[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
The
primary inputs to the valuation model as of June 30, 2018, were Cell Cs
annualized adjusted EBITDA for the 11 months ended June 30, 2018, of ZAR 3.9
billion ($284.8 million, translated at exchange rates applicable as of June 30,
2018), an EBITDA multiple of 6.75, Cell Cs net external debt of ZAR 8.8 billion
($641.1 million, translated at exchange rates applicable as of June 30, 2018)
and a marketability discount of 10%. The EBITDA multiple was determined based on
an analysis of Cell Cs peer group, which comprises eight African and emerging
market mobile telecommunications operators.
The
fair value of Cell C utilizing the adjusted EV/EBITDA valuation model developed
by the Company is sensitive to the following inputs: (i) the Companys
determination of adjusted EBITDA; (ii) the EBITDA multiple used; and (iii) the
marketability discount used. Utilization of different inputs, or changes to
these inputs, may result in significantly higher or lower fair value
measurement.
The
fair value of Cell C as of June 30, 2019, utilizing the discounted cash flow
valuation model developed by the Company is sensitive to the following inputs:
(i) the ability of Cell C to achieve the forecasts in their business case; (ii)
the weighted average cost of capital (WACC) rate used; and (iii) the minority
and marketability discount used. Utilization of different inputs, or changes to
these inputs, may result in a significantly higher or lower fair value
measurement.
The
following table presents the impact on the carrying value of the Companys Cell
C investment of a 1% increase and 1% decrease in the WACC rate and the EBITDA
margins used in the Cell C valuation on the June 30, 2019, all amounts
translated at exchange rates applicable as of June 30, 2019:
The
fair value of the Cell C shares as of June 30, 2019, represented approximately
0% of the Companys total assets, including these shares. The Company expects to
hold these shares for an extended period of time and that there will be
short-term equity price volatility with respect to these shares particularly
given the current situation of Cell Cs business.
The
salient terms of the Companys investment in DNI is described in Note 3. Under
the terms of its subscription agreements with DNI, the Company agreed to pay to
DNI an additional amount of up to ZAR 400.0 million ($27.6 million, translated
at exchange rates applicable as of June 30, 2019), in cash, subject to the
achievement of certain performance targets by DNI. The Company expected to pay
the additional amount during the first quarter of the year ended June 30, 2020,
and recorded an amount of ZAR 373.6 million ($27.2 million), in long-term
liabilities as of June 30, 2018, which amount represented the present value of
the ZAR 400.0 million to be paid (amounts translated at the exchange rate
applicable as of June 30, 2018, respectively). As described in Note 3 and Note
20, the Company settled the ZAR 400 million ($27.6 million) due to DNI as of
March 31, 2019. The Company recorded accreted interest during year ended June
30, 2019, of $1.8 million (ZAR 26.4 million, translated at the applicable
average exchange rates during the periods specified).
As
part of the Companys risk management strategy, the Company enters into
derivative transactions to mitigate exposures to foreign currencies using
foreign exchange contracts. These foreign exchange contracts are
over-the-counter derivative transactions. Substantially all of the Companys
derivative exposures are with counterparties that have long-term credit ratings
of B (or equivalent) or better. The Company uses quoted prices in active
markets for similar assets and liabilities to determine fair value (Level 2).
The Company has no derivatives that require fair value measurement under Level 1
or 3 of the fair value hierarchy. The Company had no outstanding foreign
exchange contracts as of June 30, 2019 and 2018.
The
following table presents the Companys assets measured at fair value on a
recurring basis as of June 30, 2019, according to the fair value hierarchy:
The
following table presents the Companys assets and liabilities measured at fair
value on a recurring basis as of June 30, 2018, according to the fair value
hierarchy:
There
have been no transfers into or out of Level 3 during the years ended June 30,
2019, 2018 and 2017.
(1)
The foreign currency adjustment represents the effects of the fluctuations of
the South African rand and the U.S. dollar on the carrying value.
Summarized
below is the movement in the carrying value of assets measured at fair value on
a recurring basis, and categorized within Level 3, during the year ended June
30, 2018:
Trade,
finance loans and other receivables originated by the Company are stated at cost
less allowance for doubtful accounts receivable. The fair value of trade,
finance loans and other receivables approximates their carrying value due to
their short-term nature.
The
fair values of trade and other payables approximates their carrying amounts, due
to their short-term nature.
The Company measures equity investments without readily determinable fair values
at fair value on a nonrecurring basis. The fair values of these investments are
determined based on valuation techniques using the best information available,
and may include quoted market prices, market comparables, and discounted cash
flow projections. An impairment charge is recorded when the cost of the asset
exceeds its fair value and the excess is determined to be other-than-temporary.
The Company has not recorded any impairment charges during the reporting periods
presented herein. The Company has no liabilities that are measured at fair value
on a nonrecurring basis.
9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS
Equity-accounted
investments
The
Companys ownership percentage in its equity-accounted investments as of June
30, 2019 and 2018, was as follows:
|
2019
|
|
2018
|
Bank Frick
|
35%
|
|
35%
|
DNI
|
30%
|
|
n/a
|
Finbond
|
29%
|
|
29%
|
OneFi Limited (OneFi)
|
25%
|
|
25%
|
SmartSwitch Namibia (Pty) Ltd (SmartSwitch
Namibia)
|
50%
|
|
50%
|
V2 Limited (V2)
|
50%
|
|
n/a
|
Walletdoc Proprietary Limited (Walletdoc)
|
20%
|
|
20%
|
Bank Frick
Bank Frick provides a complete suite of banking services, with one of its key strategic pillars being the provision of payment services and funding of financial technology opportunities. Bank Frick holds acquiring licenses from both Visa and MasterCard and operates a branch in London.
On
October 2, 2017, the Company acquired a 30% interest in Bank Frick, a fully
licensed bank based in Balzers, Liechtenstein, from the Kuno Frick Family
Foundation (Frick Foundation) for approximately CHF 39.8 million ($40.9
million) in cash. On February 9, 2018, the Company purchased an additional 5% in
Bank Frick from the Frick Foundation for CHF 10.4 million ($11.1 million) and
the Frick Foundation contributed approximately CHF 3.8 million ($4.1 million) to
Bank Frick to facilitate the development of Bank Fricks Fintech and blockchain
businesses. The Company had an option, exercisable until October 2, 2019, to
acquire an additional 35% interest in Bank Frick.
On October 2, 2019, the Company
exercised the option to acquire an additional 35% interest in Bank Frick from
the Frick Foundation. The Company will pay an amount, the "Option Price
Consideration", for the additional 35% interest in Bank Frick, which represents
the higher of CHF 46.4 million ($46.5 million at exchange rates on October 2,
2019) or 35% of 15 times the average annual normalized net income of the Bank
over the two years ended December 31, 2018. The shares will only transfer on
payment of the Option Price Consideration, which shall occur on the later of (i)
180 days after the date of exercise of the option; (ii) in the event of any
regulatory approvals being required, 10 days after receipt of approval (either
unconditionally or on terms acceptable to both parties); and (iii) 10 days after
the date on which the Option Price Consideration is agreed or finally
determined.
F-40
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued)
Equity-accounted
investments (continued)
DNI
The
Companys investment in DNI is described in Note 3. On July 27, 2017, the
Company acquired a 45% voting and economic interest in DNI and on March 9, 2018,
it increased this interest to 49%. The Company obtained control of DNI on June
30, 2018, and ceased accounting for DNI using the equity method from that date.
DNI owned 50% of the issued and outstanding ordinary shares in Speckpack and it
has been accounted for separately as an equity method investment from June 30,
2018.
The
Company recognized a non-cash re-measurement loss of approximately $4.6 million
during the year ended June 30, 2018, related to the re-measurement of its
previously held interest in DNI, at 49%, upon acquisition on June 30, 2018
(refer to Note 3). The re-measurement loss is included in selling, general and
administration expenses in the consolidated statement of operations for the year
ended June 30, 2018.
The
Company consolidated DNI up until March 31, 2019, as disclosed in Note 3. The
Company retained a 38% interest in DNI following the deconsolidation and used
the equity method to account for its interest in DNI because it has the ability
to exert significant influence over the operations of DNI through its
shareholding and board representation. The Company disposed of an 8% interest in
DNI on May 3, 2019, leaving it with a 30% interest as of June 30, 2019.
Finbond
As
of June 30, 2019, the Company owned 267,672,032 shares in Finbond representing
approximately 29.0% of its issued and outstanding ordinary shares. Finbond is
listed on the Johannesburg Stock Exchange and its closing price on June 28,
2019, the last trading day of the month, was ZAR 4.00 per share. The market
value of the Companys holding in Finbond on June 28, 2019, was ZAR 1.1 billion
($76.0 million translated at exchange rates applicable as of June 30, 2019). On
July 13, 2017, the Company acquired an additional 3.6 million shares in Finbond
for approximately ZAR 11.2 million ($0.8 million). On July 11, 2018, the
Company, pursuant to its election, received an additional 6,602,551 shares in
Finbond as a capitalization share issue in lieu of a dividend. On July 17, 2017,
the Company, pursuant to its election, received an additional 4,361,532 shares
in Finbond as a capitalization share issue in lieu of a dividend.
On
August 2, 2019, the Company, pursuant to its election, received an additional
1,148,901 shares in Finbond as a capitalization share issue in lieu of a
dividend.
On
October 7, 2016, the Company provided a loan of ZAR 139.2 million ($10.0
million, translated at the foreign exchange rates applicable on the date of the
loan) to Finbond in order to partially finance Finbonds expansion strategy in
the United States. Interest on the loan was payable quarterly in arrears and was
based on the London Interbank Offered Rate (LIBOR) in effect from time to time
plus a margin of 12.00% . The loan was included in accounts receivable, net, as
of June 30, 2017, on the Companys consolidated balance sheet.
The
loan was initially set to mature at the earlier of Finbond concluding a rights
offer or February 28, 2017, but the agreement was subsequently amended to extend
the repayment date to on or before February 28, 2018, or such later date as may
be mutually agreed by the parties in writing. The Company had the right to elect
for the loan to be repaid in either Finbond ordinary shares, including through a
rights offering, (in accordance with an agreed mechanism) or in cash. The
Company was required to make a repayment election within 180 days after the
repayment date otherwise the repayment election would automatically default to
repayment in ordinary shares. Finbond undertook to perform all necessary steps
reasonably required to effect the issuance of shares to settle the repayment of
the loan if that option was elected by the Company.
In
March 2018, the parties amended the agreement to extend the repayment date from
February 28, 2018 to August 31, 2018, and to finalize certain matters related to
the rights offering mechanism and determining the maximum number of shares that
Finbond would issue to parties participating in a rights offering. On March 23,
2018, Finbond publicly announced that it had commenced a rights offering process
and that the proceeds of the offering would be used to settle certain loans,
including the loan due to the Company. The Company agreed to underwrite the
Finbond rights offer up to an amount of 55,585,514 shares. The rights offering
closed on April 20, 2018, and Finbond issued 55,585,514 shares to the Company.
F-41
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued)
Equity-accounted
investments (continued)
Finbond (continued)
As
a result of Finbonds listing on the Johannesburg Stock Exchange it reports its
six-month results during the Companys first quarter and its annual results
during the Companys fourth quarter and the Company includes the impact of
Finbonds results in its consolidated financial statements during those
quarters.
OneFi
The
Company provided a credit facility of up to $10 million in the form of
convertible debt to OneFi, of which $3 million was drawn. Interest at 8% per
annum is charged on the $3.0 million drawn. Repayment of the notes is due at the
earlier of June 11, 2020, or the Company selling its interest in OneFi. The
Company included the $3.0 million due in accounts receivable, net and other
receivables as of June 30, 2019. The notes may also be converted to ordinary
shares subject to the occurrence of certain contractually agreed events. The
undrawn portion of the credit facility expired and the Company has no further
obligations in this regard.
V2 Limited
On
October 4, 2018, the Company acquired a 50% voting and economic interest in V2
Limited (V2) for $2.5 million. The Company has committed to provide V2 with a
further equity contribution of $2.5 million and a working capital facility of
$5.0 million, which are both subject to the achievement of certain pre-defined
objectives.
Summarized
below is the movement in equity-accounted investments during the years ended
June 30, 2019 and 2018, which includes the investment in equity and the
investment in loans provided to equity-accounted investees:
|
|
|
|
|
Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
DNI(1)
|
|
|
Frick
|
|
|
Finbond
|
|
|
Other(2)
|
|
|
Total
|
|
Investment in equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of July 1, 2017 as reported
|
$
|
-
|
|
$
|
-
|
|
$
|
18,961
|
|
$
|
6,742
|
|
$
|
25,703
|
|
Correction of Finbond error (Note 1)
|
|
|
|
|
|
|
|
(1,927
|
)
|
|
|
|
|
(1,927
|
)
|
Balance as of July 1, 2017 as restated
|
|
-
|
|
|
-
|
|
|
17,034
|
|
|
6,742
|
|
|
23,776
|
|
Acquisition of shares
|
|
79,541
|
|
|
51,949
|
|
|
13,043
|
|
|
-
|
|
|
144,533
|
|
Stock-based compensation
|
|
-
|
|
|
-
|
|
|
(139
|
)
|
|
-
|
|
|
(139
|
)
|
Comprehensive income (loss):
|
|
7,005
|
|
|
(606
|
)
|
|
2,768
|
|
|
4
|
|
|
9,171
|
|
Other comprehensive
loss
|
|
-
|
|
|
-
|
|
|
(2,426
|
)
|
|
-
|
|
|
(2,426
|
)
|
Equity accounted earnings (loss)
|
|
7,005
|
|
|
(606
|
)
|
|
5,194
|
|
|
4
|
|
|
11,597
|
|
Share of net income (loss)
|
|
9,510
|
|
|
201
|
|
|
5,450
|
|
|
4
|
|
|
15,165
|
|
Amortization - acquired intangible assets
|
|
(3,480
|
)
|
|
(531
|
)
|
|
-
|
|
|
-
|
|
|
(4,011
|
)
|
Deferred taxes - acquired intangible assets
|
|
975
|
|
|
128
|
|
|
-
|
|
|
-
|
|
|
1,103
|
|
Dilution resulting from corporate transactions
|
|
-
|
|
|
-
|
|
|
(256
|
)
|
|
-
|
|
|
(256
|
)
|
Other
|
|
-
|
|
|
(404
|
)
|
|
-
|
|
|
-
|
|
|
(404
|
)
|
Dividends received
|
|
(1,765
|
)
|
|
(1,946
|
)
|
|
(1,096
|
)
|
|
(400
|
)
|
|
(5,207
|
)
|
Carrying value at the acquisition date (Note 3)
|
|
(79,972
|
)
|
|
-
|
|
|
-
|
|
|
339
|
|
|
(79,633
|
)
|
Foreign currency adjustment(3)
|
|
(4,809
|
)
|
|
(1,268
|
)
|
|
(2,628
|
)
|
|
(593
|
)
|
|
(9,298
|
)
|
Balance as of June 30, 2018
|
$
|
-
|
|
$
|
48,129
|
|
$
|
28,982
|
|
$
|
6,092
|
|
$
|
83,203
|
|
F-42
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued)
Equity-accounted
investments (continued)
|
|
|
|
|
|
Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DNI(1)
|
|
|
Frick
|
|
|
Finbond
|
|
|
Other(2)
|
|
|
Total
|
|
|
Balance as of
June 30, 2018
|
$
|
-
|
|
$
|
48,129
|
|
$
|
28,982
|
|
$
|
6,092
|
|
$
|
83,203
|
|
|
Re-measurement of 8% of DNI (Note 3)
|
|
14,849
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
14,849
|
|
|
Re-measurement of 30% of DNI (Note 3)
|
|
59,346
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
59,346
|
|
|
Acquisition of shares
|
|
-
|
|
|
-
|
|
|
1,920
|
|
|
2,989
|
|
|
4,909
|
|
|
Stock-based compensation
|
|
-
|
|
|
-
|
|
|
117
|
|
|
-
|
|
|
117
|
|
|
Comprehensive income (loss):
|
|
865
|
|
|
(1,542
|
)
|
|
7,079
|
|
|
(669
|
)
|
|
5,733
|
|
|
Other comprehensive income
|
|
-
|
|
|
-
|
|
|
4,251
|
|
|
-
|
|
|
4,251
|
|
|
Equity accounted earnings (loss)
|
|
865
|
|
|
(1,542
|
)
|
|
2,828
|
|
|
(669
|
)
|
|
1,482
|
|
|
Share
of net income (loss)
|
|
1,380
|
|
|
1,109
|
|
|
2,524
|
|
|
(669
|
)
|
|
4,344
|
|
|
Amortization -
acquired intangible assets
|
|
(715
|
)
|
|
(747
|
)
|
|
-
|
|
|
-
|
|
|
(1,462
|
)
|
|
Deferred taxes - acquired intangible assets
|
|
200
|
|
|
180
|
|
|
-
|
|
|
-
|
|
|
380
|
|
|
Accretion resulting
from corporate transactions
|
|
-
|
|
|
-
|
|
|
304
|
|
|
-
|
|
|
304
|
|
|
Other
|
|
-
|
|
|
(2,084
|
)
|
|
-
|
|
|
-
|
|
|
(2,084
|
)
|
|
Dividends received
|
|
(864
|
)
|
|
-
|
|
|
(1,920
|
)
|
|
(454
|
)
|
|
(3,238
|
)
|
|
Return on investment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(284
|
)
|
|
(284
|
)
|
|
Deconsolidation of DNI (Note 3)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(242
|
)
|
|
(242
|
)
|
|
Sale of 8% interest in DNI (Note 3)
|
|
(14,996
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(14,996
|
)
|
|
Foreign currency adjustment(3)
|
|
1,830
|
|
|
653
|
|
|
(878
|
)
|
|
(34
|
)
|
|
1,571
|
|
|
Balance as of
June 30, 2019
|
$
|
61,030
|
|
$
|
47,240
|
|
$
|
35,300
|
|
$
|
7,398
|
|
$
|
150,968
|
|
|
Investment in loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of
July 1, 2017
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
2,159
|
|
$
|
2,159
|
|
|
Loans granted
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,000
|
|
|
1,000
|
|
|
Transfer from accounts receivable, net and other receivables
|
|
-
|
|
|
-
|
|
|
11,235
|
|
|
-
|
|
|
11,235
|
|
|
Transfer to investment in equity
|
|
-
|
|
|
-
|
|
|
(11,102
|
)
|
|
-
|
|
|
(11,102
|
)
|
|
Foreign currency adjustment(3)
|
|
-
|
|
|
-
|
|
|
(133
|
)
|
|
(7
|
)
|
|
(140
|
)
|
|
Balance as of June 30,
2018
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,152
|
|
|
3,152
|
|
|
Transfer to accounts receivable, net and other receivables
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,000
|
)
|
|
(3,000
|
)
|
|
Foreign currency adjustment(3)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4
|
)
|
|
(4
|
)
|
|
Balance as of
June 30, 2019
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
148
|
|
$
|
148
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Loans
|
|
|
Total
|
|
|
Carrying amount as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2018
|
|
|
|
|
|
|
$
|
83,203
|
|
$
|
3,152
|
|
|
|
|
|
Continuing
|
|
|
|
|
|
|
$
|
82,864
|
|
$
|
3,152
|
|
$
|
86,016
|
|
|
Discontinued (Note 3)
|
|
|
|
|
|
|
$
|
339
|
|
$
|
-
|
|
$
|
339
|
|
|
June 30, 2019
|
|
|
|
|
|
|
$
|
150,968
|
|
$
|
148
|
|
$
|
151,116
|
|
(1) DNI was included as an
equity-accounted investment from August 1, 2017 until June 30, 2018, the date
upon which the Company obtained control and commenced consolidation of DNI, and
then again from March 31, 2019;
(2) Includes OneFi, SmartSwitch Namibia, V2
and Walletdoc;
(3) The foreign currency adjustment represents the effects of
the fluctuations of the South African rand, Nigerian naira and Namibian dollar,
against the U.S. dollar on the carrying value.
F-43
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
9. EQUITY-ACCOUNTED
INVESTMENTS AND OTHER LONG-TERM ASSETS (continued)
Summary
financial information of equity-accounted investments
Summarized
below is the financial information of equity-accounted investments (during the
Companys reporting periods in which investments were carried using the
equity-method, unless otherwise noted) as of the stated reporting period of the
investee and translated at the applicable closing or average foreign exchange
rates (as applicable):
|
|
DNI
|
|
|
Bank Frick
|
|
|
Finbond
|
|
|
Other(1)
|
|
Balance sheet, as of
|
|
June 30
|
|
|
June 30
|
|
|
February 28(2)
|
|
|
Various(3)
|
|
Current
assets(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
$
|
35,608
|
|
|
n/a
|
|
|
n/a
|
|
$
|
17,781
|
|
2018
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
11,433
|
|
Long-term assets
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
39,851
|
|
$
|
1,013,677
|
|
$
|
240,792
|
|
|
2,304
|
|
2018
|
|
n/a
|
|
|
1,418,160
|
|
|
252,265
|
|
|
1,343
|
|
Current
liabilities(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
25,757
|
|
|
n/a
|
|
|
n/a
|
|
|
8,492
|
|
2018
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
3,295
|
|
Long-term
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
7,324
|
|
|
915,050
|
|
|
125,704
|
|
|
4,654
|
|
2018
|
|
n/a
|
|
|
1,323,470
|
|
|
175,539
|
|
|
3,930
|
|
Redeemable stock
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
2018
|
|
n/a
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Non-controlling
interests
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
1,100
|
|
|
-
|
|
|
11,696
|
|
|
25
|
|
2018
|
|
n/a
|
|
|
-
|
|
|
10,948
|
|
|
-
|
|
Statement of operations, for
the period ended
|
|
June 30(5)
|
|
|
June 30(6)
|
|
|
February 28(2)
|
|
|
Various(7)
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
15,898
|
|
|
41,126
|
|
|
174,177
|
|
|
33,807
|
|
2018
|
|
n/a
|
|
|
33,814
|
|
|
161,915
|
|
|
10,955
|
|
2017
|
|
n/a
|
|
|
n/a
|
|
|
97,431
|
|
|
7,168
|
|
Operating income
(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
5,814
|
|
|
3,633
|
|
|
21,592
|
|
|
(753
|
)
|
2018
|
|
n/a
|
|
|
776
|
|
|
33,989
|
|
|
826
|
|
2017
|
|
n/a
|
|
|
n/a
|
|
|
19,551
|
|
|
276
|
|
Income (loss) from
continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
4,306
|
|
|
3,169
|
|
|
10,152
|
|
|
(915
|
)
|
2018
|
|
n/a
|
|
|
617
|
|
|
18,651
|
|
|
152
|
|
2017
|
|
n/a
|
|
|
n/a
|
|
|
9,700
|
|
|
3
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
$
|
4,481
|
|
|
3,169
|
|
|
10,152
|
|
|
(1,029
|
)
|
2018
|
|
n/a
|
|
$
|
617
|
|
|
18,651
|
|
|
152
|
|
2017
|
|
n/a
|
|
|
n/a
|
|
$
|
9,700
|
|
$
|
3
|
|
(1) Includes OneFi, SmartSwitch Namibia, Walletdoc and V2, as
appropriate;
(2) Finbond balances included were derived from its publically
available information. The amounts as of February 28, 2018 and for the years
ended February 28, 2018 and 2017, respectively, have been restated for the error
described in Note 1;
(3) Balance sheet information for OneFi, SmartSwitch
Namibia and V2 is as of June 30, 2019 and 2018, and Walletdoc as of February 28,
2019 and 2018, respectively.
(4) Bank Frick and Finbond are banks and do not
present current and long-term assets and liabilities. All assets and liabilities
of these two entities are included under the long-term caption.
(5)
Statement of operations information for DNI is for the period from April 1, 2019
to June 30, 2019.
(6) Statement of operations information for 2018 for Bank
Frick is for the period from October 1, 2017 to June 30, 2018.
(7) Statement
of operations information for OneFi, SmartSwitch Namibia and V2 for the year
ended June 30, and Walletdoc for the year ended February 28.
F-44
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued)
Other
long-term assets
Summarized below is the breakdown of other long-term assets as of June 30, 2019,
and June 30, 2018:
|
|
|
June 30,
|
|
|
|
June 30,
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
Total equity investments
|
$
|
26,993
|
|
|
$
|
199,865
|
|
|
Investment in 15%
of Cell C, at fair value (Note 7)
|
|
-
|
|
|
|
172,948
|
|
|
Investment in MobiKwik(1)
|
|
26,993
|
|
|
|
26,917
|
|
|
Total held to maturity investments
|
|
-
|
|
|
|
10,395
|
|
|
Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd
8.625% notes
|
|
-
|
|
|
|
10,395
|
|
|
Long-term portion of payments to agents in South Korea
amortized over the contract period
|
|
9,564
|
|
|
|
17,582
|
|
|
Policy holder assets under investment
contracts (Note 11)
|
|
619
|
|
|
|
610
|
|
|
Reinsurance assets under insurance contracts (Note 11)
|
|
1,163
|
|
|
|
633
|
|
|
Other long-term assets
|
|
5,850
|
|
|
|
5,947
|
|
|
Total other
long-term assets
|
$
|
44,189
|
|
|
$
|
235,032
|
|
(1)
The Company has determined that MobiKwik does not have readily determinable fair
value and has therefore elected to record this investment at cost minus
impairment, if any, plus or minus changes resulting from observable price
changes in orderly transactions for the identical or a similar investment of the
same issuer. The Company accounted for its investment in MobiKwik at cost as of
June 30, 2018.
Cell C
On
August 2, 2017, the Company, through its subsidiary, Net1SA, purchased
75,000,000 class A shares of Cell C for an aggregate purchase price of ZAR 2.0
billion ($151.0 million) in cash. The Company funded the transaction through a
combination of cash and the facilities described in Note 12. Net1 SA has
pledged, among other things, its entire equity interest in Cell C as security
for the South African facilities described in Note 12 used to partially fund the
acquisition of Cell C. The Companys investment in Cell is carried at fair
value. Refer to Note 7 for additional information regarding changes in the fair
value of Cell C.
MobiKwik
The
Company signed a subscription agreement with MobiKwik, which is one of Indias
largest independent mobile payments networks, with over 80 million users and 2.5
million merchants. Pursuant to the subscription agreement, the Company agreed to
make an equity investment of up to $40.0 million in MobiKwik over a 24 month
period. The Company made an initial $15.0 million investment in August 2016 and
a further $10.6 million investment in June 2017, under this subscription
agreement. During the year ended June 30, 2019, the Company paid $1.1 million to
subscribe for additional shares in MobiKwik. As of June 30, 2019 and 2018,
respectively, the Company owned approximately 13% and 12% of MobiKwiks issued
share capital.
Cedar Cellular
In
December 2017, the Company purchased, for cash, $9.0 million of notes, with a
face value of $20.5 million, issued by Cedar Cellular Investment 1 (RF) (Pty)
Ltd (Cedar Cellular), a Cell C shareholder, representing 7.625% of the
issuance. The investment in the notes was made in connection with the Cell C
investment discussed above. The notes are listed on The International Stock
Exchange. The Company has elected to treat the investment in the notes as held
to maturity securities. The investment in the notes is reviewed on a quarterly
basis for indicators of other-than-temporary impairment. The notes bear interest
semi-annually at 8.625% per annum on the face value and interest is payable in
cash or deferred, at Cedar Cellulars election, for payment on the maturity
date. The notes mature on August 2, 2022. The notes are secured by all of Cedar
Cellulars investment in Cell C, namely, 59,000,000 class A shares.
The
Company recognized interest income of $2.4 million and $1.4 million, related to
the Cedar Cellular notes during the year ended June 30, 2019 and 2018,
respectively. Interest on this investment will only be paid, at Cedar Cellulars
election, on maturity in August 2022.
F-45
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued)
Other
long-term assets (continued)
Cedar Cellular (continued)
The
Company does not expect to recover the amortized cost basis of the Cedar
Cellular notes due to a reduction in the amount of future cash flows expected to
be collected from the debt security compared to previous expectations. The
Company does not expect to generate any cash flows from the debt security at
maturity in August 2022 or prior to the maturity date due to the current
challenges facing the business and the uncertainties over the future value of
the current equity in Cell C. Accordingly, the Company believes it is unlikely
that Cedar Cellular will generate sufficient cash inflows to settle any
outstanding accumulated interest and principal due to the note holders on
maturity in August 2022.
The
Companys cannot calculate an effective interest rate on the Cedar Cellular note
because the carrying value is currently zero ($0.0 million) as of June 30, 2019.
The Company therefore cannot calculate the present value of the expected cash
flows to be collected from the debt security by discounting these cash flows at
the interest rate implicit in the security upon acquisition (at a rate of
24.82%) because there are no future cash flows to discount. The present value of
the expected cash flows of zero ($0.0 million) is less than the amortized cost
basis recorded of $12.8 million (before the cumulative 2019 impairments for the
year ended June 30, 2019). Accordingly, the Company recorded an
other-than-temporary impairment related to a credit loss of $12.8 million during
the year ended June 30, 2019. The impairment of $12.8 million is included in the caption—Impairment of Cedar Cellular note-in the consolidated statement of operations for the year ended June 30, 2019, respectively.
Summarized
below are the components of the Companys equity securities without readily
determinable fair value and held to maturity investments as of June 30, 2019:
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Carrying
|
|
|
|
|
Cost basis
|
|
|
holding gains
|
|
|
holding losses
|
|
|
value
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in MobiKwik
|
$
|
26,993
|
|
$
|
-
|
|
$
|
-
|
|
$
|
26,993
|
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Cedar Cellular
notes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Total
|
$
|
26,993
|
|
$
|
-
|
|
$
|
-
|
|
$
|
26,993
|
|
Summarized
below are the components of the Companys held to maturity investments as of
June 30, 2018:
|
|
|
Cost
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Carrying
|
|
|
|
|
basis(1)
|
|
|
holding gains(1)
|
|
|
holding losses
|
|
|
value
|
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Cedar Cellular
notes
|
$
|
10,395
|
|
$
|
-
|
|
$
|
-
|
|
$
|
10,395
|
|
|
Total
|
$
|
10,395
|
|
$
|
-
|
|
$
|
-
|
|
$
|
10,395
|
|
(1)
An amount of $1.4 million attributed to interest recognized under the Cedar
Cellular note was incorrectly included in the unrealized holding gains column as
of June 30, 2018, and has been reclassified to the cost basis column.
F-46
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued)
Contractual
maturities of held to maturity investments
Summarized
below is the contractual maturity of the Companys held to maturity investment
as of June 30, 2019:
|
|
Cost basis
|
|
|
Estimated fair value(1)
|
|
Due in one year or less
|
$
|
-
|
|
$
|
-
|
|
Due in one year through five years(2)
|
|
-
|
|
|
-
|
|
Due in five years through ten years
|
|
-
|
|
|
-
|
|
Due after ten years
|
|
-
|
|
|
-
|
|
Total
|
$
|
-
|
|
$
|
-
|
|
(1)
The estimated fair value of the Cedar Cellular note has been calculated
utilizing the Companys portion of the security provided to the Company by Cedar
Cellular, namely, Cedar Cellulars investment in Cell
C.
(2)
The cost basis is zero ($0.0 million).
10. GOODWILL AND INTANGIBLE
ASSETS, net
Goodwill
Summarized below is the movement in the carrying value of goodwill for the years
ended June 30, 2019, 2018 and 2017:
|
|
Gross
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
value
|
|
|
impairment
|
|
|
value
|
|
Balance as of July 1, 2016
|
$
|
179,478
|
|
$
|
-
|
|
$
|
179,478
|
|
Acquisition of Ceevo FS (Note 3)
|
|
2,475
|
|
|
-
|
|
|
2,475
|
|
Foreign currency
adjustment(1)
|
|
6,880
|
|
|
-
|
|
|
6,880
|
|
Balance as of June 30, 2017
|
|
188,833
|
|
|
-
|
|
|
188,833
|
|
Impairment loss
|
|
-
|
|
|
(20,917
|
)
|
|
(20,917
|
)
|
Foreign currency adjustment(1)
|
|
1,019
|
|
|
144
|
|
|
1,163
|
|
Balance as of June 30, 2018
|
|
189,852
|
|
|
(20,773
|
)
|
|
169,079
|
|
Impairment loss
|
|
-
|
|
|
(14,440
|
)
|
|
(14,440
|
)
|
Foreign currency
adjustment(1)
|
|
(5,308
|
)
|
|
56
|
|
|
(5,252
|
)
|
Balance as of June 30, 2019
|
$
|
184,544
|
|
$
|
(35,157
|
)
|
$
|
149,387
|
|
(1) the foreign currency adjustment represents the effects of
the fluctuations between the South African rand, the Euro and the Korean won,
and the U.S. dollar on the carrying value.
Goodwill
associated with the acquisition of Ceevo FS represents the excess of cost over
the fair value of acquired net assets. The Ceevo FS goodwill is not deductible
for tax purposes. See Note 3 for the allocation of the purchase price to the
fair value of acquired net assets. Ceevo FS was allocated to the Companys
International transaction processing operating segment.
Impairment loss
The
Company assesses the carrying value of goodwill for impairment annually, or more
frequently, whenever events occur and circumstances change indicating potential
impairment. The Company performs its annual impairment test as at June 30 of
each year.
Year ended June 30, 2019
During
the second quarter of fiscal 2019, the Company performed an impairment analysis
and recognized an impairment loss of approximately $8.2 million, of which
approximately $7.0 million related to goodwill allocated to its IPG business
within its international transaction processing operating segment and $1.2
million related to goodwill within its South African transaction processing
operating segment. Given the consolidation and restructuring of IPG over the
period to December 31, 2018, several business lines were terminated or
meaningfully reduced, resulting in lower than expected revenues, profits and
cash flows. IPGs new business initiatives are still in their infancy, and it is
expected to generate lower cash flows than initially forecast.
F-47
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
10. GOODWILL AND INTANGIBLE
ASSETS, net (continued)
Goodwill
(continued)
Impairment loss (continued)
Year ended June 30, 2019 (continued)
In
order to determine the amount of the IPG goodwill impairment, the estimated fair
value of the Companys IPG business assets and liabilities were compared to the
carrying value of the IPGs assets and liabilities. The Company used a
discounted cash flow model in order to determine the fair value of IPG. The
allocation of the fair value of IPG required the Company to make a number of
assumptions and estimates about the fair value of assets and liabilities where
the fair values were not readily available or observable. Based on this
analysis, the Company determined that the carrying value of IPGs assets and
liabilities exceeded their fair value at the reporting date.
The
Company also identified and recognized an impairment loss of $6.2 million
related to goodwill allocated to its financial inclusion and applied
technologies operating segment as a result of its June 30, 2019, annual
impairment test. The June 2019 impairment loss resulted from on-going losses
incurred in the latter half of the fiscal year that were greater than, and were
incurred for a longer duration, than initially expected.
The
estimated fair value of the business assets and liabilities were compared to the
carrying value of the assets and liabilities of the reporting unit within the
financial inclusion and applied technologies operating segment in order to
determine the $6.2 million goodwill impairment. The Company used an EV/EBITDA
multiple valuation model to determine the fair value of the reporting unit.
The
allocation of the fair value of the reporting unit required the Company to make
a number of assumptions and estimates about the fair value of assets and
liabilities where the fair values were not readily available or observable.
Based on this analysis, except for the impairments recognized, the Company
determined that the carrying value of the reporting units assets and
liabilities exceeded their fair value at the reporting date. In the event that
there is deterioration in the Companys operating segments, or in any other of
the Companys businesses, this may lead to additional impairments in future
periods.
Year ended June 30, 2018
During
the third quarter of fiscal 2018, the Company recognized an impairment loss of
approximately $19.9 million related to goodwill allocated to the Masterpayment
business within its international transaction processing operating segment as a
result of changes to the operating model of Masterpayment. During the second
quarter of fiscal 2018, the Company re-evaluated the operating performance and
ongoing viability of Masterpayments working capital financing and supply chain
solutions offering and determined to exit this portion of its business. While
the Company believed that it could scale this offering in the medium to
long-term by focusing on customers and industries outside Masterpayments
initial target market, this standalone offering did not fit the Companys
strategy of providing payment solutions and working capital to small and
medium-sized merchants. In order to focus on the Companys stated international
strategy, the Company decided to wind-down the traditional working capital
finance book issued to non-payment solutions customers. During the third quarter
of fiscal 2018, the Company evaluated Masterpayments business strategy and
following the wind-down referred to above, it determined that Masterpayment was
unlikely to deliver the financial results or cash flows previously anticipated.
The Company and two of Masterpayments senior managers agreed, by mutual
consent, that with effect from the end of March 2018, the managers terminated
their employment with Masterpayment in order to dedicate themselves to new
professional tasks. The Company also impaired goodwill of approximately $1.1
million during its June 2018 annual goodwill impairment assessment related to a
business allocated to its South African transaction processing operating
segment, which ceased trading during the year.
In
order to determine the amount of goodwill impairment, the estimated fair value
of the Companys Masterpayment business was allocated to the individual fair
value of the assets and liabilities of Masterpayment as if it had been acquired
in a business combination, which resulted in the implied fair value of the
goodwill. The Company used a discounted cash flow model in order to determine
the fair value of Masterpayment. The allocation of the fair value of
Masterpayment required the Company to make a number of assumptions and estimates
about the fair value of assets and liabilities where the fair values were not
readily available or observable.
F-48
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
10. GOODWILL
AND INTANGIBLE ASSETS, net (continued)
Goodwill
(continued)
Goodwill
has been allocated to the Companys reportable segments as follows:
|
|
|
South
|
|
|
|
|
|
Financial
|
|
|
|
|
|
|
|
African
|
|
|
International
|
|
|
inclusion and
|
|
|
|
|
|
|
|
transaction
|
|
|
transaction
|
|
|
applied
|
|
|
Carrying
|
|
|
|
|
processing
|
|
|
processing
|
|
|
technologies
|
|
|
value
|
|
|
Balance as of July 1, 2016
|
$
|
20,425
|
|
$
|
136,185
|
|
$
|
22,868
|
|
$
|
179,478
|
|
|
Acquisition of Ceevo
FS (Note 3)
|
|
-
|
|
|
2,475
|
|
|
-
|
|
|
2,475
|
|
|
Foreign currency adjustment(1)
|
|
2,706
|
|
|
1,910
|
|
|
2,264
|
|
|
6,880
|
|
|
Balance as of June 30, 2017
|
|
23,131
|
|
|
140,570
|
|
|
25,132
|
|
|
188,833
|
|
|
Impairment loss
|
|
(1,052
|
)
|
|
(19,865
|
)
|
|
-
|
|
|
(20,917
|
)
|
|
Foreign currency
adjustment(1)
|
|
(1,133
|
)
|
|
3,243
|
|
|
(947
|
)
|
|
1,163
|
|
|
Balance as of June 30, 2018
|
|
20,946
|
|
|
123,948
|
|
|
24,185
|
|
|
169,079
|
|
|
Impairment of
goodwill
|
|
(1,180
|
)
|
|
(7,011
|
)
|
|
(6,249
|
)
|
|
(14,440
|
)
|
|
Foreign currency adjustment(1)
|
|
(558
|
)
|
|
(4,209
|
)
|
|
(485
|
)
|
|
(5,252
|
)
|
|
Balance as of June 30, 2019
|
$
|
19,208
|
|
$
|
112,728
|
|
$
|
17,451
|
|
$
|
149,387
|
|
(1) the foreign currency adjustment represents the effects of
the fluctuations between the South African rand, the Euro and the Korean won,
and the U.S. dollar on the carrying value.
Intangible
assets, net
Summarized
below is the fair value of intangible assets acquired, translated at the
exchange rate applicable as of the relevant acquisition dates, and the
weighted-average amortization period:
|
|
|
Weighted-
|
|
Fair value as
|
|
Average
|
|
of acquisition
|
|
Amortization
|
|
date
|
|
period (in years)
|
Finite-lived intangible asset:
|
|
|
|
Acquired during the
year ended June 30, 2017
|
|
|
|
Pros Software customer relationships
|
$2,311
|
|
0.75
|
Ceevo FS
customer relationships
|
186
|
|
0.65
|
Ceevo FS software and unpatented technology
|
147
|
|
1.25
|
|
|
|
|
Indefinite-lived intangible asset:
|
|
|
|
Acquired during
the year ended June 30, 2017
|
|
|
|
Ceevo FS Financial institution license
|
$745
|
|
n/a
|
On
acquisition, the Company recognized deferred tax liabilities of approximately
$0.7 million related to the acquisition of intangible assets during the year
ended June 30, 2017.
The
Company assesses the carrying value of intangible assets for impairment whenever
events occur or circumstances change indicating that the carrying amount of the
intangible asset may not be recoverable. Except as discussed in Note 3, no
intangible assets have been impaired during the years ended June 30, 2019, 2018
and 2017, respectively.
F-49
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
10. GOODWILL
AND INTANGIBLE ASSETS, net (continued)
Intangible
assets, net (continued)
Summarized
below is the carrying value and accumulated amortization of intangible assets as
of June 30, 2019 and 2018:
|
|
As of June 30, 2019
|
|
|
As of June 30, 2018
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
carrying
|
|
|
Accumulated
|
|
|
carrying
|
|
|
carrying
|
|
|
Accumulated
|
|
|
carrying
|
|
|
|
value
|
|
|
amortization
|
|
|
value
|
|
|
value
|
|
|
amortization
|
|
|
value
|
|
Finite-lived intangible
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
relationships
|
$
|
96,653
|
|
$
|
(86,285
|
)
|
$
|
10,368
|
|
$
|
100,421
|
|
$
|
(76,237
|
)
|
$
|
24,184
|
|
Software and
unpatented technology
|
|
32,071
|
|
|
(31,829
|
)
|
|
242
|
|
|
33,121
|
|
|
(32,342
|
)
|
|
779
|
|
FTS patent
|
|
2,721
|
|
|
(2,721
|
)
|
|
-
|
|
|
2,792
|
|
|
(2,792
|
)
|
|
-
|
|
Exclusive licenses
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,506
|
|
|
(4,506
|
)
|
|
-
|
|
Trademarks
|
|
6,772
|
|
|
(6,265
|
)
|
|
507
|
|
|
6,962
|
|
|
(5,589
|
)
|
|
1,373
|
|
Total finite-lived
intangible assets
|
|
138,217
|
|
|
(127,100
|
)
|
|
11,117
|
|
|
147,802
|
|
|
(121,466
|
)
|
|
26,336
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial institution license
|
|
772
|
|
|
-
|
|
|
772
|
|
|
793
|
|
|
-
|
|
|
793
|
|
Total
indefinite-lived intangible assets
|
|
772
|
|
|
-
|
|
|
772
|
|
|
793
|
|
|
-
|
|
|
793
|
|
Total intangible assets
|
$
|
138,989
|
|
$
|
(127,100
|
)
|
$
|
11,889
|
|
$
|
148,595
|
|
$
|
(121,466
|
)
|
$
|
27,129
|
|
Amortization
expense charged for the years to June 30, 2019, 2018 and 2017 was $22.1 million,
$11.8 million, and $14.0 million, respectively.
Future
estimated annual amortization expense for the next five fiscal years, assuming
exchange rates prevailing on June 30, 2019, is presented in the table below.
Actual amortization expense in future periods could differ from this estimate as
a result of acquisitions, changes in useful lives, exchange rate fluctuations
and other relevant factors.
2020
|
$
|
7,955
|
|
2021
|
|
2,803
|
|
2022
|
|
72
|
|
2023
|
|
71
|
|
2024
|
|
71
|
|
Thereafter
|
|
145
|
|
Total future
estimated amortization expense
|
$
|
11,117
|
|
F-50
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
11. REINSURANCE
ASSETS AND POLICY HOLDER LIABILITIES UNDER INSURANCE AND INVESTMENT
CONTRACTS
Reinsurance
assets and policy holder liabilities under insurance contracts
Summarized
below is the movement in reinsurance assets and policy holder liabilities under
insurance contracts during the years ended June 30, 2019 and 2018:
|
|
Reinsurance
|
|
|
Insurance
|
|
|
|
assets(1)
|
|
|
contracts(2)
|
|
Balance as of July 1, 2017
|
$
|
191
|
|
$
|
(1,611
|
)
|
Increase in policy holder
benefits under insurance contracts
|
|
1,899
|
|
|
(9,714
|
)
|
Claims and
policyholders benefits under insurance contracts
|
|
(1,449
|
)
|
|
9,214
|
|
Foreign currency
adjustment(3)
|
|
(8
|
)
|
|
79
|
|
Balance as of June 30, 2018
|
|
633
|
|
|
(2,032
|
)
|
Increase in policy holder
benefits under insurance contracts
|
|
775
|
|
|
(8,137
|
)
|
Claims and
policyholders benefits under insurance contracts
|
|
(228
|
)
|
|
8,237
|
|
Foreign currency
adjustment(3)
|
|
(17
|
)
|
|
52
|
|
Balance as of June 30, 2019
|
$
|
1,163
|
|
$
|
(1,880
|
)
|
|
(1)
|
Included in other long-term assets (refer to Note
9);
|
|
(2)
|
Included in other long-term liabilities;
|
|
(3)
|
Represents the effects of the fluctuations of the ZAR
against the U.S. dollar.
|
The
Company has agreements with reinsurance companies in order to limit its losses
from large insurance contracts, however, if the reinsurer is unable to meet its
obligations, the Company retains the liability. The value of insurance contract
liabilities is based on the best estimate assumptions of future experience plus
prescribed margins, as required in the markets in which these products are
offered, namely South Africa. The process of deriving the best estimates
assumptions plus prescribed margins includes assumptions related to claim
reporting delays (based on average industry experience).
Reinsurance
assets and policy holder liabilities under investment contracts
Summarized
below is the movement in assets and policy holder liabilities under investment
contracts during the years ended June 30, 2019 and 2018:
|
|
|
|
|
Investment
|
|
|
|
Assets(1)
|
|
|
contracts(2)
|
|
Balance as of July 1, 2017
|
$
|
627
|
|
$
|
(627
|
)
|
Increase in policyholder
benefits under insurance contracts
|
|
13
|
|
|
(13
|
)
|
Foreign currency
adjustment(3)
|
|
(30
|
)
|
|
30
|
|
Balance as of June 30, 2018
|
|
610
|
|
|
(610
|
)
|
Increase in
policyholder benefits under insurance contracts
|
|
24
|
|
|
(24
|
)
|
Foreign currency
adjustment(3)
|
|
(15
|
)
|
|
15
|
|
Balance as of June 30, 2019
|
$
|
619
|
|
$
|
(619
|
)
|
|
(1)
|
Included in other long-term assets (refer to Note
9);
|
|
(2)
|
Included in other long-term liabilities;
|
|
(3)
|
Represents the effects of the fluctuations of the ZAR
against the U.S. dollar.
|
The
Company does not offer any investment products with guarantees related to
capital or returns.
F-51
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
12. BORROWINGS
South
Africa
The
amounts below have been translated at exchange rates applicable as of the dates
specified.
July 2017 Facilities, as amended, comprising a short-term facility
and long-term borrowings
Long-term borrowings Facilities A, B, C and D
On
July 21, 2017, Net1 SA entered into a Common Terms Agreement, Senior Facility A
Agreement, Senior Facility B Agreement, Senior Facility C Agreement,
Subordination Agreement, Security Cession & Pledge and certain ancillary
loan documents (collectively, the Original Loan Documents) with RMB, a South
African corporate and investment bank, and Nedbank Limited (acting through its
Corporate and Investment Banking division), an African corporate and investment
bank, and any other lenders that may participate in such loans (collectively,
the Lenders), pursuant to which, among other things, Net1 SA may borrow up to
an aggregate of ZAR 1.25 billion to finance a portion of its investment in Cell
C and to fund its on-going working capital requirements. Net1 agreed to
guarantee the obligations of Net1 SA to the Lenders and subordinate any claims
it may have against Net1 SA and certain of its subsidiaries to the Lenders
claims against such persons. On July 26, 2017, Net1 SA entered into a letter
agreement (the Letter and together with the Original Loan Documents and March
2018 amendment described below, the Loan Documents) with the Lenders to amend
the Common Terms Agreement to, among other things, permit the amounts borrowed
under the Senior Facility B to fund the acquisition of Cell C shares and adjust
the terms of certain conditions precedent. On March 8, 2018, the Company amended
its South African long-term facility to include an additional term loan,
Facility D, of up to ZAR 210.0 million.
The
Loan Documents provide for a Facility A term loan of up to ZAR 750 million, a
Facility B term loan of up to ZAR 500 million, a Facility C term loan in an
amount equal to the aggregate amount of voluntary prepayments of the outstanding
principal amount of the Facility A loan, and a Facility D term loan of up to ZAR
210 million. Net1 SA paid non-refundable deal origination fees of approximately
$0.6 million and $0.2 million in August 2017 and March 2018, respectively.
Interest on the loans was payable quarterly based on the Johannesburg Interbank
Agreed Rate (JIBAR) in effect from time to time plus a margin of 2.25% for the
Facility A loan, 3.5% for the Facility B loan , 2.25% for the Facility C loan
and 2.75% for the Facility D loan. Interest expense incurred during the years
ended June 30, 2019 and 2018, was $2.9 million and $7.2 million, respectively.
During the years ended June 30, 2019 and 2018, $0.3 million and $0.5 million,
respectively, of prepaid facility fees were amortized. On July 26, 2017, the
Company utilized ZAR 1.25 billion (approximately $92.2 million) of its South
African long-term facility to partially fund the acquisition of 15% of Cell C.
On March 9, 2018, the Company utilized ZAR 84.0 million (approximately $7.1
million) of its new ZAR 210 million South African long-term facility to
partially fund the acquisition of a further 4.0% in DNI and the balance of the
facility to extend a ZAR 126.0 million (approximately $10.6 million) loan to DNI
(refer to Note 3).
Principal
repayments of the facilities were due in twelve quarterly installments
commencing on September 29, 2017 and the Company made repayments of ZAR 683.8
million ($46.9 million) and ZAR 776.3 million ($60.5 million) during the years
ended June 30, 2019 and 2018, respectively. A principal repayment of ZAR 151.3
million ($10.7 million, translated at exchange rates applicable as of June 30,
2019) was scheduled to be paid on June 29, 2019, however the Company settled the
outstanding amount of ZAR 230.0 million ($16.0 million) in full on May 3, 2019,
utilizing a combination of existing cash reserves and through the sale of DNI
shares as discussed in Note 3.
The
loans were secured by a pledge by Net1 SA of, among other things, its entire
equity interests in Cell C and DNI. The Loan Documents contain customary
covenants that require Net1 SA to maintain a specified total net leverage ratio
and restrict the ability of Net1 SA, and certain of its subsidiaries to make
certain distributions with respect to their capital stock, prepay other debt,
encumber their assets, incur additional indebtedness, make investment above
specified levels, engage in certain business combinations and engage in other
corporate activities, without the Lenders consent.
F-52
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
12. BORROWINGS
(continued)
South
Africa (continued)
July 2017 Facilities, as amended, comprising a short-term facility
and long-term borrowings (continued)
Long-term borrowings Facilities A, B, C and D (continued)
On
September 4, 2019, Net1 SA further amended the July 2017 Facilities agreement,
which included adding Main Street 1692 (RF) Proprietary Limited (Debt
Guarantor), a South African company incorporated for the sole purpose of
holding collateral for the benefit of the Lenders and acting as debt guarantor.
The covenants were also amended and now include customary covenants that require
Net1 SA to maintain a specified total asset cover ratio and restrict the ability
of Net1 SA, and certain of its subsidiaries to make certain distributions with
respect to their capital stock, prepay other debt, encumber their assets, incur
additional indebtedness, make investment above specified levels, engage in
certain business combinations and engage in other corporate activities. Net1
also agreed that in the event of any sale of KSNET, Inc., it would deposit a
portion of the proceeds in an amount of the USD equivalent of the Facility F
loan and the Nedbank general banking facility commitment into a bank account
secured in favor of the Debt Guarantor. Net1 SA also entered into a pledge and
cession agreement with the Debt Guarantor pursuant to which, among other things,
Net1 SA agreed to cede its shareholdings in Cell C, DNI and Net1 FIHRST Holdings
(Pty) Ltd to the Debt Guarantor.
Short-term facility - Facility E
On
September 26, 2018, Net1 SA further amended its amended July 2017 Facilities
agreement with RMB to include an overdraft facility (Facility E) of up to ZAR
1.5 billion ($106.5 million, translated at exchange rates applicable as of June
30, 2019) to fund the Companys ATMs. The available Facility E overdraft
facility was subsequently reduced to ZAR 1.2 billion ($85.2 million) in
September 2019. Interest on the overdraft facility is payable on the last day of
each month and on the final maturity date based on South African prime rate. The
overdraft facility will be reviewed in September 2020. The overdraft facility
amount utilized must be repaid in full within one month of utilization and at
least 90% of the amount utilized must be repaid with 25 days. The overdraft
facility is secured by a pledge by Net1 SA of, among other things, cash and
certain bank accounts utilized in the Companys ATM funding process, the cession
of an insurance policy with Senate Transit Underwriters Managers Proprietary
Limited, and any rights and claims Net1 SA has against Grindrod Bank Limited.
The Company paid a non-refundable origination fee of approximately ZAR 3.8
million ($0.3 million) in October 2018. As at June 30, 2019, the Company had
utilized approximately ZAR 1.0 billion ($69.6 million) of this overdraft
facility. This ZAR 1.2 billion overdraft facility may only be used to fund ATMs
and therefore the overdraft utilized and converted to cash to fund the Companys
ATMs is considered restricted cash. The prime rate on June 30, 2019, was 10.25%,
and reduced to 10.00% on July 19, 2019, following a reduction in the South
African repo rate.
Short-term facility - Facility F
On
September 4, 2019, Net1 SA further amended its amended July 2017 Facilities
agreement with RMB to include an overdraft facility (Facility F) of up to ZAR
300.0 million ($21.3 million, translated at exchange rates applicable as of June
30, 2019) for the sole purposes of funding the acquisition of airtime from Cell
C. Net1 SA may not dispose of the airtime acquired from Cell C prior to April 1,
2020, without the prior consent of RMB, Absa Bank Limited and Investec Asset
Management Proprietary Limited. Facility F comprises (i) a first Senior Facility
F loan of ZAR 220 million (ii) a second Senior Facility F loan of ZAR 80
million, or such lesser amount as may be agreed by the facility agent. Facility
F is required to be repaid in full nine month following the first utilization of
the facility. Net1 SA is required to prepay Facility F subject to customary
prepayment terms. Interest on Facility F is payable quarterly in arrears based
JIBAR plus a margin of 5.50% per annum. The margin on the Facility F will
increase by 1% per annum if Net1 SA has not disposed of certain assets by
October 31, 2019, and will increase by a further 1% if Net1 SA has not disposed
of its shareholding in DNI by January 31, 2020. Net1 SA paid a non-refundable
structuring fee of ZAR 2.2 million to the Lenders in September 2019.
F-53
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
12. BORROWINGS
(continued)
South
Africa (continued)
June 2018 Facility, a long-term borrowing (a DNI
facility)
On
June 28, 2018, DNI entered into a Revolving Credit Facility Agreement (DNI
Credit Facility Agreement) with RMB and K2018318388 (South Africa) (RF)
Proprietary Limited (Debt Guarantor), a South African company incorporated for
the sole purpose of holding collateral for the benefit of RMB and acting as debt
guarantor. DNI, RMB and the Debt Guarantor concurrently entered into a
Subordination Agreement; Shareholder Guarantee, Cession and Pledge Agreement;
Guarantee Cession and Pledge Agreement (collectively with the DNI Credit
Facility Agreement, the Revolving Credit Agreement Documents), with various
other parties, including DNIs subsidiaries and DNIs shareholders (except Net1
SA), pursuant to which, among other things, DNI obtained a ZAR 200.0 million
revolving credit facility with a term of three years to June 2021 from RMB to
finance the acquisition and/ or requisition of telecommunication towers. The
facility has been deconsolidated from the Companys consolidated balance sheet
following the disposal of DNI on March 31, 2019, as described in Note 3.
Interest
on the revolving credit facility is payable quarterly based on JIBAR in effect
from time to time plus a margin of 2.75% . Interest expense incurred by the
Company during the year ended June 30, 2019, was $0.6 million. DNI paid a
non-refundable deal origination fee of approximately ZAR 2.3 million ($0.2
million) in July 2018. DNIs shareholders, excluding Net1 SA, have agreed to
pledge their entire equity interest in DNI to RMB, guarantee the obligations of
DNI to RMB and subordinate any claims they may have against DNI and certain of
its subsidiaries to RMBs claims against such persons. DNI has agreed to ensure
that Net1 SA will become bound by the terms and conditions applicable to the
other DNI shareholders party to the Shareholder Guarantee, Cession and Pledge
Agreement once the DNI shares pledged as security for the July 2017 facilities
are released. The revolving credit facility is also secured by a pledge by DNI
of, among other things, its entire equity interests in its subsidiaries and it
has also agreed to arrange for the registration of notarial bonds over its
movable property. The Loan Documents contain customary covenants that require
DNI to maintain specified net senior debt to EBITDA and EBITDA to net senior
interest ratios and restrict the ability of DNI, and certain of its subsidiaries
to make certain distributions with respect to their capital stock, prepay other
debt, encumber their assets, incur additional indebtedness, make investment
above specified levels, engage in certain business combinations and engage in
other corporate activities, without the approval of RMB.
Nedbank facility, comprising short-term facilities
As
of June 30, 2019, the aggregate amount of the Companys short-term South African
credit facility with Nedbank Limited was ZAR 450.0 million ($32.0 million). The
credit facility comprises an overdraft facility of (i) up to ZAR 300 million
($21.3 million), which is further split into (a) a ZAR 250.0 million ($17.8
million) overdraft facility which may only be used to fund ATMs used at pay
points and (b) a ZAR 50 million ($3.6 million) general banking facility and (ii)
indirect and derivative facilities of up to ZAR 150 million ($10.7 million),
which include letters of guarantees, letters of credit and forward exchange
contracts. The ZAR 250.0 million component of the primary amount may only be
used to fund ATMs and therefore this component of the primary amount utilized
and converted to cash to fund the Companys ATMs is considered restricted cash.
The
Company has ceded its investment in Cash Paymaster Services Proprietary Limited
(CPS), a South African subsidiary, as well as all of its rights, title and
interest in an insurance policy issued by Fidelity Risk Proprietary Limited as
security for its repayment obligations under the facility. A commitment fee of
0.35% per annum is payable on the monthly unutilized amount of the overdraft
portion of the short-term facility. The Company is required to comply with
customary non-financial covenants, including, without limitation, covenants that
restrict its ability to dispose of or encumber its assets, incur additional
indebtedness or engage in certain business combinations. The short-term facility
provides Nedbank with the right to set off funds held in certain identified
Company bank accounts with Nedbank against any amounts owed to Nedbank under the
facility. As of June 30, 2019, the Company had total funds of $2.7 million in
bank accounts with Nedbank which have been set off against $8.6 million drawn
under the Nedbank facility, for a net amount drawn under the facility of $5.9
million. As of June 30, 2019, the interest rate on the overdraft facility was
9.10%, and reduced to 8.85% on July 19, 2019, following a reduction in the South
African repo rate.
As
of June 30, 2019, the Company has utilized approximately ZAR 82.8 million ($5.9
million) of its ZAR 250 million overdraft facility to fund ATMs and utilized
none of its ZAR 50 million general banking facility. As of June 30, 2019 and
2018, the Company had utilized approximately ZAR 93.6 million ($6.6 million) and
ZAR 108.0 million ($7.9 million), respectively, of its indirect and derivative
facilities of ZAR 150 million to enable the bank to issue guarantee, letters of
credit and forward exchange contracts, in order for the Company to honor its
obligations to third parties requiring such guarantees (refer to Note 22).
F-54
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
12. BORROWINGS
(continued)
South
Africa (continued)
October 2016 long-term facilities
On
October 4, 2016, Net1 SA, entered into a Subscription Agreement (the Blue Label
Subscription Agreement) with Blue Label Telecoms Limited (Blue Label), a
JSE-listed company which is a leading provider of prepaid electricity and
airtime in South Africa. Pursuant to the Blue Label Subscription Agreement, Net1
SA intended to subscribe for approximately 117.9 million ordinary shares of Blue
Label at a price of ZAR 16.96 per share, for an aggregate price of ZAR 2.0
billion. Net1 SA entered into a facility agreement with RMB to fund ZAR 1.4
billion of the required ZAR 2 billion Blue Label transaction and paid a
guarantee fee of approximately ZAR 16.0 million ($1.1 million) during the year
ended June 30, 2017. In May 2017, Blue Label and Net1 SA mutually agreed that
Net1 SA would not subscribe for the shares in Blue Label and the Blue Label
Subscription Agreement was terminated. Interest expense for the year ended June
30, 2017, includes the ZAR 16.0 million guarantee fee expensed related to the
October 2016 facilities obtained from RMB.
United
States, a short-term facility
On
September 14, 2018, the Company renewed its $10.0 million overdraft facility
from Bank Frick and on February 4, 2019, the Company increased the overdraft
facility to $20.0 million. The interest rate on the facilities is 4.50% plus
3-month US dollar LIBOR and interest is payable on a quarterly basis. The
3-month US dollar LIBOR rate was 2.31988% on June 30, 2019. The facility has no
fixed term, however, it may be terminated by either party with six weeks written
notice. The facility is secured by a pledge of the Companys investment in Bank
Frick. As of June 30, 2019, the Company had utilized approximately $9.5 million
of this facility.
South
Korea
Short-term facility
The
Company obtained a one year KRW 10 billion ($8.6 million) short-term overdraft
facility from Hana Bank, a South Korean bank, in January 2019. The interest rate
on the facilities is 1.984% plus 3-month CD rate. The CD rate as of June 30,
2019, was 1.780% . The facility expires in January 2020, however it can be
renewed. The facility is unsecured with no fixed repayment terms. As of June 30,
2019, the Company had not utilized this facility.
Long-term borrowings
The
Companys wholly owned subsidiary, Net1 Applied Technologies Korea (Net1
Korea), signed a five-year senior secured facilities agreement (the Facilities
Agreement) with a consortium of South Korean banks in October 2013. On October
20, 2017, the Company made an unscheduled repayment of $16.6 million and settled
the full outstanding balance, including interest, related to these borrowings
and the Company was released from its security obligations created under the
Facilities Agreement. The Company made a scheduled repayment of its Facility A
loan of KRW 10 billion ($8.8 million), unscheduled voluntary principal
repayments towards its Facility A loan of KRW 22.1 billion ($19.6 million) and a
prepayment towards its Facility C revolving credit facility of KRW 10.0 billion
($8.9 million) during the year ended June 30, 2017. The Company utilized
approximately KRW 0.3 billion ($0.3 million) and KRW 0.9 billion ($0.8 million),
of its Facility C revolving credit facility to pay interest due during the year
ended June 30, 2018 and 2017, respectively.
Interest
on the loans and revolving credit facility was payable quarterly and was based
on the South Korean CD rate in effect from time to time plus a margin of 3.10%
for the Facility A loan and Facility C revolving credit facility. Total interest
expense related to the facilities during the years ended June 30, 2018 and 2017,
was $0.4 million and $1.2 million, respectively. Prepaid facility fees amortized
during each of the years ended June 30, 2018 and 2017, was approximately $0.1
million, respectively.
F-55
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
12. BORROWINGS
(continued)
Movement
in short-term borrowings
Summarized
below are the Companys short-term facilities as of June 30, 2019, and the
movement in the Companys short-term facilities from as of June 30, 2018 to as
of June 30, 2019:
|
|
|
|
|
|
|
|
|
|
United
|
|
|
|
South
|
|
|
|
|
|
|
|
South Africa
|
|
|
|
States
|
|
|
|
Korea
|
|
|
|
|
|
|
|
Amended
|
|
|
|
|
|
|
|
Bank
|
|
|
|
Hana
|
|
|
|
|
|
|
|
July 2017
|
|
|
|
Nedbank
|
|
|
|
Frick
|
|
|
|
Bank
|
|
|
|
Total
|
|
Short-term facilities as of June 30, 2019:
|
$
|
85,203
|
|
|
$
|
31,951
|
|
|
$
|
20,000
|
|
|
$
|
8,648
|
|
|
$
|
145,802
|
|
Overdraft
|
|
-
|
|
|
|
3,550
|
|
|
|
20,000
|
|
|
|
8,648
|
|
|
|
32,198
|
|
Overdraft
restricted as to use for ATM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
funding only
|
|
85,203
|
|
|
|
17,751
|
|
|
|
-
|
|
|
|
-
|
|
|
|
102,954
|
|
Indirect and
derivative facilities
|
|
-
|
|
|
|
10,650
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movement in utilized overdraft facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2018
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Utilized
|
|
722,375
|
|
|
|
85,843
|
|
|
|
14,536
|
|
|
|
-
|
|
|
|
822,754
|
|
Repaid
|
|
(655,612
|
)
|
|
|
(80,365
|
)
|
|
|
(4,992
|
)
|
|
|
-
|
|
|
|
(740,969
|
)
|
Foreign currency adjustment(1)
|
|
2,803
|
|
|
|
402
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,205
|
|
Balance as of June 30, 2019(2)
|
|
69,566
|
|
|
|
5,880
|
|
|
|
9,544
|
|
|
|
-
|
|
|
|
84,990
|
|
Restricted as to use for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATM funding only
|
|
69,566
|
|
|
|
5,880
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75,446
|
|
No
restrictions as to use
|
|
-
|
|
|
|
-
|
|
|
|
9,544
|
|
|
|
-
|
|
|
|
9,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movement in utilized indirect and
derivative facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2018
|
|
-
|
|
|
|
7,871
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,871
|
|
Guarantees cancelled
|
|
-
|
|
|
|
(1,075
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,075
|
)
|
Utilized
|
|
-
|
|
|
|
46
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46
|
|
Foreign currency adjustment(1)
|
|
-
|
|
|
|
(199
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(199
|
)
|
Balance as of June 30, 2019
|
$
|
-
|
|
|
$
|
6,643
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,643
|
|
(1) Represents the effects of the
fluctuations between the ZAR and the U.S. dollar.
(2) Nedbank as of June 30,
2019, of $5.9 million comprises the net of total overdraft facilities withdrawn
of $8.6 million offset against funds in bank accounts with Nedbank of $2.7
million.
F-56
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
12. BORROWINGS (continued)
Movement
in long-term borrowings
Summarized
below is the movement in the Companys long term borrowing from as of June 30,
2017, to as of June 30, 2019:
|
|
|
South Korea
|
|
|
|
South Africa
|
|
|
|
|
|
|
|
|
Continuing
|
|
|
|
Discontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended
|
|
|
|
2018
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Net1 Korea
|
|
|
|
July 2017
|
|
|
|
Facility
|
|
|
|
(Note 3)
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of July 1, 2017, allocated to
|
$
|
16,239
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16,239
|
|
|
Current portion of long-term borrowings
|
|
8,738
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,738
|
|
|
Long-term borrowings
|
|
7,501
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,501
|
|
|
Utilized
|
|
197
|
|
|
|
112,960
|
|
|
|
-
|
|
|
|
-
|
|
|
|
113,157
|
|
|
Repaid
|
|
(16,592
|
)
|
|
|
(60,470
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(77,062
|
)
|
|
DNI acquisition (Note 3)
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
616
|
|
|
|
616
|
|
|
Foreign currency
adjustment(1)
|
|
156
|
|
|
|
(2,942
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,786
|
)
|
|
Balance as of June 30, 2018, allocated to
|
|
-
|
|
|
|
49,548
|
|
|
|
-
|
|
|
|
616
|
|
|
|
50,164
|
|
|
Current portion of long-term
borrowings
|
|
-
|
|
|
|
44,079
|
|
|
|
-
|
|
|
|
616
|
|
|
|
44,695
|
|
|
Long-term borrowings
|
|
-
|
|
|
|
5,469
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,469
|
|
|
Utilized
|
|
-
|
|
|
|
-
|
|
|
|
14,613
|
|
|
|
-
|
|
|
|
14,613
|
|
|
Repaid
|
|
-
|
|
|
|
(31,844
|
)
|
|
|
(4,944
|
)
|
|
|
(569
|
)
|
|
|
(37,357
|
)
|
|
Repaid from sale
of DNI shares (Note 3)
|
|
-
|
|
|
|
(15,011
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(15,011
|
)
|
|
Deconsolidated (Note 3)
|
|
-
|
|
|
|
-
|
|
|
|
(10,435
|
)
|
|
|
-
|
|
|
|
(10,435
|
)
|
|
Foreign currency
adjustment(1)
|
|
-
|
|
|
|
(2,693
|
)
|
|
|
766
|
|
|
|
(47
|
)
|
|
|
(1,974
|
)
|
|
Balance as of June 30, 2019
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
(1)
|
Represents the effects of the fluctuations between the
ZAR and the Korean won, against the U.S. dollar.
|
13. OTHER
PAYABLES
Summarized
below is the breakdown of other payables as of June 30, 2019 and 2018:
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Accrual of implementation costs to be refunded to SASSA
|
$
|
34,039
|
|
$
|
-
|
|
|
Accruals
|
|
10,620
|
|
$
|
16,148
|
|
|
Provisions
|
|
6,074
|
|
|
8,211
|
|
|
Other
|
|
10,814
|
|
|
9,690
|
|
|
Value-added tax payable
|
|
3,234
|
|
|
5,478
|
|
|
Payroll-related payables
|
|
1,113
|
|
|
1,533
|
|
|
Participating merchants settlement obligation
|
|
555
|
|
|
585
|
|
|
|
$
|
66,449
|
|
$
|
41,645
|
|
Other
includes transactions-switching funds payable, deferred income, client deposits
and other payables.
F-57
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
13. OTHER PAYABLES (continued)
Accrual of implementation costs to be refunded to SASSA (continued)
After the award of the tender, SASSA requested that CPS biometrically register all social grant beneficiaries (including child grant beneficiaries) and collect additional information for each child grant recipient. CPS agreed to SASSA’s request and, as a result, it performed approximately 11 million additional registrations beyond those that CPS tendered for in the quoted service fee. Accordingly, CPS sought reimbursement from SASSA of the cost of this exercise, supported by a factual findings certificate from an independent auditing firm. SASSA paid CPS ZAR 317.0 million, including VAT, as full settlement of the additional costs CPS incurred.
In March 2015, Corruption Watch, a South African non-profit civil society organization, commenced legal proceedings in the Gauteng Division, Pretoria of the High Court of South Africa (“High Court”) seeking an order by the High Court to review and set aside the decision of SASSA’s Chief Executive Officer to approve a payment to CPS of ZAR 317.0 million and directing CPS to repay the aforesaid amount, plus interest. Corruption Watch claimed that there was no lawful basis to make the payment to CPS, and that the decision was unreasonable and irrational and did not comply with South African legislation. CPS was named as a respondent in this legal proceeding.
On February 22, 2018, the matter was heard by the High Court. On March 23, 2018, the High Court ordered that the June 15, 2012 variation agreement between SASSA and CPS be reviewed and set aside. CPS was ordered to refund ZAR 317.0 million to SASSA, plus interest from June 2014 to date of payment. On April 4, 2018, CPS filed an application seeking leave to appeal the whole order and judgment of the High Court with the High Court because it believed that the High Court erred in its application of the law and/or in fact in its findings. On April 25, 2018, the High Court refused the application seeking leave to appeal. In September 2018, CPS received notification from the Supreme Court that its petition seeking leave to appeal had been granted. The matter was heard on September 10, 2019.
On September 30, 2019, the Supreme Court delivered its
ruling in the matter, declining CPS' appeal and awarding costs against CPS. CPS
is liable to repay SASSA ZAR 317.0 million, plus interest from June 2014 to date
of payment. As a result, CPS recorded the liability at June 30, 2019, of $34.0
million (ZAR 479.4 million, translated at exchange rates applicable as of June
30, 2019, comprising a revenue refund of $19.7 million (ZAR 277.6 million),
accrued interest of $11.4 million (ZAR 161.0 million), unclaimed indirect taxes
of $2.8 million (ZAR 39.4 million) and estimated costs of $0.1 million (ZAR 1.4
million)). The Company has reduced revenue by $19.7 million during the year
ended June 30, 2019, because it has interpreted the Supreme Court ruling as a
price variation and not a nonreciprocal transaction.
F-58
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
14. COMMON
STOCK
Common
stock
Holders
of shares of Net1s common stock are entitled to receive dividends and other
distributions when declared by Net1s board of directors out of legally
available funds. Payment of dividends and distributions is subject to certain
restrictions under the Florida Business Corporation Act, including the
requirement that after making any distribution Net1 must be able to meet its
debts as they become due in the usual course of its business.
Upon
voluntary or involuntary liquidation, dissolution or winding up of Net1, holders
of common stock share ratably in the assets remaining after payments to
creditors and provision for the preference of any preferred stock according to
its terms. There are no pre-emptive or other subscription rights, conversion
rights or redemption or scheduled installment payment provisions relating to
shares of common stock. All of the outstanding shares of common stock are fully
paid and non-assessable.
Each
holder of common stock is entitled to one vote per share for the election of
directors and for all other matters to be voted on by shareholders. Holders of
common stock may not cumulate their votes in the election of directors, and are
entitled to share equally and ratably in the dividends that may be declared by
the board of directors, but only after payment of dividends required to be paid
on outstanding shares of preferred stock according to its terms. The shares of
Net1 common stock are not subject to redemption.
The
Companys number of shares, net of treasury, presented in the consolidated
balance sheets and consolidated statement of changes in equity includes
participating non-vested equity shares (specifically contingently returnable
shares) as described below in Note 17 Amended and Restated Stock Incentive
PlanRestricted StockGeneral Terms of Awards.
The
following table presents a reconciliation between the number of shares, net of
treasury, presented in the consolidated statement of changes in equity and the
number of shares, net of treasury, excluding non-vested equity shares that have
not vested during the years ended June 30, 2019, 2018 and 2017:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Number of shares, net of treasury:
|
|
|
|
|
|
|
|
|
|
Statement of changes in equity common stock
|
|
56,568,425
|
|
|
56,685,925
|
|
|
56,369,737
|
|
Less:
Non-vested equity shares that have not vested as of end of year (Note 17)
|
|
583,908
|
|
|
765,411
|
|
|
505,473
|
|
Number of shares, net of treasury excluding non-vested equity shares that
have not vested
|
|
55,984,517
|
|
|
55,920,514
|
|
|
55,864,264
|
|
Redeemable
common stock issued pursuant to transaction with the IFC Investors
Holders
of redeemable common stock have all the rights enjoyed by holders of common
stock, however, holders of redeemable common stock have additional contractual
rights. On April 11, 2016, the Company entered into a Subscription Agreement
(the Subscription Agreement) with International Finance Corporation, IFC
African, Latin American and Caribbean Fund, LP, IFC Financial Institutions
Growth Fund, LP, and Africa Capitalization Fund, Ltd. (collectively, the IFC
Investors). Under the Subscription Agreement, the IFC Investors purchased, and
the Company sold in the aggregate, approximately 9.98 million shares of the
Companys common stock, par value $0.001 per share, at a price of $10.79 per
share, for gross proceeds to the Company of approximately $107.7 million. The
Company has accounted for these 9.98 million shares as redeemable common stock
as a result of the put option discussed below.
The
Company has entered into a Policy Agreement with the IFC Investors (the Policy
Agreement). The material terms of the Policy Agreement are described below.
F-59
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
14. COMMON
STOCK (continued)
Redeemable
common stock issued pursuant to transaction with the IFC Investors
(continued)
Board Rights
For
so long as the IFC Investors in aggregate beneficially own shares representing
at least 5% of the Companys common stock, the IFC Investors will have the right
to nominate one director to the Companys board of directors. For so long as the
IFC Investors in aggregate beneficially own shares representing at least 2.5% of
the Companys common stock, the IFC Investors will have the right to appoint an
observer to the Companys board of directors at any time when they have not
designated, or do not have the right to designate, a director.
Put Option
Each
Investor will have the right, upon the occurrence of specified triggering
events, to require the Company to repurchase all of the shares of its common
stock purchased by the IFC Investors pursuant to the Subscription Agreement (or
upon exercise of their preemptive rights discussed below). Events triggering
this put right relate to (1) the Company being the subject of a governmental
complaint alleging, a court judgment finding or an indictment alleging that the
Company (a) engaged in specified corrupt, fraudulent, coercive, collusive or
obstructive practices; (b) entered into transactions with targets of economic
sanctions; or (c) failed to operate its business in compliance with anti-money
laundering and anti-terrorism laws; or (2) the Company rejecting a bona fide
offer to acquire all of its outstanding Common Stock at a time when it has in
place or implements a shareholder rights plan, or adopting a shareholder rights
plan triggered by a beneficial ownership threshold of less than twenty percent.
The put price per share will be the higher of the price per share paid by the
IFC Investors pursuant to the Subscription Agreement (or paid when exercising
their preemptive rights) and the volume weighted average price per share
prevailing for the 60 trading days preceding the triggering event, except that
with respect to a put right triggered by rejection of a bona fide offer, the put
price per share will be the highest price offered by the offeror. The Company
believes that the put option has no value and, accordingly, has not recognized
the put option in its consolidated financial statements.
Registration Rights
The
Company has agreed to grant certain registration rights to the IFC Investors for
the resale of their shares of the Companys common stock, including filing a
resale shelf registration statement and taking certain actions to facilitate
resales thereunder.
Preemptive Rights
For
so long as the IFC Investors hold in aggregate 5% of the outstanding shares of
common stock of the Company, each Investor will have the right to purchase its
pro-rata share of new issuances of securities by the Company, subject to certain
exceptions.
Sale
of common stock during fiscal 2017
In
February 2017, the Company sold a total of five million shares of its common
stock at a price of $9.00 per share to two investors, for aggregate gross
proceeds to the Company of $45.0 million. These sales were made pursuant to
stock purchase agreements entered into on October 6, 2016, as amended.
F-60
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
14. COMMON
STOCK (continued)
Common
stock repurchases
Executed under share repurchase authorizations
On
February 3, 2016, the Companys Board of Directors approved the replenishment of
its share repurchase authorization to repurchase up to an aggregate of $100
million of common stock. The authorization has no expiration date. The share
repurchase authorization will be used at managements discretion, subject to
limitations imposed by SEC Rule 10b-18 and other legal requirements and subject
to price and other internal limitations established by the Board. Repurchases
will be funded from the Companys available cash. Share repurchases may be made
through open market purchases, privately negotiated transactions, or both. There
can be no assurance that the Company will purchase any shares or any particular
number of shares. The authorization may be suspended, terminated or modified at
any time for any reason, including market conditions, the cost of repurchasing
shares, liquidity and other factors that management deems appropriate.
In
June 2016, the Company adopted a 10b-5 in connection with its $100 million
authorization. The plan expired at the end of August 2016. During the first
quarter of the year ended June 30, 2017, the Company repurchased 3,137,609
shares under its share repurchase authorization for approximately $31.6 million.
Other repurchases
The
Company did not repurchase any of its shares during the years ended June 30,
2019 and 2018, respectively, outside of the authorization. On May 24, 2017, the
Company and one of its co-founders, the former chief executive officer and
former member of its board of directors, Mr. S.C.P. Belamant, entered into a
Separation and Release of Claims Agreement (the Separation Agreement). The
Company repurchased 1,269,751 shares of its common stock from Mr. Belamant, at a
price of $10.80 per share, for an aggregate consideration of $13.7 million under
the Separation Agreement.
15. ACCUMULATED
OTHER COMPREHENSIVE (LOSS) INCOME
The
table below presents the change in accumulated other comprehensive (loss) income
per component during the years ended June 30, 2019, 2018 and 2017:
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
currency
|
|
|
|
|
|
|
|
translation
|
|
|
|
|
|
|
|
reserve
|
|
|
Total
|
|
|
|
|
(as restatedA )
|
|
|
(as restatedA )
|
|
|
Balance as of July 1, 2016
|
$
|
(189,692
|
)
|
$
|
(189,692
|
)
|
|
Movement in foreign currency
translation reserve related to equity accounted
|
|
|
|
|
|
|
|
investment
|
|
(2,697
|
)
|
|
(2,697
|
)
|
|
Movement in foreign currency
translation reserve
|
|
29,653
|
|
|
29,653
|
|
|
Balance as of June 30, 2017
|
|
(162,736
|
)
|
|
(162,736
|
)
|
|
Movement in foreign currency
translation reserve related to equity accounted
|
|
|
|
|
|
|
|
investment
|
|
(2,426
|
)
|
|
(2,426
|
)
|
|
Movement in foreign currency
translation reserve
|
|
(19,376
|
)
|
|
(19,376
|
)
|
|
Balance as of June 30, 2018
|
|
(184,538
|
)
|
|
(184,538
|
)
|
|
Release of foreign currency
translation reserve related to DNI disposal (Note 3)
|
|
1,806
|
|
|
1,806
|
|
|
Release of
foreign currency translation reserve related to disposal of DNI
|
|
|
|
|
|
|
|
interest as an equity method
investment (Note 3)
|
|
646
|
|
|
646
|
|
|
Movement in
foreign currency translation reserve related to equity accounted
|
|
|
|
|
|
|
|
investment
|
|
4,251
|
|
|
4,251
|
|
|
Movement in
foreign currency translation reserve
|
|
(21,438
|
)
|
|
(21,438
|
)
|
|
Balance as of June 30, 2019
|
$
|
(199,273
|
)
|
$
|
(199,273
|
)
|
|
(A)
|
Certain amounts have been restated to correct the
misstatement discussed in Note 1.
|
F-61
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
15. ACCUMULATED
OTHER COMPREHENSIVE (LOSS)
INCOME
(continued)
During
the year ended June 30, 2019, the Company reclassified $1.8 million from
accumulated other comprehensive loss (accumulated foreign currency translation
reserve) to net (loss) income related to the DNI disposal (refer to Note 3) and
reclassified $0.6 million from accumulated other comprehensive loss (accumulated
foreign currency translation reserve) to net (loss) income related to the
disposal of the DNI interest as an equity method investment (refer to Note
3).There were no reclassifications from accumulated other comprehensive loss to
comprehensive (loss) income during the year ended June 30, 2018 and 2017,
respectively.
16. REVENUE
The
Company is a leading provider of transaction processing services, financial
inclusion products and services and secure payment technology. The Company
operates market-leading payment processors in South Africa and internationally.
The Company offers debit, credit and prepaid processing and issuing services for
all major payment networks. In South Africa, The Company provides innovative
low-cost financial inclusion products, including banking, lending and insurance,
and, through DNI, was a leading distributor of mobile subscriber starter packs
for Cell C, a South African mobile network operator.
The
following table represents our revenue disaggregated by major revenue streams,
including reconciliation to operating segments for the year ended June 30,
2019:
|
|
|
|
|
|
|
|
|
Rest of
|
|
|
|
|
|
|
|
South
|
|
|
|
|
|
the
|
|
|
|
|
|
|
|
Africa
|
|
|
Korea
|
|
|
world
|
|
|
Total
|
|
|
South African transaction
processing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Processing fees
|
$
|
79,379
|
|
$
|
-
|
|
$
|
-
|
|
$
|
79,379
|
|
|
Welfare benefit distribution fees
|
|
3,086
|
|
|
-
|
|
|
-
|
|
|
3,086
|
|
|
Other
|
|
6,583
|
|
|
-
|
|
|
-
|
|
|
6,583
|
|
|
Sub-total
|
|
89,048
|
|
|
-
|
|
|
-
|
|
|
89,048
|
|
|
International transaction processing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Processing fees
|
|
-
|
|
|
132,731
|
|
|
9,303
|
|
|
142,034
|
|
|
Other
|
|
-
|
|
|
5,695
|
|
|
539
|
|
|
6,234
|
|
|
Sub-total
|
|
-
|
|
|
138,426
|
|
|
9,842
|
|
|
148,268
|
|
|
Financial inclusion and applied technologies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom products and services
|
|
58,209
|
|
|
-
|
|
|
-
|
|
|
58,209
|
|
|
Account holder
fees
|
|
17,428
|
|
|
-
|
|
|
-
|
|
|
17,428
|
|
|
Lending revenue
|
|
27,512
|
|
|
-
|
|
|
-
|
|
|
27,512
|
|
|
Technology
products
|
|
20,706
|
|
|
-
|
|
|
-
|
|
|
20,706
|
|
|
Insurance revenue
|
|
5,862
|
|
|
-
|
|
|
-
|
|
|
5,862
|
|
|
Other
|
|
13,666
|
|
|
-
|
|
|
-
|
|
|
13,666
|
|
|
Sub-total
|
|
143,383
|
|
|
-
|
|
|
-
|
|
|
143,383
|
|
|
Corporate/Eliminations - revenue refund (Note 13)
|
|
(19,709)
|
|
|
-
|
|
|
-
|
|
|
(19,709)
|
|
|
|
$
|
212,722
|
|
$
|
138,426
|
|
$
|
9,842
|
|
$
|
360,990
|
|
17. STOCK-BASED
COMPENSATION
Amended
and Restated Stock Incentive Plan
The
Companys Amended and Restated 2015 Stock Incentive Plan (the Plan) was most
recently amended and restated on November 11, 2015, after approval by
shareholders. No evergreen provisions are included in the Plan. This means that
the maximum number of shares issuable under the Plan is fixed and cannot be
increased without shareholder approval, the plan expires by its terms upon a
specified date, and no new stock options are awarded automatically upon exercise
of an outstanding stock option. Shareholder approval is required for the
repricing of awards or the implementation of any award exchange program.
F-62
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
17. STOCK-BASED
COMPENSATION (continued)
Amended
and Restated Stock Incentive Plan (continued)
The
Plan permits Net1 to grant to its employees, directors and consultants incentive
stock options, nonqualified stock options, stock appreciation rights, restricted
stock, performance-based awards and other awards based on its common stock. The
Remuneration Committee of the Companys Board of Directors (Remuneration
Committee) administers the Plan.
The
total number of shares of common stock issuable under the Plan is 11,052,580.
The maximum number of shares for which awards, other than performance-based
awards, may be granted in any combination during a calendar year to any
participant is 569,120. The maximum limits on performance-based awards that any
participant may be granted during a calendar year are 569,120 shares subject to
stock option awards and $20 million with respect to awards other than stock
options. Shares that are subject to awards which terminate or lapse without the
payment of consideration may be granted again under the Plan. Shares delivered
to the Company as part or full payment for the exercise of an option or to
satisfy withholding obligations upon the exercise of an option may be granted
again under the Plan in the Remuneration Committees discretion. No awards may
be granted under the Plan after August 19, 2025, but awards granted on or before
such date may extend to later dates.
Options
General Terms of Awards
Option
awards are generally granted with an exercise price equal to the market price of
the Company's stock at the date of grant, with vesting conditioned upon the
recipients continuous service through the applicable vesting date and expire 10
years after the date of grant. The options generally become exercisable in
accordance with a vesting schedule ratably over a period of three years from the
date of grant. The Company issues new shares to satisfy stock option award
exercises but may also use treasury shares.
Valuation Assumptions
The
table below presents the range of assumptions used to value options granted
during the year ended June 30, 2019:
|
2019
|
Expected volatility
|
44%
|
Expected dividends
|
0%
|
Expected life (in years)
|
3
|
Risk-free rate
|
2.75%
|
No
stock options were awarded during the years ended June 30, 2018 and 2017,
respectively.
Restricted Stock
General Terms of Awards
Shares
of restricted stock are considered to be participating non-vested equity shares
(specifically contingently returnable shares) for the purposes of calculating
earnings per share (refer to Note 19) because, as discussed in more detail
below, the recipient is obligated to transfer any unvested restricted stock back
to the Company for no consideration and these shares of restricted stock are
eligible to receive non-forfeitable dividend equivalents at the same rate as
common stock. Restricted stock generally vests ratably over a three year period,
with vesting conditioned upon the recipients continuous service through the
applicable vesting date and under certain circumstances, the achievement of
certain performance targets, as described below.
Recipients
are entitled to all rights of a shareholder of the Company except as otherwise
provided in the restricted stock agreements. These rights include the right to
vote and receive dividends and/or other distributions. However, the restricted
stock agreements generally prohibit transfer of any nonvested and forfeitable
restricted stock. If a recipient ceases to be a member of the Board of Directors
or an employee for any reason, all shares of restricted stock that are not then
vested and nonforfeitable will be immediately forfeited and transferred to the
Company for no consideration. Forfeited shares of restricted stock are available
for future issuances by the Remuneration Committee.
F-63
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
17. STOCK-BASED
COMPENSATION (continued)
Amended
and Restated Stock Incentive Plan (continued)
Restricted Stock (continued)
General Terms of Awards (continued)
The
Company issues new shares to satisfy restricted stock awards.
Valuation Assumptions
The
fair value of restricted stock is generally based on the closing price of the
Companys stock quoted on The Nasdaq Global Select Market on the date of
grant.
Vesting of all non-employee director shares issued prior to June 30,
2017
Grants
of restricted stock to non-employee directors made during fiscal 2017, as well
as those grants made in prior years, originally vested over a three-year period.
After the end of fiscal 2017, the Companys board consulted with Pay Governance,
an independent compensation consultant, and determined that one-year vesting of
restricted stock grants is a more common compensation practice for independent
directors and therefore, amended the terms of outstanding awards to vest
one-year after grant. As a result of this amendment, 56,250 shares of restricted
stock held by the non-employee directors as of June 30, 2017, were fully-vested
during the year ended June 30, 2018.
Forfeiture of restricted stock awarded in August and November 2014 that did
not achieve targeted market conditions
In
August and November 2014, respectively, the Remuneration Committee approved an
award of 127,626 and 71,530 shares of restricted stock to employees. These
shares of restricted stock were scheduled to vest in full only on the date, if
any, the following conditions were satisfied: (1) the closing price of the
Companys common stock equals or exceeds $19.41 (subject to appropriate
adjustment for any stock split or stock dividend) for a period of 30 consecutive
trading days during a measurement period commencing on the date that the Company
filed its Annual Report on Form 10-K for the fiscal year ended 2017 and ending
on December 31, 2017 and (2) the recipient was employed by the Company on a
full-time basis when the condition in (1) was met. The $19.41 price target
represented a 20% increase, compounded annually, in the price of the Companys
common stock on Nasdaq over the $11.23 closing price on August 27, 2014. These
shares of restricted stock were forfeited during the year ended June 30, 2018,
because the target market conditions were not achieved. The stock-based
compensation charge related to these awards was not reversed upon forfeiture
because these awards contained market conditions.
The
127,626 and 71,530 shares of restricted stock were effectively forward starting
knock-in barrier options with a strike price of zero. The fair value of these
shares of restricted stock was calculated utilizing an adjusted Monte Carlo
simulation discounted cash flow model which was developed for the purpose of the
valuation of these shares. For each simulated share price path, the market share
price condition was evaluated to determine whether or not the shares would vest
under that simulation. The adjustment to the Monte Carlo simulation model
incorporates a jump diffusion process to the standard Geometric Brownian
Motion simulation, in order to capture the discontinuous share price jumps
observed in the Companys share price movements on stock exchanges on which it
is listed. Therefore, the simulated share price paths capture the idiosyncrasies
of the observed Company share price movements.
In
scenarios where the shares do not vest, the final vested value at maturity is
zero. In scenarios where vesting occurs, the final vested value on maturity is
the share price on vesting date. The value of the grant is the average of the
discounted vested values. The Company used an expected volatility of 76.01%, an
expected life of approximately three years, a risk-free rate of 1.27% and no
future dividends in its calculation of the fair value of the 127,626 shares of
restricted stock. The Company used an expected volatility of 63.73%, an expected
life of approximately three years, a risk-free rate of 1.21% and no future
dividends in its calculation of the fair value of the 71,530 shares of
restricted stock. Estimated expected volatility was calculated based on the
Companys 30 day VWAP share price using the exponentially weighted moving
average of returns.
F-64
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
17. STOCK-BASED COMPENSATION (continued)
Amended
and Restated Stock Incentive Plan (continued)
Restricted Stock (continued)
Forfeiture of restricted stock with Performance Conditions awarded in August
2015
In
August 2015, the Remuneration Committee approved an award of 301,537 shares of
restricted stock to employees. The shares of restricted stock awarded to
employees in August 2015 were subject to time-based and performance-based
vesting conditions. In order for any of the shares to have vested, the recipient
had to remain employed by the Company on a full-time basis on the date that it
filed its Annual Report on Form 10-K for the fiscal year ended June 30, 2018. If
that condition was satisfied, then the shares would vest based on the level of
Fundamental EPS the Company achieved for the fiscal year ended June 30, 2018
(2018 Fundamental EPS), as follows:
-
One-third of the shares will vest if the Company achieves 2018 Fundamental
EPS of $2.88;
-
Two-thirds of the shares will vest if the Company achieves 2018
Fundamental EPS of $3.30; and
-
All of the shares will vest if the Company achieves 2018 Fundamental EPS
of $3.76.
At
levels of 2018 Fundamental EPS greater than $2.88 and less than $3.76, the
number of shares that would have vested would be determined by linear
interpolation relative to 2018 Fundamental EPS of $3.30. All shares of
restricted stock have been valued utilizing the closing price of shares of the
Companys common stock quoted on The Nasdaq Global Select Market on the date of
grant.
Any
shares that did not vest in accordance with the above-described conditions would
be forfeited. During the year ended June 30, 2017, the Company reversed the
stock-based compensation charge recognized to date related to the 301,537 shares
of restricted stock because it believed that it was unlikely that the 2018
Fundamental EPS target would be achieved due to the dilutive impact on the
fundamental EPS calculation as a result of the issuance of approximately 10
million shares to the IFC in May 2016. The Company has not achieved the 2018
Fundamental EPS target and the 173,262 remaining shares that had not been
forfeited as a result of terminations were forfeited during the year ended June
30, 2018.
Forfeiture of 150,000 shares of restricted stock with Performance Conditions
awarded in August 2016
In
August 2016, the Remuneration Committee approved an award of 350,000 shares of
restricted stock to executive officers. In May 2017, the Company determined to
accelerate the vesting of all (200,000) of the shares of restricted stock
awarded to its former CEO. The shares of restricted stock awarded to executive
officers in August 2016 were subject to time-based and performance-based vesting
conditions. In order for any of the shares to vest, the recipient was required
to remain employed by the Company on a full-time basis on the date that it files
its Annual Report on Form 10-K for the fiscal year ended June 30, 2019. If that
condition is satisfied, then the shares will vest based on the level of
Fundamental EPS the Company achieves for the fiscal year ended June 30, 2019
(2019 Fundamental EPS), as follows:
-
One-third of the shares will vest if the Company achieves 2019 Fundamental
EPS of $2.60;
-
Two-thirds of the shares will vest if the Company achieves 2019
Fundamental EPS of $2.80; and
-
All of the shares will vest if the Company achieves 2019 Fundamental EPS
of $3.00.
At
levels of 2019 Fundamental EPS greater than $2.60 and less than $3.00, the
number of shares that will vest will be determined by linear interpolation
relative to 2019 Fundamental EPS of $2.80. All shares of restricted stock have
been valued utilizing the closing price of shares of the Companys common stock
quoted on The Nasdaq Global Select Market on the date of grant.
Any
shares that did not vest in accordance with the above-described conditions would
be forfeited. During the year ended June 30, 2019, the Company reversed the
stock-based compensation charge recognized related to 150,000 shares of
restricted stock because the Company did not achieve the 2019 Fundamental EPS
target. The 150,000 shares of restricted stock were forfeited.
F-65
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
17. STOCK-BASED
COMPENSATION (continued)
Amended
and Restated Stock Incentive Plan (continued)
Restricted Stock (continued)
Market Conditions - Restricted Stock Granted in August 2017
In
August 2017, the Remuneration Committee approved an award of 210,000 shares of
restricted stock to executive officers. The shares of restricted stock awarded
to executive officers in August 2017 are subject to a time-based vesting
condition and a market condition and vest in full only on the date, if any, that
the following conditions are satisfied: (1) the price of the Companys common
stock must equal or exceed certain agreed VWAP levels (as described below)
during a measurement period commencing on the date that it files its Annual
Report on Form 10-K for the fiscal year ended 2020 and ending on December 31,
2020 and (2) the recipient is employed by the Company on a full-time basis when
the condition in (1) is met. If either of these conditions is not satisfied,
then none of the shares of restricted stock will vest and they will be
forfeited. The $23.00 price target represents an approximate 35% increase,
compounded annually, in the price of the Companys common stock on Nasdaq over
the $9.38 closing price on August 23, 2017. The VWAP levels and vesting
percentages related to such levels are as follows:
-
Below $15.00 (threshold)0%
-
At or above $15.00 and below $19.0033%
-
At or above $19.00 and below $23.0066%
-
At or above $23.00100%
These
210,000 shares of restricted stock are effectively forward starting knock-in
barrier options with multi-strike prices of zero. The fair value of these shares
of restricted stock was calculated utilizing a Monte Carlo simulation model
which was developed for the purpose of the valuation of these shares. For each
simulated share price path, the market share price condition was evaluated to
determine whether or not the shares would vest under that simulation. A standard
Geometric Brownian motion process was used in the forecasting of the share price
instead of a jump diffusion model, as the share price volatility was more
stable compared to the highly volatile regime of previous years. Therefore, the
simulated share price paths capture the idiosyncrasies of the observed Company
share price movements.
In
scenarios where the shares do not vest, the final vested value at maturity is
zero. In scenarios where vesting occurs, the final vested value on maturity is
the share price on vesting date. The value of the grant is the average of the
discounted vested values. The Company used an expected volatility of 44.0%, an
expected life of approximately three years, a risk-free rate ranging between
1.275% to 1.657% and no future dividends in its calculation of the fair value of
the restricted stock. The estimated expected volatility was calculated based on
the Companys 30 day VWAP share price using the exponentially weighted moving
average of returns.
Market Conditions - Restricted Stock Granted in September 2018
In
September 2018, the Remuneration Committee approved an award of 148,000 shares
of restricted stock to executive officers. The 148,000 shares of restricted
stock awarded to executive officers in September 2018 are subject to a
time-based vesting condition and a market condition and vest in full only on the
date, if any, that the following conditions are satisfied: (1) the price of the
Companys common stock must equal or exceed certain agreed VWAP levels (as
described below) during a measurement period commencing on the date that it
files its Annual Report on Form 10-K for the fiscal year ended 2021 and ending
on December 31, 2021 and (2) the recipient is employed by the Company on a
full-time basis when the condition in (1) is met. If either of these conditions
is not satisfied, then none of the shares of restricted stock will vest and they
will be forfeited. The $23.00 price target represents an approximate 55%
increase, compounded annually, in the price of the Companys common stock on
Nasdaq over the $6.20 closing price on September 7, 2018. The VWAP levels and
vesting percentages related to such levels are as follows:
-
Below $15.00 (threshold)0%
-
At or above $15.00 and below $19.0033%
-
At or above $19.00 and below $23.0066%
-
At or above $23.00100%
F-66
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
17. STOCK-BASED
COMPENSATION (continued)
Amended
and Restated Stock Incentive Plan (continued)
Restricted Stock (continued)
Market Conditions - Restricted Stock Granted in September 2018
(continued)
The
fair value of these shares of restricted stock was calculated using a Monte
Carlo simulation of a stochastic volatility process. The choice of a stochastic
volatility process as an extension to the standard Black Scholes process was
driven by both observations of larger than expected moves in the daily time
series for the Companys VWAP price, but also the observation of the strike
structure of volatility (i.e. skew and smile) for out-of-the money calls and
out-of-the money puts versus at-the-money options for both the Companys stock
and NASDAQ futures.
In
scenarios where the shares do not vest, the final vested value at maturity is
zero. In scenarios where vesting occurs, the final vested value on maturity is
the share price on vesting date. In its calculation of the fair value of the
restricted stock, the Company used an average volatility of 37.4% for the VWAP
price, a discounting based on USD overnight indexed swap rates for the grant
date, and no future dividends. The average volatility was extracted from the
time series for VWAP prices as the standard deviation of log prices for the
three years preceding the grant date. The mean reversion of volatility and the
volatility of volatility parameters of the stochastic volatility process were
extracted by regressing log differences against log levels of volatility from
the time series for at-the-money options 30 day volatility quotes, which were
available from January 2, 2018 onwards.
Stock Appreciation Rights
The
Remuneration Committee may also grant stock appreciation rights, either singly
or in tandem with underlying stock options. Stock appreciation rights entitle
the holder upon exercise to receive an amount in any combination of cash or
shares of common stock (as determined by the Remuneration Committee) equal in
value to the excess of the fair market value of the shares covered by the right
over the grant price. No stock appreciation rights have been granted.
Stock
option and restricted stock activity
Options
The
following table summarizes stock option activity for the years ended June 30,
2019, 2018 and 2017:
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
Average
|
|
|
|
|
|
|
|
average
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
Grant
|
|
|
|
|
Number of
|
|
|
exercise
|
|
|
Term
|
|
|
Value
|
|
|
Date Fair
|
|
|
|
|
shares
|
|
|
price ($)
|
|
|
(in years)
|
|
|
($000)
|
|
|
Value ($)
|
|
|
Outstanding July 1,
2016
|
|
2,077,524
|
|
|
15.92
|
|
|
3.65
|
|
|
926
|
|
|
4.15
|
|
|
Exercised
|
|
(321,026
|
)
|
|
8.97
|
|
|
|
|
|
3,607
|
|
|
2.58
|
|
|
Expired unexercised
|
|
(474,443
|
)
|
|
22.51
|
|
|
|
|
|
-
|
|
|
3.98
|
|
|
Forfeitures
|
|
(435,448
|
)
|
|
17.88
|
|
|
|
|
|
-
|
|
|
5.34
|
|
|
Outstanding June 30,
2017
|
|
846,607
|
|
|
13.87
|
|
|
3.80
|
|
|
486
|
|
|
4.21
|
|
|
Forfeitures
|
|
(37,333
|
)
|
|
11.23
|
|
|
|
|
|
-
|
|
|
4.55
|
|
|
Outstanding June 30,
2018
|
|
809,274
|
|
|
13.99
|
|
|
2.67
|
|
|
370
|
|
|
4.20
|
|
|
Granted September 2018
|
|
600,000
|
|
|
6.20
|
|
|
10.00
|
|
|
1,212
|
|
|
2.02
|
|
|
Expired unexercised
|
|
(370,000
|
)
|
|
19.27
|
|
|
|
|
|
-
|
|
|
5.00
|
|
|
Forfeitures
|
|
(174,695
|
)
|
|
6.65
|
|
|
|
|
|
-
|
|
|
2.00
|
|
|
Outstanding June 30,
2019
|
|
864,579
|
|
|
7.81
|
|
|
7.05
|
|
|
-
|
|
|
2.62
|
|
These
options have an exercise price range of $6.20 to $11.23.
F-67
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
17. STOCK-BASED
COMPENSATION (continued)
Stock
option and restricted stock activity (continued)
Options (continued)
The
following table presents stock options vested and expected to vest as of June
30, 2019:
|
|
|
|
|
|
Weighted
|
|
|
average
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
|
exercise
|
|
|
contractual
|
|
|
intrinsic
|
|
|
|
|
Number of
|
|
|
price
|
|
|
term
|
|
|
value
|
|
|
|
|
shares
|
|
|
($)
|
|
|
(in years)
|
|
|
($000)
|
|
|
Vested and expected to vest
June 30, 2019
|
|
864,579
|
|
|
7.81
|
|
|
7.05
|
|
|
-
|
|
These
options have an exercise price range of $6.20 to $11.23.
The
following table presents stock options that are exercisable as of June 30,
2019:
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
|
average
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
|
Number of
|
|
|
exercise
|
|
|
Term
|
|
|
Value
|
|
|
|
|
shares
|
|
|
price ($)
|
|
|
(in years)
|
|
|
($000)
|
|
|
Exercisable June 30, 2019
|
|
353,579
|
|
|
10.15
|
|
|
3.84
|
|
|
-
|
|
No stock options became exercisable during the year ended June 30, 2019. During
the year ended June 30, 2018 and 2017, 105,982 and 154,803 stock options became
exercisable, respectively. No stock options were exercised during the year ended
June 30, 2019 and 2018, respectively. During the year ended June 30, 2017, the
Company received approximately $2.9 million from the exercise of 321,026 stock
options. During the year ended June 30, 2019, 2018 and 2017, employees forfeited
174,695, 37,333 and 435,448 stock options, respectively. During the year ended
June 30, 2019, 200,000 stock options awarded in August 2008 and 170,000 stock
options awarded in May 2009 expired unexercised. During the year ended June 30,
2017, 474,443 stock options awarded in August 2006 expired unexercised. The
Company issues new shares to satisfy stock option exercises.
F-68
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
17. STOCK-BASED
COMPENSATION (continued)
Stock
option and restricted stock activity (continued)
Restricted stock
The
following table summarizes restricted stock activity for the years ended June
30, 2019, 2018 and 2017:
|
|
|
Number of
|
|
|
|
Weighted
|
|
|
|
|
Shares of
|
|
|
|
Average Grant
|
|
|
|
|
Restricted
|
|
|
|
Date Fair Value
|
|
|
|
|
Stock
|
|
|
|
($000)
|
|
|
Non-vested
July 1, 2016
|
|
589,447
|
|
|
|
7,622
|
|
|
Total granted
|
|
389,587
|
|
|
|
4,172
|
|
|
Granted August 2016
|
|
387,000
|
|
|
|
4,145
|
|
|
Granted May 2017
|
|
2,587
|
|
|
|
27
|
|
|
Total vested
|
|
(268,091
|
)
|
|
|
2,590
|
|
|
Vested August 2016
|
|
(68,091
|
)
|
|
|
694
|
|
|
Vested June 2017
|
|
(200,000
|
)
|
|
|
1,896
|
|
|
Forfeitures
|
|
(205,470
|
)
|
|
|
2,219
|
|
|
Non-vested
June 30, 2017
|
|
505,473
|
|
|
|
11,173
|
|
|
Total granted
|
|
618,411
|
|
|
|
4,581
|
|
|
Granted August 2017
|
|
588,594
|
|
|
|
4,288
|
|
|
Granted March 2018
|
|
22,817
|
|
|
|
234
|
|
|
Granted May 2018
|
|
7,000
|
|
|
|
59
|
|
|
Vested August 2017
|
|
(56,250
|
)
|
|
|
527
|
|
|
Total forfeitures
|
|
(302,223
|
)
|
|
|
3,222
|
|
|
Forfeitures employee terminations
|
|
(33,635
|
)
|
|
|
516
|
|
|
Forfeitures August and November
2014 awards with market conditions
|
|
(95,326
|
)
|
|
|
1,133
|
|
|
Forfeitures August 2015 awards with performance
conditions
|
|
(173,262
|
)
|
|
|
1,573
|
|
|
Non-vested
June 30, 2018
|
|
765,411
|
|
|
|
6,162
|
|
|
Granted September 2018
|
|
148,000
|
|
|
|
114
|
|
|
Total vested
|
|
(64,003
|
)
|
|
|
503
|
|
|
Vested August 2018
|
|
(52,594
|
)
|
|
|
459
|
|
|
Vested March 2019
|
|
(11,409
|
)
|
|
|
44
|
|
|
Total forfeitures
|
|
(265,500
|
)
|
|
|
1,060
|
|
|
Forfeitures employee terminations
|
|
(115,500
|
)
|
|
|
460
|
|
|
Forfeitures August 2016 awards with performance
conditions
|
|
(150,000
|
)
|
|
|
600
|
|
|
Non-vested
June 30, 2019
|
|
583,908
|
|
|
|
3,410
|
|
The
September 2018 grants comprise 148,000 shares of restricted stock awarded to
executive officers that are subject to market and time-based vesting.
The
August 2017 grants comprise (i) 326,000 shares of restricted stock awarded to
executive officers and employees that are subject to time-based vesting, (ii)
210,000 shares of restricted stock awarded to executive officers that are
subject to market and time-based vesting as described above, and (iii) 52,594
shares of restricted stock awarded to non-employee directors. The March 2018
grant relates to an award made to the Companys new Chief Financial Officer. The
May 2018 grant comprises 7,000 shares of restricted stock awarded to employees
on the same terms as the 326,000 awards made. The 326,000 and 7,000 shares of
restricted stock will only vest if the recipient is employed by the Company on a
full-time basis on August 23, 2020. The 52,594 shares of restricted stock
awarded to non-employee directors only vested if the recipient was a director on
August 23, 2018. The 22,817 shares of restricted stock vest in two tranches,
11,409 vested on March 1, 2019, and 11,408 will vest on March 1, 2020, subject
to the Chief Financial Officers continued employment.
The
August 2016 grants comprise (i) 350,000 shares of restricted stock awarded to
executive officers that are subject to performance and time-based vesting as
described above and (ii) 37,000 shares of restricted stock awarded to
non-employee directors.
F-69
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
17. STOCK-BASED
COMPENSATION (continued)
Stock
option and restricted stock activity (continued)
Restricted stock (continued)
The
fair value of restricted stock vested during the years ended June 30, 2019, 2018
and 2017, was $0.5 million, $0.5 million and $2.6 million, respectively. During
the year ended June 30, 2019, 52,594 shares of restricted stock held by the
non-employee directors and 11,409 shares of restricted stock held by the
Companys Chief Financial Officer vested. During the year ended June 30, 2018,
the Company determined that 56,250 shares of restricted stock held by the
non-employee directors as of June 30, 2017, were fully-vested. During the year
ended June 30, 2017, the Company agreed to accelerate the vesting of 200,000
shares of restricted stock granted to the Companys former Chief Executive
Officer in August 2016 pursuant to the Separation Agreement signed in May 2017.
During the year ended June 30, 2019, employees forfeited 115,500 shares of
restricted stock upon termination which had either time-based or market
conditions. In addition, an executive officer forfeited 150,000 shares of
restricted stock as the performance conditions were not achieved. During the
year ended June 30, 2018, employees forfeited (i) 3,000 shares of restricted
stock upon termination which did not have performance or market conditions
attached and (ii) 30,635 shares of restricted stock upon termination which had
either market or performance conditions. In addition, executive officers and
employees forfeited 95,326 shares of restricted stock as the market conditions
were not achieved and forfeited 173,262 shares of restricted stock as the
performance conditions were not achieved. During the year ended June 30, 2017,
employees and the former Chief Executive Officer that resigned during the year
ended June 30, 2017, forfeited 205,470 shares of restricted stock that had not
vested.
Stock-based
compensation charge and unrecognized compensation cost
The
Company has recorded a net stock compensation charge of $0.4 million, $2.6
million and $2.0 million for the years ended June 30, 2019, 2018 and 2017,
respectively, which comprised:
|
|
|
|
|
|
Allocated to
|
|
|
|
|
|
|
|
|
|
|
cost of goods
|
|
|
|
|
|
|
|
|
|
|
sold, IT
|
|
|
Allocated to
|
|
|
|
|
Total
|
|
|
processing,
|
|
|
selling,
|
|
|
|
|
charge
|
|
|
servicing
|
|
|
general and
|
|
|
|
|
(reversal)
|
|
|
and support
|
|
|
administration
|
|
|
Year ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation charge
|
$
|
2,319
|
|
$
|
-
|
|
$
|
2,319
|
|
|
Reversal of stock
compensation charge related to stock options
|
|
|
|
|
|
|
|
|
|
|
and restricted stock forfeited
|
|
(1,926
|
)
|
|
-
|
|
|
(1,926
|
)
|
|
Total year ended June 30, 2019
|
$
|
393
|
|
$
|
-
|
|
$
|
393
|
|
|
Year ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation charge
|
$
|
2,656
|
|
$
|
-
|
|
$
|
2,656
|
|
|
Reversal of stock compensation charge
related to restricted stock
|
|
|
|
|
|
|
|
|
|
|
forfeited
|
|
(49
|
)
|
|
-
|
|
|
(49
|
)
|
|
Total year ended
June 30, 2018
|
$
|
2,607
|
|
$
|
-
|
|
$
|
2,607
|
|
|
Year ended June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation charge
|
$
|
3,905
|
|
$
|
-
|
|
$
|
3,905
|
|
|
Reversal of stock
compensation charge related to stock options
|
|
|
|
|
|
|
|
|
|
|
and restricted stock forfeited
|
|
(1,923
|
)
|
|
-
|
|
|
(1,923
|
)
|
|
Total year ended June 30, 2017
|
$
|
1,982
|
|
$
|
-
|
|
$
|
1,982
|
|
The
stock compensation charge and reversals have been allocated to cost of goods
sold, IT processing, servicing and support and selling, general and
administration based on the allocation of the cash compensation paid to the
relevant employees.
F-70
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
17. STOCK-BASED
COMPENSATION (continued)
Stock-based
compensation charge and unrecognized compensation cost (continued)
As
of June 30, 2019, the total unrecognized compensation cost related to stock
options was approximately $0.8 million, which the Company expects to recognize
over approximately three years. As of June 30, 2019, the total unrecognized
compensation cost related to restricted stock awards was approximately $1.4
million, which the Company expects to recognize over approximately two years.
Tax
consequences
The
Company has recorded a deferred tax asset of approximately $0.2 million and $0.8
million, respectively, for the years ended June 30, 2019 and 2018. As of June
30, 2019 and 2018, the Company has a valuation allowance of approximately $0.2
million and $0.8 million, respectively, related to the deferred tax asset
because it does not believe that the stock-based compensation deduction would be
utilized as it does not anticipate generating sufficient taxable income in the
United States. The Company deducts the difference between the market value on
date of exercise by the option recipient and the exercise price from income
subject to taxation in the United States.
18. INCOME
TAXES
Impact
of Tax Cuts and Jobs Act
On
December 22, 2017, the Tax Cuts and Jobs Act (the TCJA), was enacted into law,
significantly modifying U.S. federal tax laws. The TCJA reduced the federal
statutory tax rate for corporations from 35% to 21% effective from January 1,
2018, eliminates alternative minimum tax for corporations, limits net operating
loss carryforwards (and eliminates carrybacks), repeals indirect foreign tax
credits carry-forward rules, limits the deductibility of interest expense and
transitions the system of U.S. international taxation of corporations from a
worldwide tax system to a territorial tax system.
During
the year ended June 30, 2019, the Company was not significantly impacted by the
transition to a territorial tax system and it does not expect a significant
impact on its future consolidated effective tax rate as it generates the
majority of its taxable income in tax jurisdictions with tax rates that are
higher than the new federal statutory tax rate of 21% (mainly South Africa,
where its income is taxed at 28%, and Korea, where its income is taxed at
22%).
Deemed repatriation of foreign earnings liability
The
TCJA also requires a U.S. shareholder of a specified foreign corporation to
include a deemed repatriation of foreign earnings (Transition Tax) as part of
the transition to a territorial tax system. However, the Company did not incur a
net Transition Tax liability because it generated sufficient foreign tax credits
to offset any potential repatriation transition tax liability. The Transition
Tax is a tax on previously untaxed accumulated and current earnings and profits
(E&P) of certain of the Companys foreign subsidiaries. In order to
determine the amount of any Transition Tax liability, the Company was required
to determine, in addition to other factors, the amount of post-1986 E&P of
the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid
on such earnings. During the year ended June 30, 2018, the Company made a
reasonable estimate of its Transition Tax liability as of June 30, 2018, and
recorded a provisional Transition Tax, before the application of any foreign tax
credits, of $55.8 million, and had no liability after the application of
generated foreign tax credits. In fact, the Company generated excess foreign tax
credits. During the year ended June 30, 2019, the Company finalized its
Transition Tax liability as of June 30, 2018, and incurred a Transition Tax,
before the application of any foreign tax credits, of $56.9 million, and has no
liability after the application of generated foreign tax credits.
Global intangible low taxed income
The
TCJA creates a new requirement that certain income earned by controlled foreign
corporations (CFCs) must be included in the gross income of the CFCs U.S.
shareholder. Global intangible low taxed income (GILTI) is the excess of the
shareholders net CFC tested income over the net deemed tangible income
return, which is currently defined as the excess of (1) 10 percent of the
aggregate of the U.S. shareholders pro rata share of the qualified business
asset investment of each CFC with respect to which it is a U.S. shareholder over
(2) the amount of certain interest expense taken into account in the
determination of net CFC-tested income.
F-71
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
18. INCOME
TAXES (continued)
Impact
of Tax Cuts and Jobs Act (continued)
Global intangible low taxed income (continued)
It
is the Companys current interpretation of the U.S. tax legislation that GILTI
is only applicable for the tax year commencing July 1, 2018 (i.e. its June 2019
tax year). The Company has not incurred a GILTI tax during the year ended June
30, 2019, because it primarily operates in tax jurisdictions (such as South
Africa and South Korea) which have higher corporate income tax rates than the
United States and certain of its South Africa subsidiaries have incurred
operating losses.
Income
tax provision
The
table below presents the components of income before income taxes for the years
ended June 30, 2019, 2018 and 2017:
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South Africa
|
$
|
(267,637
|
)
|
$
|
131,366
|
|
$
|
129,786
|
|
|
United States
|
|
(23,479
|
)
|
|
(15,329
|
)
|
|
(20,902
|
)
|
|
Other
|
|
(11,910
|
)
|
|
(15,671
|
)
|
|
5,572
|
|
|
(Loss) Income before income taxes
|
$
|
(303,026
|
)
|
$
|
100,366
|
|
$
|
114,456
|
|
Presented
below is the provision for income taxes by location of the taxing jurisdiction
for the years ended June 30, 2019, 2018 and 2017:
|
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
(As
|
|
|
|
(As
|
|
|
|
|
|
|
|
|
restatedA )
|
|
|
|
restatedA )
|
|
|
Current income tax
|
$
|
17,163
|
|
|
$
|
95,529
|
|
|
$
|
45,857
|
|
|
South Africa
|
|
10,076
|
|
|
|
35,745
|
|
|
|
35,986
|
|
|
Continuing
|
|
3,689
|
|
|
|
35,745
|
|
|
|
35,986
|
|
|
Discontinued
|
|
6,387
|
|
|
|
-
|
|
|
|
-
|
|
|
United States
|
|
1,100
|
|
|
|
55,788
|
|
|
|
4,686
|
|
|
Other
|
|
5,987
|
|
|
|
3,996
|
|
|
|
5,185
|
|
|
Deferred taxation (benefit)
charge
|
|
(12,494
|
)
|
|
|
8,537
|
|
|
|
(6
|
)
|
|
South Africa
|
|
(11,117
|
)
|
|
|
9,772
|
|
|
|
(439
|
)
|
|
Continuing
|
|
(7,854
|
)
|
|
|
9,772
|
|
|
|
(439
|
)
|
|
Discontinued
|
|
(3,263
|
)
|
|
|
-
|
|
|
|
-
|
|
|
United States
|
|
4
|
|
|
|
477
|
|
|
|
1,123
|
|
|
Other
|
|
(1,381
|
)
|
|
|
(1,712
|
)
|
|
|
(690
|
)
|
|
Foreign tax credits generated
United States
|
|
(944
|
)
|
|
|
(55,778
|
)
|
|
|
(3,345
|
)
|
|
Change in tax rate United States
|
|
-
|
|
|
|
309
|
|
|
|
-
|
|
|
Income tax provision
|
$
|
3,725
|
|
|
$
|
48,597
|
|
|
$
|
42,506
|
|
(A) Deferred taxation (benefit) charge South Africa for 2018 and 2017 have
been restated to correct the misstatement discussed in Note 1.
There
were no changes to the enacted tax rate in the years ended June 30, 2019, 2018
and 2017. However, during the year ended June 30, 2018, there were changes to
the U.S. tax code which, among other things, changed the Federal tax rate. The
Company has a June year end and used a blended rate of 28.10% for its tax year
ending June 30, 2018, in the U.S. Certain of the Companys deferred tax assets
and liabilities which it expected would be utilized/ reversed during the period
ended June 30, 2018, were re-measured at the blended rate and those deferred
taxes that the Company believed would only be utilized/ reversed in subsequent
tax years, were re-measured at 21%. The net impact of the change in the tax rate
on the Companys deferred taxes included in income tax expense during the year
ended June 30, 2018, was $0.3 million. The Company also provided an additional
valuation allowance of approximately $0.6 million during the year ended June 30,
2018, related to net operating loss carryforwards that it believed would not be
utilized as a result of the enactment of the TCJA.
F-72
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
18. INCOME
TAXES (continued)
Income
tax provision (continued)
The
Company calculated its Transition Tax liability as of June 30, 2018, and
incurred a Transition Tax, before the application of any foreign tax credits, of
$55.8 million, and has no liability after the application of generated foreign
tax credits. During the year ended June 30, 2019, the Company recorded the
difference of $1.1 million between the Transition Tax liability of $56.9 million
and the provisional Transition Tax liability of $55.8 million in current income
tax, United States. During the year ended June 30, 2019, the Company also
included the additional foreign tax credits utilized of $1.1 million against
this Transition Tax in foreign tax credits generated United States. During the
year ended June 30, 2018, the Company included a provisional Transition Tax of
$55.8 million in current income tax, United States. Foreign tax credits of $65.3
million were generated and included in the computation of provisional Transition
Tax of which $55.8 million were utilized against the Transition Tax in that
year. The foreign tax credits utilized are included in Foreign tax credits
generated United States for the year ended June 30, 2018.
During
the year ended June 30, 2019, the Company incurred significant net operating
losses through certain of it its South African wholly-owned subsidiaries and
recorded a deferred taxation benefit related to these losses. However, the
Company has created a valuation allowance for these net operating losses which
reduced the deferred taxation benefit recorded. The movement in the valuation
allowance for the year ended June 30, 2018, is primarily attributable to the
creation of the valuation allowance related to excess tax credits recognized
from the preliminary Transition Tax calculation and the creation of a valuation
allowance related to net operating losses generated during the year ended June
30, 2018, that the Company does not believe it will be able to utilize in the
foreseeable future. The movement in the valuation allowance for the year ended
June 30, 2017, is primarily attributable to a decrease resulting from the
utilization of foreign tax credits and an increase related to a valuation
allowance created for net operating loss carryforwards for the Companys German
subsidiaries.
As
discussed above, the Company has generated excess foreign tax credits related to
the Transition Tax and any distribution received from Net1s subsidiaries will
first be applied against the deemed distributions recognized as a result of the
Transition Tax as so called previously taxed income, or PTI,. Therefore
distributions actually made during the year ended June 30, 2018, were treated as
PTI and did not generate any additional foreign tax credits because the quantum
of the actual distributions were lower than the deemed distributions calculated
as a result of the Transition Tax. Net1 included actual and deemed dividends
received from one of its South African subsidiaries in its year ended June 30,
2017, taxation computation. Net1 applied net operating losses against this
income during the year ended June 30, 2017, and did not generate any indirect
foreign tax credits. Net1 has applied certain of these foreign tax credits
against its current income tax provision for the years ended June 30, 2017.
A
reconciliation of income taxes, calculated at the fully-distributed South
African income tax rate to the Companys effective tax rate, for the years ended
June 30, 2019, 2018 and 2017, is as follows:
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
(As
|
|
|
(As
|
|
|
|
|
|
|
|
restatedA )
|
|
|
restatedA )
|
|
|
Income taxes at
fully-distributed South African tax rates
|
|
28.00%
|
|
|
28.00%
|
|
|
28.00%
|
|
|
Movement in valuation allowance
|
|
(24.23%
|
)
|
|
5.99%
|
|
|
0.07%
|
|
|
Non-deductible items
|
|
(4.75%
|
)
|
|
15.19%
|
|
|
1.05%
|
|
|
Capital gains differential
|
|
(1.54%
|
)
|
|
(1.81%
|
)
|
|
-%
|
|
|
Taxation on deemed
dividends in the United States
|
|
1.53%
|
|
|
1.92%
|
|
|
8.00%
|
|
|
Foreign tax rate differential
|
|
0.38%
|
|
|
(0.65%
|
)
|
|
-%
|
|
|
Prior year adjustments
|
|
(0.63%
|
)
|
|
(0.02%
|
)
|
|
0.07%
|
|
|
Transition Tax
|
|
(0.36%
|
)
|
|
55.38%
|
|
|
-%
|
|
|
Foreign tax credits
|
|
0.37%
|
|
|
(55.58%
|
)
|
|
(0.05%
|
)
|
|
Change in tax laws United States
|
|
-%
|
|
|
-%
|
|
|
-%
|
|
|
Income tax provision
|
|
(1.23%
|
)
|
|
48.42%
|
|
|
37.14%
|
|
(A)
Non-deductible items for 2018 and 2017 have been restated to correct the
misstatement discussed in Note 1.
F-73
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
18. INCOME
TAXES (continued)
Income
tax provision (continued)
Percentages
included in the 2019 column in the reconciliation of income taxes presented
above are impacted by the loss incurred by the Company during the year ended
June 30, 2019. For instance, the income tax provision of $3.7 million represents
(1.39%) multiplied by the net loss before tax of $(268,987). Non-deductible
items for the year ended June 30, 2019, includes the impairment losses
recognized related to goodwill impaired. Movement in the valuation allowance for
the year ended June 30, 2019, includes allowances created related to net
operating losses incurred during the year and a valuation allowance created for
a deferred tax asset recorded related to the DNI disposal capital losses
generated (refer to Note 3) and the Cell C capital loss following the fair value
adjustment (refer to Note 7). Non-deductible items for the year ended June 30,
2018, includes the impairment loss recognized related to goodwill impaired,
non-deductible interest on borrowings and the accretion of interest. The impact
on foreign tax during the year ended June 30, 2018, was primarily due to the
impact of the Transition Tax.
Net1
received dividends from one of its South African subsidiaries during the year
ended June 30, 2017, which resulted in an increase in taxation on dividends
received. No significant foreign tax credits were generated during the year
ended June 30, 2017, and the Company utilized foreign tax credits generated in
prior years. The utilization of these foreign tax credits used in prior years is
included in the movement in the valuation allowance. The non-deductible items
during the year ended June 30, 2017, includes transaction related expenses,
including legal and consulting fees incurred that are not deductible for tax
purposes.
Deferred
tax assets and liabilities
Deferred
income taxes reflect the temporary differences between the financial reporting
and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. The primary
components of the temporary differences that gave rise to the Companys deferred
tax assets and liabilities as of June 30, and their classification, were as
follows:
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
(As
|
|
|
|
|
|
|
|
restatedA )
|
|
|
Total deferred tax assets
|
|
|
|
|
|
|
|
Capital losses related to
investments(B)
|
$
|
43,569
|
|
$
|
3,226
|
|
|
Net operating loss carryforwards
|
|
35,873
|
|
|
10,242
|
|
|
Foreign tax credits
|
|
32,799
|
|
|
32,644
|
|
|
Provisions and accruals
|
|
13,230
|
|
|
5,975
|
|
|
FTS patent
|
|
277
|
|
|
367
|
|
|
Intangible assets
|
|
-
|
|
|
687
|
|
|
Other
|
|
2,394
|
|
|
4,523
|
|
|
Total deferred tax assets
before valuation allowance
|
|
128,142
|
|
|
57,664
|
|
|
Valuation allowances
|
|
(125,887
|
)
|
|
(48,691
|
)
|
|
Total deferred tax assets, net of valuation allowance
|
|
2,255
|
|
|
8,973
|
|
|
Total deferred tax liabilities:
|
|
|
|
|
|
|
|
Intangible assets
|
|
2,676
|
|
|
6,420
|
|
|
Investments
|
|
1,621
|
|
|
5,886
|
|
|
Other
|
|
489
|
|
|
7,515
|
|
|
Total
deferred tax liabilities
|
|
4,786
|
|
|
19,821
|
|
|
Reported as
|
|
|
|
|
|
|
|
Long-term deferred tax assets
|
|
2,151
|
|
|
4,776
|
|
|
Long-term deferred tax liabilities
|
|
4,682
|
|
|
16,067
|
|
|
Net deferred
income tax liabilities
|
$
|
2,531
|
|
$
|
11,291
|
|
(A)
Total deferred tax liabilities: Investments and long-term deferred tax
liabilities have been restated to correct the misstatement discussed in Note
1.
(B)
Capital losses as of June 30, 2018, were previously included in Other and have
been reclassified to Capital losses related to investments.
F-74
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
18. INCOME
TAXES (continued)
Deferred
tax assets and liabilities (continued)
Decrease in total net deferred income tax
liabilities
Capital losses related to investments
Capital
losses related to investments increased primarily due to the capital loss
arising from the difference between the amount paid for Cell C in August 2017
and the its fair value as of June 30, 2019 of $0.0 million and the capital
losses incurred related to the DNI disposals (refer to Note 3).
Net operating loss carryforwards
Net
operating loss carryforwards have increased primarily as a result of the losses
incurred by certain of the Companys wholly-owned South African subsidiaries.
Intangible assets
Deferred
tax liabilities intangible assets have decreased during the year ended June
30, 2019, as a result of the disposition of DNI (refer to Note 3), and
amortization of KSNET, Masterpayment and Transact24 intangible assets.
Investments
Deferred
tax liabilities investments has decreased during the year ended June 30, 2019,
as a result of the fair value adjustment to reduce the carrying value of the
investment in Cell C to below its initial cost.
Increase in valuation allowance
At
June 30, 2019, the Company had deferred tax assets of $2.3 million (2018: $9.0
million), net of the valuation allowance. Management believes, based on the
weight of available positive and negative evidence it is more likely than not
that the Company will realize the benefits of these deductible differences, net
of the valuation allowance. However, the amount of the deferred tax asset
considered realizable could be adjusted in the future if estimates of taxable
income are revised.
At
June 30, 2019, the Company had a valuation allowance of $125.9 million (2018:
$48.7 million) to reduce its deferred tax assets to estimated realizable value.
The movement in the valuation allowance for the years ended June 30, 2019 and
2018, is presented below:
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital losses
|
|
|
operating
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
related to
|
|
|
loss carry-
|
|
|
tax
|
|
|
FTS
|
|
|
|
|
|
|
|
Total
|
|
|
investments(A)
|
|
|
forwardsA
|
|
|
credits
|
|
|
patent
|
|
|
Other(A)(B)
|
|
|
July 1, 2017
|
$
|
38,967
|
|
$
|
997
|
|
$
|
3,699
|
|
$
|
32,574
|
|
$
|
120
|
|
$
|
1,577
|
|
|
Charged to statement of operations
|
|
9,582
|
|
|
2,229
|
|
|
4,573
|
|
|
10
|
|
|
-
|
|
|
2,770
|
|
|
Utilized
|
|
60
|
|
|
-
|
|
|
-
|
|
|
60
|
|
|
-
|
|
|
-
|
|
|
Change in tax laws
|
|
(894
|
)
|
|
-
|
|
|
(263
|
)
|
|
-
|
|
|
-
|
|
|
(631
|
)
|
|
Foreign currency adjustment
|
|
976
|
|
|
-
|
|
|
1,038
|
|
|
-
|
|
|
(63
|
)
|
|
1
|
|
|
June 30, 2018
|
|
48,691
|
|
|
3,226
|
|
|
9,047
|
|
|
32,644
|
|
|
57
|
|
|
3,717
|
|
|
Reversed to statement of
operations .
|
|
(881
|
)
|
|
-
|
|
|
(198
|
)
|
|
-
|
|
|
(57
|
)
|
|
(626
|
)
|
|
Charged to statement of operations
|
|
79,029
|
|
|
40,159
|
|
|
26,570
|
|
|
155
|
|
|
-
|
|
|
12,145
|
|
|
Utilized
|
|
(730
|
)
|
|
-
|
|
|
(10
|
)
|
|
-
|
|
|
-
|
|
|
(1,720
|
)
|
|
Foreign currency adjustment
|
|
778
|
|
|
184
|
|
|
452
|
|
|
-
|
|
|
-
|
|
|
142
|
|
|
June 30, 2019
|
$
|
125,887
|
|
$
|
43,569
|
|
$
|
35,861
|
|
$
|
32,799
|
|
$
|
-
|
|
$
|
13,658
|
|
(A) Capital losses related to investments for the prior year
have been reclassified from Other.
(B) Net operating loss carry-forwards of
$3,602 as of June 30, 2018, that were previously included in the other caption
have been reclassified to the net operating loss carry-forwards caption.
F-75
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
18. INCOME
TAXES (continued)
Deferred
tax assets and liabilities (continued)
Net operating loss carryforwards and foreign tax
credits
United States
The
TCJA amends the rules regarding net operating loss carryforwards for Federal
income tax purposes effective from July 1, 2018. The new rules prohibit net
operating loss carrybacks, allow indefinite net operating loss carryforwards and
limit the amount of the net operating loss carryforwards generated after July 1,
2018, that may be used against future taxable income, to 80% of taxable income
before the net operating loss deduction. These new rules did not impact the
Companys net operating loss carryforwards generated during the year ended June
30, 2018 and in prior periods.
As
of June 30, 2019, Net1 had net operating loss carryforwards that will expire, if
unused, as follows:
Year of expiration
|
|
U.S. net operating
|
|
|
|
loss carry
|
|
|
|
forwards
|
|
2024
|
$
|
1,874
|
|
2028
|
$
|
4,423
|
|
During
the year ended June 30, 2019 and 2018, Net1 generated additional direct foreign
tax credits related to dividends received from a foreign investment. Net1 had no
net unused foreign tax credits that are more likely than not to be realized as
of June 30, 2019 and 2018, respectively.
Uncertain
tax positions
As
of June 30, 2019 and 2018, the Company has unrecognized tax benefits of $1.2
million and $0.8 million, respectively, all of which would impact the Companys
effective tax rate. The Company files income tax returns mainly in South Africa,
South Korea, Germany, Hong Kong, India, Malta, the United Kingdom, Botswana and
in the U.S. federal jurisdiction. As of June 30, 2019, the Companys South
African subsidiaries are no longer subject to income tax examination by the
South African Revenue Service for periods before June 30, 2016. The Company is
subject to income tax in other jurisdictions outside South Africa, none of which
are individually material to its financial position, statement of cash flows, or
results of operations. The Company does not expect the change related to
unrecognized tax benefits will have a significant impact on its results of
operations or financial position in the next 12 months.
The
following is a reconciliation of the total amounts of unrecognized tax benefits
for the year ended June 30, 2019, 2018 and 2017:
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
Unrecognized tax benefits -
opening balance
|
$
|
838
|
|
$
|
475
|
|
$
|
1,930
|
|
|
Gross increases - tax positions in
prior periods
|
|
107
|
|
|
196
|
|
|
-
|
|
|
Gross decreases - tax
positions in prior periods
|
|
-
|
|
|
-
|
|
|
(2,109
|
)
|
|
Gross increases - tax positions in
current period
|
|
307
|
|
|
311
|
|
|
440
|
|
|
Gross decreases - tax
positions in current period
|
|
-
|
|
|
(150
|
)
|
|
-
|
|
|
Lapse of statute limitations
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Foreign currency
adjustment
|
|
(38
|
)
|
|
6
|
|
|
214
|
|
|
Unrecognized tax benefits - closing balance
|
$
|
1,214
|
|
$
|
838
|
|
$
|
475
|
|
As
of each of June 30, 2019 and 2018, the Company had accrued interest related to
uncertain tax positions of approximately $0.1 million, respectively, on its
consolidated balance sheet. As of each of June 30, 2019 and 2018, the Company
had accrued penalties related to uncertain tax positions of approximately $0.2
million, respectively, on its consolidated balance sheet.
F-76
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
19. (LOSS) EARNINGS PER SHARE
The
Company has issued redeemable common stock (refer to Note 14) which is
redeemable at an amount other than fair value. Redemption of a class of common
stock at other than fair value increases or decreases the carrying amount of the
redeemable common stock and is reflected in basic earnings per share using the
two-class method. There were no redemptions of common stock, or adjustments to
the carrying value of the redeemable common stock during the years ended June
30, 2019, 2018 or 2017. Accordingly, the two-class method presented below does
not include the impact of any redemption.
Basic
(loss) earnings per share include shares of restricted stock that meet the
definition of a participating security because these shares are eligible to
receive non-forfeitable dividend equivalents at the same rate as common stock.
Basic (loss) earnings per share have been calculated using the two-class method
and basic earnings per share for the years ended June 30, 2019, 2018 and 2017,
reflects only undistributed earnings. The computation below of basic (loss)
earnings per share excludes the net (loss) income attributable to shares of
unvested restricted stock (participating non-vested restricted stock) from the
numerator and excludes the dilutive impact of these unvested shares of
restricted stock from the denominator.
Diluted
(loss) earnings per share has been calculated to give effect to the number of
shares of additional common stock that would have been outstanding if the
potential dilutive instruments had been issued in each period. Stock options are
included in the calculation of diluted earnings per share utilizing the treasury
stock method and are not considered to be participating securities as the stock
options do not contain non-forfeitable dividend rights. The calculation of
diluted (loss) earnings per share includes the dilutive effect of a portion of
the restricted stock granted to employees in August and November 2014, August
2015, August 2016, August 2017, March 2018 and September 2018 as these shares of
restricted stock are considered contingently returnable shares for the purposes
of the diluted earnings per share calculation and the vesting conditions in
respect of a portion of the restricted stock had been satisfied. The vesting
conditions are discussed in Note 17.
The
following table presents net (loss) income attributable to Net1 and the share
data used in the basic and diluted (loss) earnings per share computations using
the two-class method for the years ended June 30, 2019, 2018 and 2017:
|
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
(As
|
|
|
|
(As
|
|
|
|
|
|
|
|
|
restatedA )
|
|
|
|
restatedA )
|
|
|
|
|
(in thousands except percent and per share
data)
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
attributable to Net1
|
$
|
(307,618
|
)
|
|
$
|
64,246
|
|
|
$
|
73,070
|
|
|
Undistributed earnings
|
|
(307,618
|
)
|
|
|
64,246
|
|
|
|
73,070
|
|
|
Continuing
|
|
(306,607
|
)
|
|
|
61,855
|
|
|
|
73,070
|
|
|
Discontinued
|
$
|
(1,011
|
)
|
|
$
|
2,391
|
|
|
$
|
-
|
|
|
Percent allocated
to common shareholders (Calculation 1)
|
|
99%
|
|
|
|
98%
|
|
|
|
99%
|
|
|
Numerator for (loss) earnings per share: basic and diluted
|
$
|
(303,299
|
)
|
|
$
|
63,175
|
|
|
$
|
72,302
|
|
|
Continuing
|
|
(302,302
|
)
|
|
|
60,824
|
|
|
|
72,302
|
|
|
Discontinued
|
$
|
(997
|
)
|
|
$
|
2,351
|
|
|
$
|
-
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic (loss) earnings per share: weighted-average
|
|
|
|
|
|
|
|
|
|
|
|
|
common shares
outstanding
|
|
55,963
|
|
|
|
55,860
|
|
|
|
53,966
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
18
|
|
|
|
51
|
|
|
|
109
|
|
|
Denominator for diluted (loss) earnings per share: adjusted
weighted
average common shares outstanding and assumed conversion
|
|
55,981
|
|
|
|
55,911
|
|
|
|
54,075
|
|
F-77
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
19. (LOSS) EARNINGS PER SHARE (continued)
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
|
|
|
|
(As
|
|
|
|
(As
|
|
|
|
|
|
|
|
restatedA)
|
|
|
|
restatedA)
|
|
|
|
(in thousands except percent and
per share data)
|
|
(Loss) Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(5.42
|
)
|
|
$
|
1.13
|
|
|
$
|
1.34
|
|
Continuing
|
|
($5.40
|
)
|
|
$
|
1.09
|
|
|
$
|
1.34
|
|
Discontinued
|
|
($0.02
|
)
|
|
$
|
0.04
|
|
|
$
|
0.00
|
|
Diluted
|
$
|
(5.42
|
)
|
|
$
|
1.13
|
|
|
$
|
1.33
|
|
Continuing
|
|
($5.40
|
)
|
|
$
|
1.09
|
|
|
$
|
1.33
|
|
Discontinued
|
|
($0.02
|
)
|
|
$
|
0.04
|
|
|
$
|
0.00
|
|
(Calculation 1)
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average common
shares outstanding (A)
|
|
55,963
|
|
|
|
55,860
|
|
|
|
53,966
|
|
Basic weighted-average common shares
outstanding and unvested
|
|
|
|
|
|
|
|
|
|
|
|
restricted shares expected to
vest (B)
|
|
56,760
|
|
|
|
56,807
|
|
|
|
54,539
|
|
Percent allocated to common shareholders (A) /
(B)
|
|
99%
|
|
|
|
98%
|
|
|
|
99%
|
|
(A) Certain amounts have been
restated to correct the misstatement discussed in Note 1.
|
|
Options to purchase 864,579
shares of the Companys common stock at prices ranging from $6.20 to $11.23 per
share were outstanding during the year ended June 30, 2019, but were not
included in the computation of diluted earnings per share because the options
exercise prices were greater than the average market price of the Companys
common shares. The options, which expire at various dates through September 7,
2028, were still outstanding as of June 30, 2019.
20. SUPPLEMENTAL CASH FLOW INFORMATION
The following table presents the supplemental cash flow
disclosures for the years ended June 30, 2019, 2018 and 2017:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Cash received from interest
|
$
|
5,595
|
|
$
|
16,835
|
|
$
|
21,130
|
|
Cash paid for interest
|
$
|
10,636
|
|
$
|
8,645
|
|
$
|
3,713
|
|
Cash paid for income taxes
|
$
|
13,110
|
|
$
|
41,065
|
|
$
|
45,165
|
|
Investing activities
The transaction referred to in
Note 3 under which the Company reduced its shareholding in DNI from 55% to 38%
and used the proceeds, of $27.6 million, from the sale to settle its obligation,
of $27.6 million, to subscribe for additional shares in DNI was closed using a
cashless settlement process. Therefore, the proceeds from sale and the
settlement of the obligation to subscribe for additional shares in DNI were not
included in net cash (used in) provided by investing activities in the Companys
audited consolidated statement of cash flows for the year ended June 30,
2019.
The transaction referred to in
Note 3 and Note 12 under which the Company reduced its shareholding in DNI from
38% to 30% and used the proceeds from the sale to settle a portion of its
long-term borrowings, of $15.0 million, was closed using a cashless settlement
process. Therefore, the proceeds from sale was not included in net cash provided
by (used in) investing activities in the Companys consolidated statement of
cash flows for the year ended June 30, 2019.
As disclosed in Note 9, during
the year ended June 30, 2018, the Company agreed to underwrite the Finbond
rights offer up to an amount of 55,585,514 shares and utilized a $10.0 million
loan due by Finbond to the Company to acquire the 55,585,514 Finbond shares.
Therefore, as this transaction was net settled in 2018 and there was no transfer
of cash between the parties, the repayment of the loan by Finbond and the
acquisition of 55,585,514 Finbond shares are not included within net cash
provided by (utilized) in investing activities in the Companys consolidated
statement of cash flows for the year ended June 30, 2018.
F-78
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
20. SUPPLEMENTAL CASH FLOW INFORMATION (continued)
Financing activities
The transaction referred to in
Note 3 and Note 12 under which the Company reduced its shareholding in DNI from
38% to 30% and used the proceeds from the sale to settle a portion of its
long-term borrowings, of $15.0 million was closed using a cashless settlement
process. Therefore, the part settlement of the long-term borrowings was not
included in net cash (used in) provided by financing activities in the Companys
consolidated statement of cash flows for the year ended June 30, 2019.
Treasury shares, at cost included
in the Companys consolidated balance sheet as of June 30, 2016, includes 47,056
shares of the Companys common stock acquired for approximately $0.5 million
which were paid for on July 1, 2016. The liability for this payment was included
in accounts payable on the Companys consolidated balance sheet as of June 30,
2016. The payment of approximately $0.5 million is included in acquisition of
treasury stock in the Companys consolidated statement of cash flows for the
year ended June 30, 2017.
21. OPERATING SEGMENTS
Operating
segments
The Company discloses segment
information as reflected in the management information systems reports that its
chief operating decision maker uses in making decisions and to report certain
entity-wide disclosures about products and services, major customers, and the
countries in which the entity holds material assets or reports material
revenues.
The Company currently has three
reportable segments: South African transaction processing, International
transaction processing and Financial inclusion and applied technologies. The
South African transaction processing and Financial inclusion and applied
technologies segments operate mainly within South Africa while the International
transaction processing segment operates mainly within South Korea, Hong Kong and
the European Union. The Companys reportable segments offer different products
and services and require different resources and marketing strategies and share
the Companys assets.
The South African transaction
processing segment currently consists mainly of an ATM infrastructure deployed
in South Africa, transaction processing for retailers, utilities, and banks, and
a welfare benefit distribution service provided to the South African government
through to September 30, 2018. The welfare benefit distribution services ceased
following the SASSA contract expiration on September 30, 2018. Fee income is
earned from customers utilizing our ATM infrastructure. Utility providers and
banks are charged a fee for transaction processing services performed on their
behalf at retailers. Fee income was also earned based on the number of recipient
cardholders paid through to September 30, 2018. There were no individually
significant customers providing more than 10% of total revenue during the year
ended June 30, 2019. This segment had an individually significant customer that
accounted for more than 10% of the total revenue of the Company during the years
ended June 30, 2018 (19%) and 2017 (22%). During the years ended June 30, 2019
and 2018, the operating segment incurred goodwill impairment losses of $1.2
million and $1.1 million, respectively (refer to Note 10).
The International transaction
processing segment consists mainly of activities in South Korea from which the
Company generates revenue from the provision of payment processing services to
merchants and card issuers. This segment generates fee revenue from the
provision of payment processing services and to a lesser extent from the sale of
goods, primarily point of sale terminals, to customers in South Korea. Fees
generated from payment services processing and other processing activities by
Transact24 and Masterpayment are included in this segment. During the year ended
June 30, 2019 and 2018, the operating segment incurred a goodwill impairment
loss of $7.0 million and $19.9 million, respectively (refer to Note 10).
The Financial inclusion and
applied technologies segment derives revenue from the provision of short-term
loans as a principal and the provision of bank accounts, as a fixed monthly fee
per account is charged for the maintenance of these accounts. This segment also
includes fee income and associated expenses from merchants and card holders
using the Companys merchant acquiring system, the sale of prepaid products
(electricity and airtime) as well as the sale of hardware and software. Finally,
the Company earns premium income from the sale of life insurance products
through its insurance business. DNI was acquired on June 30, 2018, and has been
allocated to the Financial inclusion and applied technologies segment. DNI
contributed to segment performance for the first nine months of the year ended
June 30, 2019. DNI did not contribute to segment performance during the last
three months of the year ended June 30, 2019 and during the year ended June 30,
2018.
F-79
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
21. OPERATING SEGMENTS (continued)
Operating segments
(continued)
DNI primarily derives revenue
from fees generated through the distribution of starter packs and, to a less
extent, from interest income earned through the provision of financing to Cell C
in order for it to expand components of Cell Cs telecommunications
infrastructure in South Africa. During the year ended June 30, 2019, the
operating segment incurred a goodwill impairment loss of $6.2 million (refer to
Note 10).
Corporate/eliminations includes
the Companys head office cost center and the amortization of
acquisition-related intangible assets. The $5.3 million impairment loss related
to the impairment of DNI intangible assets (refer to Note 3) during the year
ended June 30, 2019, has been allocated to corporate/ elimination. The $8.0
million paid to the Companys founder, former chief executive officer and former
member of our board of directors during the year ended June 30, 2017, is also
included in corporate/ eliminations.
The reconciliation of the
reportable segments revenue to revenue from external customers for the years
ended June 30, 2019, 2018 and 2017, respectively, is as follows:
|
|
Revenue
|
|
|
|
|
|
|
Corporate/
|
|
|
|
|
|
From
|
|
|
|
Reportable
|
|
|
Eliminations
|
|
|
Inter-
|
|
|
external
|
|
|
|
Segment
|
|
|
(Note 13)
|
|
|
segment
|
|
|
customers
|
|
South African transaction processing
|
$
|
96,038
|
|
$
|
-
|
|
$
|
6,990
|
|
$
|
89,048
|
|
International transaction processing
|
|
148,268
|
|
|
-
|
|
|
-
|
|
|
148,268
|
|
Financial inclusion and applied
technologies .
|
|
146,184
|
|
|
-
|
|
|
2,801
|
|
|
143,383
|
|
Reportable segments
|
|
390,490
|
|
|
-
|
|
|
9,791
|
|
|
380,699
|
|
Corporate/Eliminations revenue
refund
|
|
-
|
|
|
(19,709
|
)
|
|
-
|
|
|
(19,709
|
)
|
Total for the year ended June 30, 2019
|
$
|
390,490
|
|
|
($19,709
|
)
|
$
|
9,791
|
|
$
|
360,990
|
|
South African transaction processing
|
$
|
268,047
|
|
$
|
-
|
|
$
|
29,949
|
|
$
|
238,098
|
|
International transaction processing
|
|
180,027
|
|
|
-
|
|
|
-
|
|
|
180,027
|
|
Financial inclusion and applied
technologies .
|
|
221,906
|
|
|
-
|
|
|
27,142
|
|
|
194,764
|
|
Total for the year ended June 30, 2018
|
$
|
669,980
|
|
$
|
-
|
|
$
|
57,091
|
|
$
|
612,889
|
|
South African transaction processing
|
$
|
249,144
|
|
$
|
-
|
|
$
|
24,518
|
|
$
|
224,626
|
|
International transaction processing
|
|
176,729
|
|
|
-
|
|
|
-
|
|
|
176,729
|
|
Financial inclusion and applied
technologies .
|
|
235,901
|
|
|
-
|
|
|
27,190
|
|
|
208,711
|
|
Total for the year ended June 30, 2017
|
$
|
661,774
|
|
$
|
-
|
|
$
|
51,708
|
|
$
|
610,066
|
|
The Company does not allocate
interest income, interest expense or income tax expense to its reportable
segments. The Company evaluates segment performance based on segment operating
income before acquisition-related intangible asset amortization which represents
operating income before acquisition-related intangible asset amortization and
expenses allocated to Corporate/Eliminations, all under GAAP. The reconciliation
of the reportable segments measure of profit or loss to (loss) income before
income taxes for the years ended June 30, 2019, 2018 and 2017, respectively, is
as follows:
|
|
For the years ended June 30,
|
|
|
|
2019(1)
|
|
|
2018
|
|
|
2017
|
|
Reportable segments measure of profit or
loss
|
$
|
(42,692
|
)
|
$
|
85,690
|
|
$
|
130,799
|
|
Operating loss: Corporate/Eliminations
|
|
(70,816
|
)
|
|
(26,741
|
)
|
|
(33,756
|
)
|
Change in fair value of equity
securities
|
|
(167,459
|
)
|
|
32,473
|
|
|
-
|
|
Loss on disposal of DNI
|
|
(5,771
|
)
|
|
-
|
|
|
-
|
|
Interest income
|
|
7,229
|
|
|
17,885
|
|
|
20,897
|
|
Interest expense
|
|
(10,724
|
)
|
|
(8,941
|
)
|
|
(3,484
|
)
|
Impairment of Cedar Cellular note
|
|
(12,793
|
)
|
|
-
|
|
|
-
|
|
(Loss) Income before income taxes
|
$
|
(303,026
|
)
|
$
|
100,366
|
|
$
|
114,456
|
|
(1) - Operating loss: Corporate/Eliminations includes $34.0
million related to the accrual referred to in Note 13.
F-80
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
21. OPERATING SEGMENTS (continued)
The following tables summarize segment information for the
years ended June 30, 2019, 2018 and 2017:
|
|
For the years ended June 30,
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
South African transaction
processing
|
$
|
96,038
|
|
|
$
|
268,047
|
|
|
$
|
249,144
|
|
International transaction processing
|
|
148,268
|
|
|
|
180,027
|
|
|
|
176,729
|
|
Financial inclusion and
applied technologies
|
|
146,184
|
|
|
|
221,906
|
|
|
|
235,901
|
|
Continuing
|
|
89,847
|
|
|
|
221,906
|
|
|
|
235,901
|
|
Discontinued
|
|
56,337
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
390,490
|
|
|
|
669,980
|
|
|
|
661,774
|
|
Continuing
|
|
334,153
|
|
|
|
669,980
|
|
|
|
661,774
|
|
Discontinued
|
|
56,337
|
|
|
|
-
|
|
|
|
-
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
South African transaction
processing(1)
|
|
(30,771
|
)
|
|
|
42,796
|
|
|
|
59,309
|
|
International transaction
processing
|
|
2,837
|
|
|
|
(12,478
|
)
|
|
|
13,705
|
|
Financial inclusion and applied
technologies(1)
|
|
(14,758
|
)
|
|
|
55,372
|
|
|
|
57,785
|
|
Continuing(1)
|
|
(39,158
|
)
|
|
|
55,372
|
|
|
|
57,785
|
|
Discontinued
|
|
24,400
|
|
|
|
-
|
|
|
|
-
|
|
Subtotal: Operating segments
|
|
(42,692
|
)
|
|
|
85,690
|
|
|
|
130,799
|
|
Corporate/Eliminations
|
|
(70,816
|
)
|
|
|
(26,741
|
)
|
|
|
(33,756
|
)
|
Continuing
|
|
(58,097
|
)
|
|
|
(22,127
|
)
|
|
|
(33,756
|
)
|
Discontinued
|
|
(12,719
|
)
|
|
|
(4,614
|
)
|
|
|
-
|
|
Total(1)
|
|
(113,508
|
)
|
|
|
58,949
|
|
|
|
97,043
|
|
Continuing(1)
|
|
(125,189
|
)
|
|
|
63,563
|
|
|
|
97,043
|
|
Discontinued
|
|
11,681
|
|
|
|
(4,614
|
)
|
|
|
-
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
South African transaction
processing
|
|
3,612
|
|
|
|
4,625
|
|
|
|
4,614
|
|
International transaction processing
|
|
9,962
|
|
|
|
17,627
|
|
|
|
21,366
|
|
Financial inclusion and
applied technologies
|
|
1,968
|
|
|
|
1,441
|
|
|
|
1,422
|
|
Continuing
|
|
1,355
|
|
|
|
1,441
|
|
|
|
1,422
|
|
Discontinued
|
|
613
|
|
|
|
-
|
|
|
|
-
|
|
Subtotal: Operating
segments
|
|
15,542
|
|
|
|
23,693
|
|
|
|
27,402
|
|
Corporate/Eliminations
|
|
21,807
|
|
|
|
11,791
|
|
|
|
13,976
|
|
Continuing
|
|
14,394
|
|
|
|
11,791
|
|
|
|
13,976
|
|
Discontinued
|
|
7,413
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
37,349
|
|
|
|
35,484
|
|
|
|
41,378
|
|
Continuing
|
|
29,323
|
|
|
|
35,484
|
|
|
|
41,378
|
|
Discontinued
|
|
8,026
|
|
|
|
-
|
|
|
|
-
|
|
Expenditures for long-lived assets
|
|
|
|
|
|
|
|
|
|
|
|
South African transaction processing
|
|
3,590
|
|
|
|
3,988
|
|
|
|
2,473
|
|
International transaction
processing
|
|
3,607
|
|
|
|
4,397
|
|
|
|
7,745
|
|
Financial inclusion and applied technologies
|
|
2,219
|
|
|
|
1,264
|
|
|
|
977
|
|
Continuing
|
|
1,488
|
|
|
|
1,264
|
|
|
|
977
|
|
Discontinued
|
|
731
|
|
|
|
-
|
|
|
|
-
|
|
Subtotal: Operating segments
|
|
9,416
|
|
|
|
9,649
|
|
|
|
11,195
|
|
Corporate/Eliminations
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
9,416
|
|
|
|
9,649
|
|
|
|
11,195
|
|
Continuing
|
|
8,685
|
|
|
|
9,649
|
|
|
|
11,195
|
|
Discontinued
|
$
|
731
|
|
|
$
|
-
|
|
|
$
|
-
|
|
F-81
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
21. OPERATING SEGMENTS (continued)
(1) South African transaction
processing and Financial inclusion and applies technologies include retrenchment
costs for the year ended June 30, 2019, of: $4,665 and $1,604, respectively, for
total retrenchment costs for the year ended June 30, 2019, of $6,269. The
retrenchment costs are included in selling, general and administration expense
on the consolidated statement of operations for the year ended June 30, 2019.
The segment information as
reviewed by the chief operating decision maker does not include a measure of
assets per segment as all of the significant assets are used in the operations
of all, rather than any one, of the segments. The Company does not have
dedicated assets assigned to a particular operating segment. Accordingly, it is
not meaningful to attempt an arbitrary allocation and segment asset allocation
is therefore not presented.
Geographic
Information
Long-lived assets based on the
geographic location for the years ended June 30, 2019, 2018 and 2017, are
presented in the table below:
|
|
Long-lived assets
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
(as
|
|
|
(as
|
|
|
|
|
|
|
restatedA)
|
|
|
restatedB)
|
|
|
|
|
|
|
|
|
|
|
|
South Africa
|
$
|
143,924
|
|
$
|
496,442
|
|
$
|
72,443
|
|
South Korea
|
|
149,390
|
|
|
177,388
|
|
|
192,473
|
|
Rest of world
|
|
83,972
|
|
|
116,643
|
|
|
77,723
|
|
Total
|
$
|
377,286
|
|
$
|
790,473
|
|
$
|
342,639
|
|
(A)
|
The South Africa and total amounts have been restated by
$1,976 to correct the misstatement discussed in Note 1.
|
(B)
|
The South Africa and total amounts have been restated by
$1,927 to correct the misstatement discussed in Note
1.
|
22. COMMITMENTS AND CONTINGENCIES
Operating lease commitments
The Company leases certain premises. At June 30, 2019, the
future minimum payments under operating leases consist of:
|
Due within 1 year
|
$6,010
|
|
|
Due within 2 years
|
$2,654
|
|
|
Due within 3 years
|
$1,122
|
|
|
Due within 4 years
|
$518
|
|
|
Due within 5 years
|
$-
|
|
Operating lease payments related
to premises and equipment were $12.1 million, $10.7 million and $9.8 million,
respectively, for the years ended June 2019, 2018 and 2017, respectively.
Capital commitments
As of June 30, 2019 and 2018, the
Company had outstanding capital commitments of approximately $2.0 million and
$1.1 million, respectively.
F-82
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
22. COMMITMENTS AND CONTINGENCIES (continued)
Purchase
obligations
As of June 30, 2019 and 2018, the
Company had purchase obligations totaling $3.5 million and $5.6 million,
respectively. The purchase obligations as of June 30, 2019, primarily include
inventory that will be delivered to the Company and sold to customers in the
second half of calendar 2019.
Guarantees
The South African Revenue Service
and certain of the Companys customers, suppliers and other business partners
have asked the Company to provide them with guarantees, including standby
letters of credit, issued by a South African bank. The Company is required to
procure these guarantees for these third parties to operate its business.
Nedbank has issued guarantees to
these third parties amounting to ZAR 93.6 million ($6.6 million, translated at
exchange rates applicable as of June 30, 2019) and thereby utilizing part of the
Companys short-term facility. The Company in turn has provided nonrecourse,
unsecured counter-guarantees to Nedbank for ZAR 93.6 million ($6.6 million,
translated at exchange rates applicable as of June 30, 2019). The Company pays
commission of between 0.4% per annum to 1.94% per annum of the face value of
these guarantees and does not recover any of the commission from third
parties.
The Company has not recognized
any obligation related to these counter-guarantees in its consolidated balance
sheet as of June 30, 2019. The maximum potential amount that the Company could
pay under these guarantees is ZAR 93.6 million ($6.6 million, translated at
exchange rates applicable as of June 30, 2019). The guarantees have reduced the
amount available for borrowings under the Companys indirect short-term credit
facility described in Note 12.
Contingencies
The Company is subject to a
variety of insignificant claims and suits that arise from time to time in the
ordinary course of business. Management currently believes that the resolution
of these other matters, individually or in the aggregate, will not have a
material adverse impact on the Companys financial position, results of
operations or cash flows.
23. RELATED PARTY TRANSACTIONS
Transact24 had an existing
relationship in place between itself and a company controlled by the spouse of
Transact24s Managing Director at the time of the Transact24 acquisition during
the year ended June 30, 2016. This arrangement therefore was also in place
before the Managing Director became an executive officer of the Company. This
relationship was disclosed to the Company during the due diligence process and
has been considered by the Companys management to be critical to the ongoing
operations of Transact24. The company controlled by the spouse of the managing
director performs transaction processing and Transact24 provides technical and
administration services to the company.
The Company has recorded revenue
of approximately $0.4 million, $4.4 million and $4.2 million related to this
relationship during the years ended June 30, 2019, 2018 and 2017, respectively.
Transact24s Managing Director has an indirect interest in these transactions as
a result of his relationship with his spouse, with an approximate value of $0.1
million, $0.3 million and $1.6 million during the years ended June 30, 2019,
2018 and 2017, respectively. No amounts were due to the Company as of June 30,
2019. The Company was due $0.2 million, as of June 30, 2018, related to the
service provided by Transact24 and these amounts are included in accounts
receivable, net and other receivables as of June 30, 2018.
DNI leased a building that was
owned by a company in which Mr. A.J. Dunn, DNIs Chief Executive Officer, has a
direct shareholding of 16%. The property was sold in November 2018. During the
nine months ended March 31, 2019, DNI paid rental of approximately $1.0 million.
On April 2, 2019, the Companys board of directors determined that Mr. A.J. Dunn
no longer performs a policy-making function by virtue of the change in his
position within the Net1 group and is, therefore, no longer an executive
officer.
F-83
NET 1 UEPS TECHNOLOGIES, INC.
|
Notes to the consolidated financial
statements
|
for the years ended June 30, 2019, 2018 and 2017
|
(All amounts
stated in thousands of United States Dollars, unless otherwise stated)
|
24. UNAUDITED QUARTERLY RESULTS
The following tables contain
selected unaudited consolidated statements of operations information for each
quarter of fiscal 2019 and 2018:
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
Jun 30,
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Sep 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2019
|
|
|
2018
|
|
|
2018
|
|
|
2019
|
|
|
|
(In thousands except per share
data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
51,472
|
|
$
|
86,484
|
|
$
|
97,150
|
|
$
|
125,884
|
|
$
|
360,990
|
|
Continuing (Q4 includes
$19,709 refund)
|
|
51,472
|
|
|
68,642
|
|
|
77,442
|
|
|
107,097
|
|
|
304,653
|
|
Discontinued
|
|
-
|
|
|
17,842
|
|
|
19,708
|
|
|
18,787
|
|
|
56,337
|
|
Operating income
|
|
(49,646
|
)
|
|
(21,683
|
)
|
|
(43,075
|
)
|
|
896
|
|
|
(113,508
|
)
|
Continuing
|
|
(49,646
|
)
|
|
(22,356
|
)
|
|
(48,901
|
)
|
|
(4,286
|
)
|
|
(125,189
|
)
|
Discontinued
|
|
-
|
|
|
673
|
|
|
5,826
|
|
|
5,182
|
|
|
11,681
|
|
Net income attributable to Net1
|
|
(183,694
|
)
|
|
(54,784
|
)
|
|
(63,941
|
)
|
|
(5,199
|
)
|
|
(307,618
|
)
|
Continuing
|
|
(183,694
|
)
|
|
(50,299
|
)
|
|
(65,469
|
)
|
|
(7,145
|
)
|
|
(306,607
|
)
|
Discontinued
|
$
|
-
|
|
$
|
(4,485
|
)
|
$
|
1,528
|
|
$
|
1,946
|
|
$
|
(1,011
|
)
|
Net income per share, in United States
dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings attributable to Net1 shareholders
|
|
($3.23
|
)
|
|
($0.96
|
)
|
|
($1.13
|
)
|
|
($0.09
|
)
|
|
($5.42
|
)
|
Continuing
|
|
($3.23
|
)
|
|
($0.88
|
)
|
|
($1.16
|
)
|
|
($0.12
|
)
|
|
($5.40
|
)
|
Discontinued
|
$
|
0.00
|
|
|
($0.08
|
)
|
$
|
0.03
|
|
$
|
0.03
|
|
|
($0.02
|
)
|
Diluted earnings attributable to Net1
shareholders
|
|
($3.23
|
)
|
|
($0.96
|
)
|
|
($1.12
|
)
|
|
($0.09
|
)
|
|
($5.42
|
)
|
Continuing
|
|
($3.23
|
)
|
|
($0.88
|
)
|
|
($1.15
|
)
|
|
($0.13
|
)
|
|
($5.40
|
)
|
Discontinued
|
$
|
0.00
|
|
|
($0.08
|
)
|
$
|
0.03
|
|
$
|
0.03
|
|
|
($0.02
|
)
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
Jun 30,
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Sep 30,
|
|
|
Year ended
|
|
|
|
2018
|
|
|
2018
|
|
|
2017
|
|
|
2017
|
|
|
June 30,
|
|
|
|
(as
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
restatedA)
|
|
|
|
|
|
|
|
|
|
|
|
(as restatedA)
|
|
|
|
(In thousands except per share
data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
149,194
|
|
$
|
162,721
|
|
$
|
148,416
|
|
$
|
152,558
|
|
$
|
612,889
|
|
Continuing
|
|
149,194
|
|
|
162,721
|
|
|
148,416
|
|
|
152,558
|
|
|
612,889
|
|
Discontinued
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Operating income
|
|
10,072
|
|
|
7,564
|
|
|
16,307
|
|
|
25,006
|
|
|
58,949
|
|
Continuing
|
|
14,686
|
|
|
7,564
|
|
|
16,307
|
|
|
25,006
|
|
|
63,563
|
|
Discontinued
|
|
(4,614
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,614
|
)
|
Net income attributable to Net1
|
|
2,766
|
|
|
32,375
|
|
|
9,622
|
|
|
19,483
|
|
|
64,246
|
|
Continuing
|
|
5,577
|
|
|
29,084
|
|
|
8,576
|
|
|
18,618
|
|
|
61,855
|
|
Discontinued
|
$
|
(2,811
|
)
|
$
|
3,291
|
|
$
|
1,046
|
|
$
|
865
|
|
$
|
2,391
|
|
Net income per share, in United States
dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings attributable to Net1 shareholders
|
$
|
0.05
|
|
$
|
0.57
|
|
$
|
0.17
|
|
$
|
0.34
|
|
$
|
1.13
|
|
Continuing
|
$
|
0.10
|
|
$
|
0.51
|
|
$
|
0.15
|
|
$
|
0.32
|
|
$
|
1.09
|
|
Discontinued
|
$
|
(0.05
|
)
|
$
|
0.06
|
|
$
|
0.02
|
|
$
|
0.02
|
|
$
|
0.04
|
|
Diluted earnings attributable to Net1
shareholders
|
$
|
0.05
|
|
$
|
0.57
|
|
$
|
0.17
|
|
$
|
0.34
|
|
$
|
1.13
|
|
Continuing
|
$
|
0.10
|
|
$
|
0.51
|
|
$
|
0.15
|
|
$
|
0.32
|
|
$
|
1.09
|
|
Discontinued
|
$
|
(0.05
|
)
|
$
|
0.06
|
|
$
|
0.02
|
|
$
|
0.02
|
|
$
|
0.04
|
|
(A) Certain amounts have been
restated to correct the misstatement discussed in Note 1. The impact of the
restatement for the year ended June 30, 2018, has been recorded during the three
months ended June 30, 2018.
*********************
F-84
Net 1 Ueps Technologies (NASDAQ:UEPS)
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Von Jun 2024 bis Jul 2024
Net 1 Ueps Technologies (NASDAQ:UEPS)
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