Net 1 UEPS Technologies Inc.
NASDAQ : UEPS
JSE : NT1

Net 1 UEPS Technologies Inc.

August 22, 2013 16:05 ET

Net 1 UEPS Technologies Inc. Reports 2013 Fourth Quarter and Full Year Results

- Bulk enrollment substantially completed; 22 million registrations and 9.5 million cards issued as of June 30, 2013;

- Revenue of $118 million, increased 25% in constant currency; and

- Fundamental EPS of $0.28, up 22% in constant currency; includes $9 million of implementation and smart card costs.

JOHANNESBURG, SOUTH AFRICA--(Marketwired - Aug. 22, 2013) - Net 1 UEPS Technologies Inc. (NASDAQ:UEPS)(JSE:NT1) today announced results for the fourth quarter and full-year fiscal 2013.

Summary Financial Metrics

Three months ended June 30,
2013 2012 % change
in USD
% change
in ZAR
(All figures in USD '000s except per share data)
Revenue 117,882 107,616 10% 25%
GAAP net income (loss) 8,285 (7,977) nm nm
Fundamental net income (1) 12,598 12,208 3% 21%
GAAP earnings (loss) per share ($) 0.18 (0.17) nm nm
Fundamental earnings per share ($) (1) 0.28 0.27 5% 22%
Fully-diluted shares outstanding ('000's) 45,713 45,542 1%
Average period USD/ ZAR exchange rate 9.19 8.03 14%
Fiscal year ended June 30,
2013 2012 % change
in USD
% change
in ZAR
(All figures in USD '000s except per share data)
Revenue 452,147 390,264 16% 31%
GAAP net income 12,977 44,651 (71%) (67%)
Fundamental net income (1) 34,822 64,094 (46%) (38%)
GAAP earnings per share ($) 0.28 0.99 (71%) (67%)
Fundamental earnings per share ($) (1) 0.76 1.42 (46%) (39%)
Fully-diluted shares outstanding ('000's) 45,678 45,232 1%
Average period USD/ ZAR exchange rate 8.71 7.72 13%
(1) Fundamental net income and earnings per share are non-GAAP measures and are described below under "Use of Non-GAAP Measures-Fundamental net income and fundamental earnings per share." See Attachment B for a reconciliation of GAAP net income (loss) to fundamental net income and earnings per share.

Factors impacting comparability of our Q4 2013 and Q4 2012 results

  • Unfavorable impact from the strengthening of the US dollar: The US dollar appreciated by 14% against the ZAR during Q4 2013 which negatively impacted our reported results;
  • SASSA implementation costs: Our SASSA contract implementation and smart card costs of $9.0 million were 15% higher in ZAR when compared to Q4 2012;
  • DOJ and SEC investigation-related expenses: We incurred DOJ and SEC investigation-related expenses of $1.2 million, pre-tax, during Q4 2013;
  • Fair value charge resulting from issue of equity instrument pursuant to BEE transaction: We recorded a fair value charge of $14.2 million related to our BEE transaction which negatively impacted our reported results during Q4 2012; and
  • Capital gain paid related to intercompany transaction: We incurred a non-recurring capital gains tax of $1.5 million resulting from an intercompany capital transaction in South Africa in Q4 2012.

Comments and Outlook

"I am very pleased to report that we have completed our bulk enrollment on time despite higher than anticipated volumes. This incredibly complex and complicated exercise and its undeniable success, has once again validated SASSA's decision to award this nationally critical tender to us. It is not surprising that MasterCard this week declared the implementation as the best government social grants payment program worldwide," said Dr. Serge Belamant, Chairman and Chief Executive Officer of Net1. "My congratulations go out to my entire workforce! Net1 is now ready to execute on its strategic plans and has commenced with the deployment of both our financial and mobile services, and the early results look extremely impressive. We continue to optimize our company so as to capitalize on the businesses that can leverage our infrastructure and have the potential to add substantial value to our shareholders," he concluded.

"Our one-time implementation costs are now effectively behind us and we therefore expect to demonstrate a marked improvement in profitability during fiscal 2014," said Herman Kotzé, Chief Financial Officer of Net1. "For fiscal 2014, we expect fundamental earnings per share of at least $1.50, assuming a constant currency base of ZAR 8.71/$1 and a share count of approximately 45.7 million shares. Our guidance also assumes the lost revenue and operating income from the roughly 370,000 beneficiaries on SASSA's database who have not re-registered and whose grants will likely be cancelled in September 2013," he concluded.

Completion of SASSA contract bulk enrollment

We completed the second phase of bulk enrollment by April 30, 2013, in accordance with the implementation plan agreed with SASSA. Having substantially concluded bulk enrollment in fiscal 2013, our temporary employee headcount, which peaked at approximately 5,500 employees for most of fiscal 2013, has since declined to 1,392 at June 30, 2013.

As of June 30, 2013, we had enrolled a total of 21.7 million people, which comprises approximately 9.5 million grant recipient cardholders and 12.2 million beneficiaries associated with these recipient cardholders in accordance with our second phase enrollment schedule, and issued them our UEPS/EMV smart card. During fiscal 2013, we incurred direct implementation expenses of approximately $56.2 million (ZAR 488.3 million), including staff, travel, temporary infrastructure hire, fixed premises hire for enrollment and stationery costs. We are unable to quantify the value of time spent by our executives and pension and welfare operations managers and staff that service the five provinces in which we operated under the previous contract and that have assisted in the implementation of the national contract. During fiscal 2012, we incurred direct implementation expenses of approximately $10.9 million (ZAR 83.9 million). We also expensed $10.3 million (ZAR 90.2 million) related to the cost of the UEPS/EMV smart cards issued during fiscal 2013, which is not included in the $56.2 million (ZAR 488.3 million) of direct implementation expenses described above. We did not expense any smart cards in fiscal 2012.

We also incurred approximately $6.9 million in capital expenditures related to the implementation during fiscal 2013. Since inception of the implementation we have incurred cumulative capital expenditures of $28.1 million. We have substantially completed the bulk enrollment of recipient cardholders and beneficiaries and do not expect any further significant capital expenditures related to this process.

SASSA has sent termination notices to all cardholder recipients and beneficiaries who had not presented themselves for enrollment during May, June and July 2013 in terms of the Promotion of Administrative Justice Act. As of July 30, 2013, there were an estimated 372,870 former grant recipient cardholders who had not presented themselves for enrollment. The grants applicable to these grant recipient cardholders will be suspended with effect from September 2013 and these beneficiaries will have to re-apply for their grants. Our revenue for fiscal 2014 will decline to the extent that these beneficiaries do not re-apply for their grants, but such decline may be offset by the amount of new grant recipient cardholders approved by SASSA.

SASSA tender award litigation

On March 27, 2013, a full bench of the South African Supreme Court of Appeal dismissed AllPay Consolidated Investment Holdings (Pty) Ltd's appeal against the earlier ruling by the North Gauteng High Court that SASSA's award of the tender to us would not be set aside. Accordingly, our SASSA contract to distribute social welfare grants to ten million South Africans every month, for a period of five years, remains in full force and effect. On April 18, 2013, AllPay applied for leave to appeal to the South African Constitutional Court, the highest court in the country, against the judgment of the Supreme Court. We and SASSA have opposed AllPay's application. The hearing has been scheduled for September 10, 2013. Both the application for leave to appeal and appeal itself will be argued on September 10, 2013. We cannot predict when or how the Constitutional Court will rule on the matter.

Results of Operations by Segment and Liquidity

Our frequently asked questions and operating metrics will be updated and posted on our website (www.net1.com).

South African transaction-based activities

Segment revenue was $59.3 million in Q4 2013, up 1% compared with Q4 2012 in USD and up 16% on a constant currency basis. In ZAR, the increases in segment revenue were primarily due to higher revenues earned under our SASSA contract and higher transaction volumes at our South African transaction processors. Segment operating income margin was 15% and 9%, respectively, and increased primarily due to increase in transaction volumes. Excluding amortization of acquisition-related intangibles, Q4 2013 segment operating income margin was 16% compared with 12% in Q4 2012.

International transaction-based activities

KSNET continues to contribute the majority of our revenues and operating income in this operating segment. Segment revenue was $35.6 million in Q4 2013, up 15% compared with Q4 2012 in USD and 31% on a constant currency basis. The increase in segment revenue and operating income was primarily due to increased transaction-based revenues in Korea partially offset by start up expenses related to our VCC and XeoHealth initiatives. NUETS did not contribute as a result of the non-renewal of its Iraqi customer's contract in Q3 2013. Excluding the amortization of intangibles, Q4 2013 operating income margin was 13% compared to 10% during Q4 2012.

Smart card accounts

Segment revenue was $11.8 million in Q4 2013, up 43% compared with Q4 2012 in USD and 64% on a constant currency basis and increased as a result of the increase in smart card accounts. Q4 2013 segment operating income margin was 29%, compared to 28% during Q4 2012.

Financial services

UEPS-based lending contributes the majority of the revenue and operating income in this operating segment. Segment revenue was $2.1 million in Q4 2013, up 16% compared with Q4 2012 in USD and 33% higher on a constant currency basis, principally due to an increase in lending activities. Q4 2013 segment operating income margin was 17% compared with 54% during Q4 2012 primarily due to the allocation of UEPS-based lending corporate administration and overhead expenses to this segment from South African transaction-based activities. We have allocated all fiscal 2013 expenses to this segment in Q4 2013. We expect to allocate expenses to this operating segment on a quarterly basis in fiscal 2014 and therefore we expect an improved margin in Q1 2014 compared with Q4 2013. Smart Life did not contribute to operating income in the fourth quarter of fiscal 2013 as it continues to be restricted from issuing new insurance policies as a result of the suspension of its license in Q3 2013.

Hardware, software and related technology sales

Segment revenue was $9.2 million in Q4 2013, up 12% compared with Q4 2012 in USD and 28% on a constant currency basis. In constant currency, the increase in revenue resulted primarily from an increase in royalty fees and ad hoc hardware sales, offset by a lower contribution from most other major contributors to this segment. Excluding amortization of all intangibles, segment operating income margin was 25% compared to 26% during Q4 2012.

Corporate/eliminations

The decrease in our corporate expenses resulted primarily from the $14.2 million BEE transaction equity instrument charge incurred in Q4 2012, offset by legal fees we incurred in connection with the DOJ and SEC investigations and higher other corporate head office-related expenses.

Cash flow and liquidity

At June 30, 2013, we had cash and cash equivalents of $53.7 million, up from $39.0 million at June 30, 2012. The increase in our cash balances from June 30, 2012 was primarily due to cash generated from operations, offset by implementation costs and capital expenditures incurred to implement our SASSA contract, scheduled repayments of our Korean debt and the acquisitions of Pbel and SmartSwitch Botswana. For Q4 2013, net cash provided by operating activities was $24.9 million compared with net cash used by operating activities was $22.6 million in Q4 2012.

Excluding the impact of interest received, interest paid under our Korean debt and taxes paid, the increase in cash provided by operating activities resulted from improved cash generated from operations, partially offset, in ZAR, by higher implementation costs related to our SASSA contract. Capital expenditures for Q4 2013 and 2012 were $6 million and $16 million, respectively, and have decreased primarily due to lower capital expenditures related to our SASSA contract implementation in Q4 2013.

Use of Non-GAAP Measures

US securities laws require that when we publish any non-GAAP measures, we disclose the reason for using the non-GAAP measure and provide reconciliation to the directly comparable GAAP measure. The presentation of fundamental net income and fundamental earnings per share and headline earnings (loss) per share are non-GAAP measures.

Fundamental net income and fundamental earnings per share

Fundamental net income and earnings per share is GAAP net income (loss) and earnings (loss) per share adjusted for (1) the amortization of acquisition-related intangible assets (net of deferred taxes), (2) stock-based compensation charges and (3) unusual non-recurring items, including the amortization of KSNET debt facility fees, as well as (a) in fiscal 2013, DOJ and SEC investigations-related expenses and acquisition-related costs; and (b) in fiscal 2012, the effects of a change in South African tax law and the creation of a valuation allowance related to foreign tax credits, equity instrument charge related to our BEE transaction, capital gains taxes paid resulting from an intercompany capital transaction in South Africa, the profit on liquidation of SmartSwitch Nigeria and loss on sale of 10% of Smart Life. Management believes that the fundamental net income and earnings per share metric enhances its own evaluation, as well as an investor's understanding, of our financial performance. Attachment B presents the reconciliation between GAAP and fundamental net income and earnings per share.

Headline earnings per share/ headline loss per share ("HEPS")

The inclusion of HEPS in this press release is a requirement of our listing on the JSE. HEPS basic and diluted is calculated using net income (loss) which has been determined based on GAAP. Accordingly, this may differ to the headline earnings (loss) per share calculation of other companies listed on the JSE as these companies may report their financial results under a different financial reporting framework, including but not limited to, International Financial Reporting Standards.

HEPS basic and diluted is calculated as GAAP net income (loss) adjusted for the loss (profit) on sale of property, plant and equipment, net of related tax effects, the loss attributable to the sale of 10% of Smart Life and the profit on liquidation of SmartSwitch Nigeria. Attachment C presents the reconciliation between our net income (loss) used to calculate earnings (loss) per share basic and diluted and HEPS basic and diluted and the calculation of the denominator for headline diluted earnings per share.

Conference Call

We will host a conference call to review Q4 2013 results on August 23, 2013, at 8:00 Eastern Time. To participate in the call, dial 1-866-652-5200 (U.S. only), 1-855-669-9657 (Canada only), 0808-162-4061 (U.K. only) or 0-800-200-648 (South Africa only) ten minutes prior to the start of the call. Callers should request "Net1 call" upon dial-in. The call will also be webcast on the Net1 homepage, www.net1.com. Please click on the webcast link at least ten minutes prior to the call. A webcast of the call will be available for replay on the Net1 website through September 22, 2013.

About Net1 (www.net1.com)

Net1 is a leading provider of alternative payment systems that leverage its Universal Electronic Payment System, or UEPS, to facilitate biometrically secure, real-time electronic transaction processing to unbanked and under-banked populations of developing economies around the world in an online or offline environment. Net1's UEPS/EMV solution is also completely interoperable with global EMV standards that seamlessly permit access to all the UEPS functionality in a traditional EMV environment. In addition to payments, UEPS can be used for banking, healthcare management, payroll, remittances, voting and identification.

Net1 operates market-leading payment processors in South Africa, Republic of Korea, and Ghana. In addition, Net1's proprietary Mobile Virtual Card technology offers secure mobile payments and banking services in developed and emerging countries while its MediKredit and XeoHealth subsidiaries provide its proprietary 5010 and ICD-10 compliant real-time claims adjudication system.

Net1 has a primary listing on the Nasdaq and a secondary listing on the JSE Limited.

Forward-Looking Statements

This announcement contains forward-looking statements that involve known and unknown risks and uncertainties. A discussion of various factors that cause our actual results, levels of activity, performance or achievements to differ materially from those expressed in such forward-looking statements are included in our filings with the Securities and Exchange Commission. We undertake no obligation to revise any of these statements to reflect future events.

NET 1 UEPS TECHNOLOGIES INC.
Unaudited Condensed Consolidated Statements of Operations
Three months ended Fiscal year ended
June 30, June 30,
2013 2012 2013 2012
(In thousands, except per share data) (In thousands, except per share data)
REVENUE $ 117,882 $ 107,616 $ 452,147 $ 390,264
EXPENSE
Cost of goods sold, IT processing, servicing and support 53,045 41,395 196,834 141,000
Selling, general and administration 41,698 45,107 191,552 137,404
Equity instrument issued pursuant to BEE transaction - 14,211 - 14,211
Depreciation and amortization 9,548 9,305 40,599 36,499
OPERATING INCOME (LOSS) 13,591 (2,402) 23,162 61,150
INTEREST INCOME 3,888 2,595 12,083 8,576
INTEREST EXPENSE 1,849 2,130 7,966 9,345
INCOME (LOSS) BEFORE INCOME TAX EXPENSE 15,630 (1,937) 27,279 60,381
INCOME TAX EXPENSE 7,484 6,151 14,656 15,936
NET INCOME (LOSS) BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS 8,146 (8,088) 12,623 44,445
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS 147 120 351 220
NET INCOME (LOSS) 8,293 (7,968) 12,974 44,665
LESS (ADD) NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST 8 9 (3) 14
NET INCOME (LOSS) ATTRIBUTABLE TO NET1 $ 8,285 $ (7,977) $ 12,977 $ 44,651
Net income (loss) per share, in United States dollars
Basic earnings (loss) attributable to Net1 shareholders $0.18 $(0.17) $0.28 $0.99
Diluted earnings (loss) attributable to Net1 shareholders $0.18 $(0.17) $0.28 $0.99
NET 1 UEPS TECHNOLOGIES INC.
Condensed Consolidated Balance Sheets
Unaudited (A)
June 30, June 30,
2013 2012
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 53,665 $ 39,123
Pre-funded social welfare grants receivable 2,934 9,684
Accounts receivable, net of allowances 102,614 101,918
Finance loans receivable 8,350 8,141
Inventory 12,222 10,779
Deferred income taxes 4,938 5,591
Total current assets before settlement assets 184,723 175,236
Settlement assets 752,476 409,166
Total current assets 937,199 584,402
PROPERTY, PLANT AND EQUIPMENT, net 48,301 52,616
EQUITY-ACCOUNTED INVESTMENTS 1,183 1,508
GOODWILL 175,806 182,737
INTANGIBLE ASSETS, net 77,257 93,930
OTHER LONG-TERM ASSETS, including reinsurance assets 36,576 40,700
TOTAL ASSETS 1,276,322 955,893
40,570
LIABILITIES
CURRENT LIABILITIES
Accounts payable 26,567 13,172
Other payables 33,808 40,167
Current portion of long-term borrowings 14,209 14,019
Income taxes payable 2,275 6,019
Total current liabilities before settlement obligations 76,859 73,377
Settlement obligations 752,476 409,166
Total current liabilities 829,335 482,543
DEFERRED INCOME TAXES 18,727 20,988
LONG-TERM BORROWINGS 66,632 79,760
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities 21,659 25,791
TOTAL LIABILITIES 936,353 609,082
COMMITMENTS AND CONTINGENCIES
EQUITY
NET1 EQUITY:
COMMON STOCK
Authorized: 200,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury - 2013: 45,592,550; 2012: 45,548,902 59 59
PREFERRED STOCK
Authorized shares: 50,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury: March: -; June: - - -
ADDITIONAL PAID-IN-CAPITAL 160,670 155,350
TREASURY SHARES, AT COST: 2013: 13,455,090; 2012: 13,455,090 (175,823) (175,823)
ACCUMULATED OTHER COMPREHENSIVE LOSS (100,858) (75,722)
RETAINED EARNINGS 452,618 439,641
TOTAL NET1 EQUITY 336,666 343,505
NON-CONTROLLING INTEREST 3,303 3,306
TOTAL EQUITY 339,969 346,811
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,276,322 $ 955,893
(A) - Derived from audited financial statements
NET 1 UEPS TECHNOLOGIES INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Three months ended Fiscal year ended
June 30, June 30,
2013 2012 2013 2012
(In thousands) (In thousands)
Cash flows from operating activities
Net income (loss) $ 8,293 $ (7,968) $ 12,974 $ 44,665
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 9,548 9,305 40,599 36,499
Loss from equity-accounted investments (147) (120) (351) (220)
Fair value adjustments 223 (1,392) 631 (3,375)
Interest payable 950 4,354 4,313 8,823
Profit on disposal of property, plant and equipment 193 (7) 110 (64)
Net loss on sale of 10% of Smart Life - - - 81
Profit on liquidation of Smartswitch Nigeria - - - (3,994)
Realized loss on sale of investments related to insurance business - - - 25
Stock-based compensation charge 582 893 3,907 2,775
Fair value of BBEE equity instrument - 14,211 - 14,211
Facility fee amortized 67 (126) 302 389
Decrease in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable (1,739) (16,653) (5,726) (31,974)
Increase in inventory (630) (4,940) (2,890) (5,271)
Increase in accounts payable and other payables 9,868 (16,731) 8,113 (18,496)
(Decrease) Increase in taxes payable (3,102) (2,147) (2,748) (7,483)
Increase (Decrease) in deferred taxes 816 (1,257) (3,317) (16,185)
Net cash provided by (used in) operating activities 24,922 (22,578) 55,917 20,406
Cash flows from investing activities
Capital expenditures (5,644) (15,702) (22,747) (39,167)
Proceeds from disposal of property, plant and equipment 123 379 510 764
Acquisitions, net of cash acquired - - (2,143) (6,154)
Repayment of loan by equity-accounted investment - - 3 122
Settlement from former shareholders of KSNET - - - 4,945
Acquisition of available for sale securities - 29 - (948)
Purchase of investments related to insurance business - - - (2,320)
Proceeds from maturity of investments related to insurance business - - - 2,321
Other investing activity Net - - 545 (1)
Net change in settlement assets (255,565) (381,062) (423,984) (252,101)
Net cash used in investing activities (261,086) (396,356) (447,816) (292,539)
Cash flows from financing activities
Repayment of long-term borrowings (7,201) (7,145) (14,508) (19,172)
Proceeds from issue of common stock - - 240 -
Acquisition of treasury stock - - - (1,129)
Proceeds on sale of 10% of Smart Life - - - 107
Net change in settlement obligations 255,565 381,062 423,984 252,101
Net cash provided by financing activities 248,364 373,917 409,716 231,907
Effect of exchange rate changes on cash (1,151) (4,109) (3,275) (15,914)
Net increase (decrease) in cash and cash equivalents 11,049 (49,126) 14,542 (56,140)
Cash and cash equivalents - beginning of period 42,616 88,250 39,123 95,263
Cash and cash equivalents - end of period $ 53,665 $ 39,124 $ 53,665 $ 39,123

Net 1 UEPS Technologies Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended June 30, 2013 and 2012 and March 31, 2013

Change - actual Change - constant
exchange rate
(1)
Key segmental data, in $ '000, Q4 '13 Q4 '12 Q3 '13 Q4 '13
vs
Q4'12
Q4 '13
vs
Q3 '13
Q4 '13
vs
Q4'12
Q4 '13
vs
Q3 '13
Revenue:
SA transaction-based activities $59,268 $58,434 $59,009 1% 0% 16% 9%
International transaction-based activities 35,600 31,003 33,119 15% 7% 31% 17%
Smart card accounts 11,750 8,189 8,657 43% 36% 64% 47%
Financial services 2,062 1,777 1,651 16% 25% 33% 36%
Hardware, software and related technology sales 9,202 8,213 8,705 12% 6% 28% 15%
Total consolidated revenue $117,882 $107,616 $111,141 10% 6% 25% 15%
Consolidated operating income (loss):
SA transaction-based activities $9,060 $5,181 ($4,197) 75% nm 100% nm
Operating income (loss) excluding amortization 9,632 6,809 (3,127) 41% nm 62% nm
Amortization of intangible assets (572) (1,628) (1,070) (65%) (47%) (60%) (42%)
International transaction-based activities 1,365 137 (1,362) 896% nm 1,039% nm
Operating income excluding amortization 4,536 3,130 1,866 45% 143% 66% 164%
Amortization of intangible assets (3,171) (2,993) (3,228) 6% (2%) 21% 7%
Smart card accounts 3,349 2,333 2,467 44% 36% 64% 47%
Financial services 354 951 1,147 (63%) (69%) (57%) (67%)
Hardware, software and related technology sales 2,216 2,074 1,699 7% 30% 22% 42%
Operating income (loss) excluding amortization 2,295 2,164 1,785 6% 29% 21% 40%
Amortization of intangible assets (79) (90) (86) (12%) (8%) 0% (0%)
Corporate/ Eliminations (2,753) (13,078) (4,480) (79%) (39%) (76%) (33%)
Total operating income (loss) $13,591 ($2,402) ($4,726) nm nm nm nm
Operating income margin (%)
SA transaction-based activities 15% 9% (7%)
International transaction-based activities 4% 0% (4%)
International transaction-based activities excluding amortization 13% 10% 6%
Smart card accounts 29% 28% 28%
Financial services 17% 54% 69%
Hardware, software and related technology sales 24% 25% 20%
Overall operating margin 12% (2%) (4%)
(1) - This information shows what the change in these items would have been if the USD/ZAR exchange rate that prevailed during the fourth quarter of fiscal 2013 also prevailed during the fourth quarter of fiscal 2012 and the third quarter of fiscal 2013.

Fiscal year ended June 30, 2013 and 2012

Change -
actual
Change -
constant
exchange
rate
(1)
Key segmental data, in '000, except margins F2013 F2012 F2013
vs
F2012
F2013
vs
F2012
Revenue:
SA transaction-based activities $240,405 $201,207 19% 35%
International transaction-based activities 133,481 118,281
13%

27%
Smart card accounts 36,990 31,263 18% 34%
Financial services 6,545 8,121 (19%) (9%)
Hardware, software and related technology sales 34,726 31,392
11%

25%
Total consolidated revenue $452,147 $390,264 16% 31%
Consolidated operating income (loss):
SA transaction-based activities $13,196 $49,824 (74%) (70%)
Operating income excluding amortization 17,687 55,995
(68%)

(64%)
Amortization of intangible assets (4,491) (6,171) (27%) (18%)
International transaction-based activities 34 1,257 (97%) (97%)
Operating income excluding amortization 13,436 14,272
(6%)

6%
Amortization of intangible assets (13,402) (13,015) 3% 16%
Smart card accounts 10,543 12,820 (18%) (7%)
Financial services 3,646 4,636 (21%) (11%)
Hardware, software and related technology sales 6,694 3,619 85% 109%
Operating income excluding amortization 7,023 3,990
76%

99%
Amortization of intangible assets (329) (371) (11%) 0%
Corporate/ Eliminations (10,951) (11,006) (0%) 12%
Total operating income $23,162 $61,150 (62%) (57%)
Operating income margin (%)
SA transaction-based activities 5% 25%
International transaction-based activities 0% 1%
International transaction-based activities excluding amortization 10% 12%
Smart card accounts 29% 41%
Financial services 56% 57%
Hardware, software and related technology sales 19% 12%
Overall operating margin 5% 16%
(1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during fiscal 2013 also prevailed during fiscal 2012.

Net 1 UEPS Technologies Inc.

Attachment B

Reconciliation of GAAP net income (loss) and earnings (loss) per share, basic, to fundamental net income and earnings per share, basic:

Three months ended June 30, 2013 and 2012

Net income (loss)
(USD'000)
E(L)PS,
basic
(USD)
Net income (loss)
(ZAR'000)
E(L)PS,
basic
(ZAR)
2013 2012 2013 2012 2013 2012 2013 2012
GAAP 8,285 (7,977) 0.18 (0.17) 76,109 (64,078) 1.67 (1.40)
Intangible asset amortization, net 2,888 3,532 26,520 28,381
Stock-based compensation charge 582 893 5,346 7,173
Facility fees for KSNET debt 67 84 615 675
DOJ and SEC investigations-related expenses 776 - 7,129 -
BEE charge - 14,211 - 112,066
Capital taxes paid - 1,465 - 11,768
Fundamental 12,598 12,208 0.28 0.27 115,719 95,985 2.54 2.09

Fiscal year ended June 30, 2013 and 2012

Net income
(USD'000)
EPS, basic
(USD)
Net income
(ZAR'000)
EPS,
basic
(ZAR)
2013 2012 2013 2012 2013 2012 2013 2012
GAAP 12,977 44,651 0.28 0.99 113,035 344,643 2.48 7.63
Intangible asset amortization, net 13,679 14,602 119,155 112,719
Stock-based compensation charge 3,907 2,775 34,032 21,419
Facility fees for KSNET debt 302 389 2,631 3,003
DOJ and SEC investigations-related expenses 3,888 - 33,866 -
Acquisition-related costs 69 - 601 -
Change in tax law - (18,315) - (150,373)
BEE charge - 14,211 - 112,066
Create FTC valuation allowance - 8,232 - 67,588
Capital taxes paid - (3,994) - (30,828)
Profit on liquidation of subsidiary - 1,465 - 11,308
Loss on sale of 10% of Smart Life - 78 - 602
Fundamental 34,822 64,094 0.76 1.42 303,320 492,147 6.66 10.89

Net 1 UEPS Technologies Inc.

Attachment C

Reconciliation of net income (loss) used to calculate earnings (loss) per share basic and diluted and headline earnings (loss) per share basic and diluted:

Three months ended June 30, 2013 and 2012

2013 2012
Net income (loss) (USD'000) 8,285 (7,977)
Adjustments:
Loss (Profit) on sale of property, plant and equipment 193 (7)
Tax effects on above (54) 2
Net income (loss) used to calculate headline earnings (USD'000) 8,424 (7,982)
Weighted average number of shares used to calculate net income (loss) per share basic earnings (loss) and headline earnings (loss) per share basic earnings (loss) ('000) 45,593 45,498
Weighted average number of shares used to calculate net income (loss) per share diluted earnings (loss) and headline earnings (loss) per share diluted earnings (loss) ('000) 45,713 45,542
Headline earnings (loss) per share:
Basic, in USD 0.18 (0.17)
Diluted, in USD 0.18 (0.17)

Fiscal year ended June 30, 2013 and 2012

2013 2012
Net income (USD'000) 12,977 44,651
Adjustments:
Profit on liquidation of SmartSwitch Nigeria - (3,994)
Loss on sale of 10% of Smart Life - 78
Loss (Profit) on sale of property, plant and equipment 110 (64)
Tax effects on above (31) 18
Net income used to calculate headline earnings (USD'000) 13,056 40,689
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000) 45,553 45,187
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000) 45,678 45,232
Headline earnings per share:
Basic, in USD 0.28 0.90
Diluted, in USD 0.28 0.90

Calculation of the denominator for headline diluted earnings per share

Q4 '13 Q4 '12 F2013 F2012
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP 45,593 45,498 45,553 45,187
Effect of dilutive securities under GAAP 120 44 125 45
Denominator for headline diluted earnings per share 45,713 45,542 45,678 45,232

Weighted average number of shares used to calculate headline earnings per share diluted represent the denominator for basic weighted-average common shares outstanding and unvested restricted shares expected to vest plus the effect of dilutive securities under GAAP. We use this number of fully-diluted shares outstanding to calculate headline earnings (loss) per share diluted because we do not use the two-class method to calculate headline earnings (loss) per share diluted.

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