNTED
INVESTMENTS (4,706) 7,787 4,477 52,533
EARNINGS (LOSS) FROM EQUITY-
ACCOUNTED INVESTMENTS 22 (4) 204 100
--------- --------- --------- ---------
NET (LOSS) INCOME (4,684) 7,783 4,681 52,633
(ADD) LESS NET (LOSS) INCOME
ATTRIBUTABLE TO NON-CONTROLLING
INTEREST (3) 17 (11) 5
--------- --------- --------- ---------
NET (LOSS) INCOME ATTRIBUTABLE TO
NET1 $ (4,681) $ 7,766 $ 4,692 $ 52,628
--------- --------- --------- ---------
--------- --------- --------- ---------
Net (loss) income per share, in
United States dollars
Basic (loss) earnings
attributable to Net1
shareholders $ (0.10) $ 0.17 $ 0.10 $ 1.17
Diluted (loss) earnings
attributable to Net1
shareholders $ (0.10) $ 0.17 $ 0.10 $ 1.17
NET 1 UEPS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
Unaudited (A)
March 31, June 30,
2013 2012
---------- ----------
---------- ----------
(In thousands, except
share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 42,616 $ 39,123
Pre-funded social welfare grants receivable 6,954 9,684
Accounts receivable, net of allowances of - March:
$3,272; June: $788 101,609 101,918
Finance loans receivable 8,773 8,141
Deferred expenditure on smart cards 3,915 4,587
Inventory 8,415 6,192
Deferred income taxes 6,927 5,591
--------- ---------
Total current assets before settlement assets 179,209 175,236
Settlement assets 538,318 409,166
--------- ---------
Total current assets 717,527 584,402
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION OF - March: $85,318; June: $74,242 50,682 52,616
EQUITY-ACCOUNTED INVESTMENTS 1,112 1,508
GOODWILL 182,066 182,737
INTANGIBLE ASSETS, net 83,193 93,930
OTHER LONG-TERM ASSETS, including reinsurance assets 38,426 40,700
--------- ---------
TOTAL ASSETS 1,073,006 955,893
--------- ---------
--------- ---------
40,570
LIABILITIES
CURRENT LIABILITIES
Accounts payable 18,681 13,172
Other payables 33,324 40,167
Current portion of long-term borrowings 14,502 14,019
Income taxes payable 5,879 6,019
--------- ---------
Total current liabilities before settlement
obligations 72,386 73,377
Settlement obligations 538,318 409,166
--------- ---------
Total current liabilities 610,704 482,543
DEFERRED INCOME TAXES 20,033 20,988
LONG-TERM BORROWINGS 75,255 79,760
OTHER LONG-TERM LIABILITIES, including insurance policy
liabilities 23,331 25,791
--------- ---------
TOTAL LIABILITIES 729,323 609,082
--------- ---------
COMMITMENTS AND CONTINGENCIES
EQUITY
NET1 EQUITY:
COMMON STOCK
Authorized: 200,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury -
March: 45,742,707; June: 45,548,902 59 59
PREFERRED STOCK
Authorized shares: 50,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury:
March: -; June: - - -
ADDITIONAL PAID-IN-CAPITAL 160,094 155,350
TREASURY SHARES, AT COST: March: 13,455,090; June:
13,455,090 (175,823) (175,823)
ACCUMULATED OTHER COMPREHENSIVE LOSS (88,275) (75,722)
RETAINED EARNINGS 444,333 439,641
--------- ---------
TOTAL NET1 EQUITY 340,388 343,505
NON-CONTROLLING INTEREST 3,295 3,306
--------- ---------
TOTAL EQUITY 343,683 346,811
--------- ---------
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,073,006 $ 955,893
--------- ---------
--------- ---------
(A) - Derived from audited financial statements
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Three months ended Nine months ended
-----------------------------------------------
March 31, March 31,
----------------------- ----------------------
2013 2012 2013 2012
---------- ----------- ---------- ----------
(In thousands) (In thousands)
Cash flows from operating
activities
Net (loss) income $ (4,684) $ 7,783 $ 4,681 $ 52,633
Depreciation and amortization 10,560 9,325 31,051 27,194
Earnings (Loss) from equity-
accounted investments (22) 4 (204) (100)
Fair value adjustments (299) (1,211) 408 (1,983)
Interest payable 1,054 694 3,363 4,469
Loss (Profit) on disposal of
plant and equipment 3 (23) (83) (57)
Net loss on sale of 10% of
Smart Life - - - 81
Profit on liquidation of
SmartSwitch Nigeria - - - (3,994)
Realized loss on sale of
Smart Life investments - - - 25
Stock-based compensation
charge 1,092 843 3,325 1,882
Facility fee amortized 71 316 235 515
(Increase) Decrease in
accounts receivable, pre-
funded social welfare grants
receivable and finance loans
receivable (4,818) 474 (3,987) (15,321)
Decrease (Increase) in
deferred expenditure on
smart cards 3,800 (56) 99 (70)
Decrease (Increase) in
inventory 1,149 (862) (2,359) (261)
Increase (Decrease) in
accounts payable and other
payables 4,533 583 (1,755) (1,765)
Increase (Decrease) in taxes
payable 948 5,626 354 (5,336)
Decrease in deferred taxes (1,201) (1,532) (4,133) (14,928)
---------- ----------- ---------- ----------
Net cash provided by
operating activities 12,186 21,964 30,995 42,984
---------- ----------- ---------- ----------
Cash flows from investing
activities
Capital expenditures (5,053) (13,879) (17,103) (23,465)
Proceeds from disposal of
property, plant and
equipment 31 117 387 385
Acquisitions, net of cash
acquired - - (2,143) -
Acquisition of prepaid
business, net of cash
acquired - - - (4,481)
Acquisition of Smart Life,
net of cash acquired - - - (1,673)
Acquisition of available for
sale securities - (948) - (948)
Settlement from former
shareholders of KSNET - - - 4,945
Repayment of loan by equity-
accounted investment - 30 3 93
Purchase of investments
related to insurance
business - - - (2,320)
Proceeds from maturity of
investments related to
insurance business - - 545 2,321
Net change in settlement
assets (156,363) 95,165 (168,419) 128,961
---------- ----------- ---------- ----------
Net cash (used in) provided
by investing activities (161,385) 80,485 (186,730) 103,818
---------- ----------- ---------- ----------
Cash flows from financing
activities
Repayment of long-term
borrowings - (4,842) (7,307) (12,027)
Proceeds from issue of common
stock - - 240 -
Proceeds on sale of 10% of
Smart Life - - - 107
Acquisition of treasury stock - - - (1,129)
Net change in settlement
obligations 156,363 (95,165) 168,419 (128,961)
---------- ----------- ---------- ----------
Net cash provided by (used
in) financing activities 156,363 (100,007) 161,352 (142,010)
---------- ----------- ---------- ----------
Effect of exchange rate
changes on cash (2,664) 4,944 (2,124) (11,805)
---------- ----------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents 4,500 7,386 3,493 (7,013)
Cash and cash equivalents -
beginning of period 38,116 80,864 39,123 95,263
---------- ----------- ---------- ----------
Cash and cash equivalents -
end of period $ 42,616 $ 88,250 $ 42,616 $ 88,250
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
Net 1 UEPS Technologies, Inc.
Attachment A
Operating segment revenue, operating income and operating margin:
Three months ended March 31, 2013 and 2012 and December 31, 2012
Change -
constant
Change - exchange
actual rate(1)
----------------------------
Q3 '13 Q3 '13 Q3 '13 Q3 '13
Key segmental data, vs vs vs vs
in $ '000, Q3 '13 Q3 '12 Q2 '13 Q3'12 Q2 '13 Q3'12 Q2 '13
-------------------------------------------------------
Revenue:
SA transaction-
based activities $ 59,009 $ 46,423 $ 60,764 27% (3%) 37% (6%)
International
transaction-based
activities 33,119 28,188 33,113 17% 0% 27% (3%)
Smart card accounts 8,657 7,558 8,219 15% 5% 23% 2%
Financial services 1,651 2,289 1,448 (28%) 14% (22%) 10%
Hardware, software
and related
technology sales 8,705 6,206 7,898 40% 10% 51% 7%
--------- -------- --------
Total consolidated
revenue $111,141 $ 90,664 $111,442 23% (0%) 32% (3%)
--------- -------- --------
Consolidated
operating (loss)
income:
SA transaction-
based activities $(4,197) $ 8,694 $ 1,933 nm nm nm nm
--------- -------- ------------------------------------
Operating (loss)
income excluding
amortization (3,127) 10,452 3,398 nm nm nm nm
Amortization of
intangible assets (1,070) (1,758) (1,465) (39%) (27%) (34%) (29%)
--------- -------- ------------------------------------
International
transaction-based
activities (1,362) 195 202 nm nm nm nm
--------- -------- ------------------------------------
Operating income
excluding
amortization 1,866 3,387 3,515 (45%) (47%) (41%) (49%)
Amortization of
intangible assets (3,228) (3,192) (3,313) 1% (3%) 9% (6%)
--------- -------- ------------------------------------
Smart card accounts 2,467 3,435 2,342 (28%) 5% (23%) 2%
Financial services 1,147 1,248 1,048 (8%) 9% (1%) 6%
Hardware, software
and related
technology sales 1,699 (1,301) 795 nm 114% nm 107%
--------- -------- ------------------------------------
Operating income
(loss) excluding
amortization 1,785 (1,209) 878 nm 103% nm 97%
Amortization of
intangible assets (86) (92) (83) (7%) 4% 1% 0%
--------- -------- ------------------------------------
Corporate/
Eliminations (4,480) 207 (1,348) nm 232% nm 222%
--------- -------- --------
Total operating
(loss) income $(4,726) $ 12,478 $ 4,972 nm nm nm nm
--------- -------- --------
Operating income
margin (%)
SA transaction-
based activities (7%) 19% 3%
International
transaction-based
activities (4%) 1% 1%
International
transaction-based
activities
excluding
amortization 6% 12% 11%
Smart card accounts 29% 45% 28%
Financial services 69% 55% 72%
Hardware, software
and related
technology sales 20% (21%) 10%
Overall operating
margin (4%) 14% 4%
(1) - This information shows what the change in these items would have been
if the USD/ ZAR exchange rate that prevailed during the third quarter of
fiscal 2013 also prevailed during the third quarter of fiscal 2012 and the
second quarter of fiscal 2013.
Nine months ended March 31, 2013 and 2012
Change
-constant
Change - exchange
actual rate(1)
------------------
F2013 F2013
Key segmental data, in '000, except vs vs
margins F2013 F2012 F2013 F2013
----------- ---------- ------------------
Revenue:
SA transaction-based activities $ 181,137 $ 142,773 27% 37%
International transaction-based
activities 97,881 87,278 12% 21%
Smart card accounts 25,240 23,074 9% 18%
Financial services 4,483 6,344 (29%) (24%)
Hardware, software and related
technology sales 25,524 23,179 10% 19%
----------- ----------
Total consolidated revenue $ 334,265 $ 282,648 18% 28%
----------- ----------
Consolidated operating income
(loss):
SA transaction-based activities $ 4,136 $ 44,643 (91%) (90%)
----------- ---------- ------------------
Operating income excluding
amortization 8,139 49,448 (84%) (82%)
Amortization of intangible
assets (4,003) (4,805) (17%) (10%)
----------- ---------- ------------------
International transaction-based
activities (1,331) 1,120 nm nm
----------- ---------- ------------------
Operating income excluding
amortization 8,366 10,750 (22%) (16%)
Amortization of intangible
assets (9,697) (9,630) 1% 9%
----------- ---------- ------------------
Smart card accounts 7,194 10,487 (31%) (26%)
Financial services 3,292 3,685 (11%) (3%)
Hardware, software and related
technology sales 4,478 1,545 190% 213%
----------- ---------- ------------------
Operating income excluding
amortization 4,732 1,819 160% 181%
Amortization of intangible
assets (254) (274) (7%) 0%
----------- ---------- ------------------
Corporate/ Eliminations (8,198) 2,072 nm nm
----------- ----------
Total operating income $ 9,571 $ 63,552 (85%) (84%)
----------- ----------
Operating income margin (%)
SA transaction-based activities 2% 31%
International transaction-based
activities (1%) 1%
International transaction-based
activities excluding
amortization 9% 12%
Smart card accounts 29% 45%
Financial services 73% 58%
Hardware, software and related
technology sales 18% 7%
Overall operating margin 3% 22%
(1)- This information shows what the change in these items would have been
if the USD/ ZAR exchange rate that prevailed during year to date fiscal
2013 also prevailed during year to date fiscal 2012.
Net 1 UEPS Technologies, Inc.
Attachment B
Reconciliation of GAAP net (loss) income and (loss) earnings per share,
basic, to fundamental net income and earnings per share, basic:
Three months ended March 31, 2013 and 2012
Net (loss) (L)EPS, Net (loss) (L)EPS,
income basic income basic
(USD'000) (USD) (ZAR'000) (ZAR)
---------------------------- ------------------------------
2013 2012 2013 2012 2013 2012 2013 2012
---------------------------- ------------------------------
GAAP (4,681) 7,766 (0.10) 0.17 (39,632) 60,979 (0.87) 1.35
Intangible asset
amortization,
net 3,295 3,751 27,898 29,463
Stock-based
compensation
charge 1,092 843 9,245 6,619
Facility fees
for KSNET debt 71 90 601 707
DOJ and SEC
investigations-
related
expenses 2,557 - 21,648 -
Acquisition-
related costs 28 - 237 -
-------------- ----------------
Fundamental 2,362 12,450 0.05 0.28 19,997 97,768 0.44 2.16
-------------- ----------------
-------------- ----------------
Nine months ended March 31, 2013 and 2012
EPS, EPS,
Net income basic Net income basic
(USD'000) (USD) (ZAR'000) (ZAR)
---------------------------- ------------------------------
2013 2012 2013 2012 2013 2012 2013 2012
---------------------------- ------------------------------
GAAP 4,692 52,628 0.10 1.17 39,684 411,787 0.87 9.13
Intangible asset
amortization,
net 10,453 10,957 88,403 85,733
Stock-based
compensation
charge 3,325 1,883 28,122 14,734
Facility fees
for KSNET debt 235 301 1,988 2,355
DOJ and SEC
investigations-
related
expenses 3,117 - 26,363 -
Acquisition-
related costs 75 - 634 -
Change in tax
law - (18,315) - (150,373)
Create FTC
valuation
allowance - 8,232 - 67,588
Profit on
liquidation of
subsidiary - (3,994) - (31,251)
Loss on sale of
10% of Smart
Life - 77 - 602
---------------- ------------------
Fundamental 21,897 51,769 0.48 1.15 185,194 401,175 4.07 8.90
---------------- ------------------
---------------- ------------------
Net 1 UEPS Technologies, Inc.
Attachment C
Reconciliation of net (loss) income used to calculate (loss) earnings per
share basic and diluted and headline (loss) earnings per share basic and
diluted:
Three months ended March 31, 2013 and 2012
2013 2012
-------- --------
Net (loss) income (USD'000) (4,681) 7,766
Adjustments:
Loss (Profit) on sale of property, plant and equipment 3 (23)
Tax effects on above (1) 6
-------- --------
Net (loss) income used to calculate headline earnings
(USD'000) (4,679) 7,749
-------- --------
-------- --------
Weighted average number of shares used to calculate net
income per share basic earnings and headline earnings per
share basic earnings ('000) 45,561 45,268
Weighted average number of shares used to calculate net
income per share diluted earnings and headline earnings
per share diluted earnings ('000) 45,609 45,375
Headline (loss) earnings per share:
Basic, in USD (0.10) 0.17
Diluted, in USD (0.10) 0.17
Nine months ended March 31, 2013 and 2012
2013 2012
-------- --------
Net income (USD'000) 4,692 52,628
Adjustments:
Profit on liquidation of SmartSwitch Nigeria - (3,994)
Loss on sale of 10% of Smart Life - 77
Profit on sale of property, plant and equipment (83) (57)
Tax effects on above 23 16
-------- --------
Net income used to calculate headline earnings (USD'000) 4,632 48,670
-------- --------
-------- --------
Weighted average number of shares used to calculate net
income per share basic earnings and headline earnings per
share basic earnings ('000) 45,540 45,083
Weighted average number of shares used to calculate net
income per share diluted earnings and headline earnings
per share diluted earnings ('000) 45,588 45,140
Headline earnings per share:
Basic, in USD 0.10 1.08
Diluted, in USD 0.10 1.08
Contacts: Net 1 UEPS Technologies, Inc. Dhruv Chopra Vice
President of Investor Relations +1-212-626-6675dchopra@net1.com
www.net1.com
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