SOURCE: Net 1 UEPS Technologies, Inc.

Net 1 UEPS Technologies, Inc.

August 25, 2016 16:05 ET

Net 1 UEPS Technologies, Inc. Reports Fourth Quarter and Full Year 2016 Results

JOHANNESBURG, SOUTH AFRICA--(Marketwired - August 25, 2016) - Net 1 UEPS Technologies, Inc. (NASDAQ: UEPS) (JSE: NT1) today released results for the fourth quarter and full-year fiscal 2016.

  • Q4 2016 Revenue of $151.3 million, an increase of 15% in constant currency;
  • Q4 2016 FEPS of $0.51, which includes an adverse impact of $2.0 million, or $0.042 per share, attributable to taxes;
  • Closed IFC transaction with the issue of 10 million shares for $107.7 million on May 11, 2016.
 
Summary Financial Metrics
    
   Three months ended June 30,
   2016  2015  % change in USD   % change in ZAR
(All figures in USD '000s except per share data)          
Revenue  151,259  164,286  (8% ) 15%
GAAP net income  24,356  23,914  2%   27%
Fundamental net income (1)  26,299  27,233  (3% ) 20%
GAAP earnings per share ($)  0.48  0.51  (7% ) 16%
Fundamental earnings per share ($) (1)  0.51  0.58  (12% ) 10%
Fully-diluted shares outstanding ('000's)  51,224  46,944  10%    
Average period USD/ ZAR exchange rate  15.02  12.04  25%    
    
    
   Year ended June 30,
   2016  2015  % change in USD   % change in ZAR
(All figures in USD '000s except per share data)          
Revenue  590,749  625,979  (6% ) 19%
GAAP net income  82,454  94,735  (13% ) 10%
Fundamental net income (1)  92,113  108,205  (15% ) 7%
GAAP earnings per share ($)  1.72  2.03  (15% ) 7%
Fundamental earnings per share ($) (1)  1.92  2.32  (17% ) 5%
Fully-diluted shares outstanding ('000's)  48,105  46,913  3%   3%
Average period USD/ ZAR exchange rate  14.38  11.43  26%    
          
(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 to fundamental net income and earnings per share.
 

Factors impacting comparability of our Q4 2016 and Q4 2015 results

  • Unfavorable impact from the strengthening of the U.S. dollar against primary functional currencies: The U.S. dollar appreciated by 26% against the ZAR and 9% against the KRW during Q4 2016, which negatively impacted our reported results;
  • Higher financial services revenue and transaction fees: We experienced growth in lending revenues due to an increase in the number of loans extended, and an increase in transaction fees;
  • Ongoing contributions from EPE and Smart Life and expansion of branch network: Our EPE and Smart Life offerings contributed to an increase in revenue in ZAR, as well as an associated increase in establishment costs for our branch network;
  • Increase in ad hoc terminal and card sales: Our reported results were positively impacted by higher ad hoc terminal and card sales during Q4, 2016;
  • Gain on change in accounting for Finbond: We recognized a gain of $1.6 million, net of tax, related to the change to the equity method of accounting from available-for-sale method for Finbond ;
  • Tax impact of dividends from South African subsidiary: Our income tax expense includes approximately $2.0 million related to the tax impact, including withholding taxes, resulting from further distributions from our South African subsidiary during fiscal 2016, which helped reduce the impact of a weakened ZAR on our reported cash balances. The conversion of a significant portion of our ZAR cash reserves to USD also had a negative impact on our interest income due to the material difference between ZAR and USD deposit rates; and
  • Issue of 10 million shares of our common stock: Our earnings per share and fundamental earnings per share for Q4 2016 were adversely impacted by the issuance of 10 million shares of our common stock to IFC Investors, partially offset by modestly higher interest income due to the cash consideration received for the share issue.

"As a disruptive force providing technology-based solutions to facilitate financial inclusion, we have built a business model that is defensible, differentiated, sustainable and socially responsible, and that once again has delivered top and bottom line constant currency growth despite on-going political and regulatory interference in South Africa, and macroeconomic events globally," said Serge Belamant, Chairman and CEO of Net1. "Being disruptive is not for the fainthearted, but we believe that unless norms, cartels and traditional thinking are challenged, progress will be obstructed at the cost of those who need it most. In fiscal 2017, we will continue to grow our South African businesses, but will also directly market and sell our UEPS/EMV solutions, and their related financial products, in other developing economies with the help of our partners like the IFC, further aided by focused acquisitions. We have spent the past few months on the restructuring and building of our management teams, and are now ready and able to scale our operations internationally," he concluded.

"During fiscal 2017, we expect to implement our strategic plan by investing between $15 and $20 million on building out our direct international sales force, management teams and infrastructure, establishing a presence in new countries and further developing our products across Europe and many emerging countries in Africa, Asia and Latin America. These investments will be a drag on our reported results but the resultant top line benefits should start to accrue in the second half of fiscal 2017, and more meaningfully in fiscal 2018 and beyond," said Herman Kotze, Chief Financial Officer of Net1. "In South Africa, we expect our CPS business to remain flat, while our financial inclusion businesses should continue to grow in excess of 15%. As a result of these factors, and taking into consideration the approximately 10 million shares issued to the IFC in May 2016, for fiscal 2017, we anticipate our fundamental earnings per share to be at least $1.65. Our guidance assumes that our existing contract with SASSA remains in effect for the full year on the existing terms and conditions, an updated constant currency base of ZAR 14.38/$1, a share count of 54.1 million shares, and a tax rate between 33%-35%," he concluded.

Purchase of shares under 10b5-1 plan and unscheduled Korean debt repayment

As of August 24, 2016, we had repurchased approximately 1.2 million shares of our common stock under our $50 million 10b5-1 plan that we adopted on June 29, 2016 and that expires at the end of August 2016.

On July 29, 2016, we prepaid KRW 30 billion (approximately $26.0 million, translated at exchange rates applicable as of June 30, 2016) of our Korean debt facility. We had outstanding long-term debt of KRW 30.0 billion following this unscheduled payment, and a replenished revolver facility of KRW 10 billion which expires in 2018.

Results of Operations by Segment and Liquidity

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

South African transaction processing

Segment revenue was $53.6 million in Q4 2016, down 10% compared with Q4 2015 in USD, but 12% higher on a constant currency basis. In ZAR, the increase in segment revenue and operating income was primarily due to higher EPE transaction revenue as a result of increased usage of our ATMs, more low-margin transaction fees generated from card holders using the South African National Payment System, increased inter-segment transaction processing activities, and a modest increase in the number of social welfare grants distributed. Our operating income margin for Q4 2016 and 2015 was 24% and 19%, respectively, and was higher primarily due to higher EPE revenue as a result of increased ATM transactions, an increase in inter-segment transaction processing activities, an increase in the number of beneficiaries paid in Q4 2016 and a modest increase in the margin of transaction fees generated from cardholders using the South African National Payment System, partially offset by annual salary increases granted to our South African employees.

International transaction processing

Segment revenue was $47.2 million in Q4 2016, up 11% compared with Q4 2015 in USD, and up 38% on a constant currency basis. Revenue increased in constant currency primarily due to higher transaction volume at KSNET during Q4 2016 and the contribution from Transact24 and Masterpayment from April 2016. Operating income during Q4 2016 was higher primarily due to higher processing activity at KSNET, partially offset by an increase in depreciation expenses at KSNET and ongoing ZAZOO start-up costs. Operating income margin for Q4 2016 and 2015 was constant at 17%.

Financial inclusion and applied technologies

Segment revenue was $62.1 million in Q4 2016, down 15% compared with Q4 2015 in USD and up 6% on a constant currency basis. In ZAR, Financial inclusion and applied technologies revenue and operating income increased primarily due to more ad hoc terminal and card sales, more insurance policies sold and higher lending service fees, partially offset by lower sales of prepaid airtime and other value-added services . Operating income for Q4 2016 was also adversely impacted by establishment costs for Smart Life and expansion of our branch network as well as an increase in inter-segment charges. Operating income margin for the Financial inclusion and applied technologies segment was 22% and 27%, respectively, during Q4 2016 and 2015, and has decreased primarily due to establishment costs for Smart Life, expansion of our branch network and an increase in inter-segment charges.

Corporate/eliminations

Our corporate expenses have decreased largely due to the impact of the stronger USD on goods and services procured in other currencies, primarily the ZAR, lower amortization costs and the gain resulting from the change in accounting for Finbond, partially offset by modest increases in USD denominated goods and services purchased from third parties and directors' fees.

Cash flow and liquidity

At June 30, 2016, we had cash and cash equivalents of $223.6 million, up from $117.6 million at June 30, 2015. The increase in our cash balances from June 30, 2015, was primarily due to the cash received from issue of our common stock to the IFC Investors and the expansion of all of our core businesses, partially offset by the strengthening of the U.S. dollar against our primary functional currencies, repurchase of shares of our common stock, provisional tax payments, acquisitions and capital expenditures.

Excluding the impact of interest received, interest paid under our Korean debt and taxes, the increase in cash from operating activities resulted from improved trading activity during fiscal 2016. Capital expenditures for Q4 2016 and 2015 were $7.1 million and $11.6 million, respectively, and have decreased primarily due to the acquisition of fewer payment processing terminals in South Korea. During Q4 2016, we paid $25.9 million for 100% of the issued and outstanding shares of Masterpayment. We received approximately $107.7 million from the issuance of approximately 10 million shares of our common stock to the IFC Investors. Finally, we paid $2.7 million related to the repurchase of our common stock under our buy-back authorization and made a scheduled Korean long-term debt repayment of $8.7 million

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 per share are non-GAAP measures.

Fundamental net income and fundamental earnings per share

Fundamental net income and earnings per share is GAAP net income and earnings per share adjusted for (1) the amortization of acquisition-related intangible assets (net of deferred taxes), (2) stock-based compensation charges and (3) unusual non-recurring items, including the amortization of KSNET debt facility fees and US government investigations-related and US lawsuit expenses as well as, in fiscal 2016, a fair value gain resulting from the acquisition of Transact24, a gain resulting from the change in accounting for Finbond and costs related to the IFC transaction and to acquisitions consummated or ultimately not pursued, and in fiscal 2015, a refund (net of taxes) related to Korean industry-wide litigation that has now been finalized. 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 ("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 which has been determined based on GAAP. Accordingly, this may differ to the headline earnings per share calculation of other companies listed on the JSE as these companies may report their financial results under a different financial reporting framework, including but not limited to, International Financial Reporting Standards.

HEPS basic and diluted is calculated as GAAP net income adjusted for the profit on sale of property, plant and equipment, and in fiscal 2016, a fair value gain resulting from the acquisition of Transact24 and a gain resulting from the change in accounting for Finbond. Attachment C presents the reconciliation between our net income used to calculate earnings 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 2016 results on August 26, 2016, at 8:00 Eastern Time. To participate in the call, dial 1-855-481-5362 (US and Canada), 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 18, 2016.

About Net1 (www.net1.com)

Net1 is a leading provider of alternative payment systems that leverage its Universal Electronic Payment System ("UEPS") or utilize its proprietary mobile technologies. The Company operates market-leading payment processors in South Africa and the Republic of Korea. Through Transact24, Net1 offers debit, credit and prepaid processing and issuing services for Visa, MasterCard and ChinaUnionPay in China and other territories across Asia-Pacific, Europe and Africa, and the United States. Through Masterpayment, Net1 provides payment processing and enables working capital financing in Europe.

UEPS permits the Company 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 interoperable with global EMV standards that seamlessly enable 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's mobile technologies include its proprietary mobile payments solution - MVC, which offers secure mobile-based payments, as well as mobile banking and prepaid value-added services in developed and emerging countries. The Company intends to deploy its varied mobile solutions through its ZAZOO business unit, which is an aggregation of innovative technology companies and is based in the United Kingdom.

Net1 has a primary listing on the NASDAQ and a secondary listing on the Johannesburg Stock Exchange.

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.
Condensed Consolidated Statements of Operations
 
   Unaudited  (A)
   Three months ended  Year ended
   June 30,  June 30,
   2016  2015  2016  2015
   (In thousands, except per share data)  (In thousands, except per share data)
                 
REVENUE  $151,259  $164,286  $590,749  $625,979
                 
EXPENSE                
                 
 Cost of goods sold, IT processing, servicing and support   70,785   80,582   290,101   297,856
                 
 Selling, general and administration   37,879   40,797   145,886   158,919
                 
 Depreciation and amortization   10,412   10,294   40,394   40,685
                 
OPERATING INCOME   32,183   32,613   114,368   128,519
                 
INTEREST INCOME   4,008   4,467   15,292   16,355
                 
INTEREST EXPENSE   543   1,096   3,423   4,456
                 
INCOME BEFORE INCOME TAX EXPENSE   35,648   35,984   126,237   140,418
                 
INCOME TAX EXPENSE   10,774   11,980   42,080   44,136
                 
NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   24,874   24,004   84,157   96,282
                 
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   61   219   639   452
                 
NET INCOME   24,935   24,223   84,796   96,734
                 
LESS NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST   579   309   2,342   1,999
                 
NET INCOME ATTRIBUTABLE TO NET1  $24,356  $23,914  $82,454  $94,735
                 
Net income per share, in United States dollars                
 Basic earnings attributable to Net1 shareholders  $0.48  $0.51  $1.72  $2.03
 Diluted earnings attributable to Net1 shareholders  $0.48  $0.51  $1.71  $2.02
                 
(A) - Derived from audited financial statements            
 
  
NET 1 UEPS TECHNOLOGIES, INC.  
Unaudited Condensed Consolidated Balance Sheets  
    (A)  (A)  
    June 30,  June 30,  
    2016  2015  
    (In thousands, except share data)  
ASSETS       
CURRENT ASSETS          
 Cash and cash equivalents  $223,644  $117,583  
 Pre-funded social welfare grants receivable   1,580   2,306  
 Accounts receivable, net of allowances of – 2016: $1,669; 2015: $1,956 (B)   107,805   121,335  
 Finance loans receivable, net of allowances of – 2016: $4,494; 2015: $4,227   37,009   40,373  
 Inventory   10,004   12,979  
 Deferred income taxes   6,956   7,298  
  Total current assets before settlement assets   386,998   301,874  
   Settlement assets (C)   536,725   692,442  
    Total current assets   923,723   994,316  
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – 2016: $99,969; 2015: $94,014   54,977   52,320  
EQUITY-ACCOUNTED INVESTMENTS   25,645   14,329  
GOODWILL   179,478   166,437  
INTANGIBLE ASSETS, net of accumulated amortization of – 2016: $91,208; 2015: $84,668   48,556   47,124  
OTHER LONG-TERM ASSETS, including reinsurance assets (B)   31,121   42,430  
 TOTAL ASSETS   1,263,500   1,316,956  
           
LIABILITIES       
CURRENT LIABILITIES          
 Accounts payable   14,097   21,453  
 Other payables   37,479   45,595  
 Current portion of long-term borrowings   8,675   8,863  
 Income taxes payable   5,235   6,287  
  Total current liabilities before settlement obligations   65,486   82,198  
   Settlement obligations (C)   536,725   692,442  
    Total current liabilities   602,211   774,640  
DEFERRED INCOME TAXES   12,559   10,564  
LONG-TERM BORROWINGS   43,134   50,762  
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities   2,376   2,205  
 TOTAL LIABILITIES   660,280   838,171  
COMMITMENTS AND CONTINGENCIES          
           
EQUITY       
COMMON STOCK          
 Authorized: 200,000,000 with $0.001 par value;          
 Issued and outstanding shares, net of treasury - 2016: 55,271,954; 2015: 46,679,565   74   64  
PREFERRED STOCK          
 Authorized shares: 50,000,000 with $0.001 par value;          
 Issued and outstanding shares, net of treasury: 2016: -; 2015: -   -   -  
ADDITIONAL PAID-IN-CAPITAL   223,978   213,896  
TREASURY SHARES, AT COST: 2016: 20,483,932; 2015: 18,057,228   (241,627)   (214,520 )
ACCUMULATED OTHER COMPREHENSIVE LOSS   (189,700)   (139,181 )
RETAINED EARNINGS   700,322   617,868  
 TOTAL NET1 EQUITY   493,047   478,127  
 REDEEMABLE COMMON STOCK   107,672   -  
 NON-CONTROLLING INTEREST   2,501   658  
  TOTAL EQUITY   603,220   478,785  
           
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $1,263,500  $1,316,956  
           
(A) - Derived from audited financial statements  
   
(B) - We have restated amounts in our unaudited condensed consolidated balance sheet as at June 30, 2015. We have decreased accounts receivable, net of allowances and increased other long-term assets by approximately $27.4 million. This restatement has no impact on our previously reported consolidated statement of operations, consolidated statements of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows.  
   
(C) As described in Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K, we have restated our settlement assets and obligations balances. The restatement resulted in an increase in settlement assets and obligations as of June 30, 2015, of $30.5 million.  
  
  
NET 1 UEPS TECHNOLOGIES, INC.  
Unaudited Condensed Consolidated Statements of Cash Flows  
          
   Unaudited   (A)  
   Three months ended   Year ended  
   June 30,   June 30,  
   2016   2015   2016   2015  
   (In thousands)   (In thousands)  
                  
Cash flows from operating activities                     
Net Income  $24,935   $24,223   $84,796   $96,734  
Depreciation and amortization   10,412    10,294    40,394    40,685  
Earnings from equity-accounted investments   (61 )  (219 )  (639 )  (452 )
Fair value adjustment   (94 )  518    519    248  
Interest payable   132    7    1,829    1,283  
Facility fee amortized   35    38    138    208  
Gain on release from accumulated other comprehensive income   (2,176 )  -    (2,176 )  -  
Gain on fair value of Transact24   -    -    (1,909 )  -  
Profit on disposal of property, plant and equipment   (173 )  (1 )  (286 )  (296 )
Stock compensation charge, net of forfeitures   953    513    3,598    3,195  
Decrease (Increase) in accounts and finance loans receivable, and pre-funded grants receivable   11,810    (4,135 )  (3,401 )  1,399  
Decrease (Increase) in inventory   1,496    (1,075 )  1,001    (3,846 )
(Decrease) Increase in accounts payable and other payables   (9,403 )  6,804    (7,840 )  (850 )
(Decrease) Increase in taxes payable   (2,681 )  (3,507 )  763    606  
(Decrease) Increase in deferred taxes   21    (1,631 )  (235 )  (3,656 )
Net cash provided by operating activities   35,206    31,829    116,552    135,258  
                      
Cash flows from investing activities                     
Capital expenditures   (7,099 )  (11,614 )  (35,797 )  (36,436 )
Proceeds from disposal of property, plant and equipment   596    80    1,349    857  
Acquisitions, net of cash acquired   (14,101 )  -    (15,767 )  -  
Acquisition of available for sale securities   -    -    (8,900 )  -  
Acquisition of equity of equity-accounted investment   -    (13,200 )  -    (13,200 )
Proceeds from sale of business   -    -    -    1,895  
Other investing activities, net   -    -    (5 )  (29 )
Net change in settlement assets (B)   (161,343 )  (24,314 )  53,364    (33,870 )
Net cash used in investing activities   (181,947 )  (49,048 )  (5,756 )  (80,783 )
                      
Cash flows from financing activities                     
Proceeds from issue of common stock   107,682    265    111,444    2,045  
Acquisition of treasury stock   (2,725 )  -    (26,637 )  (9,151 )
Acquisition of interests in non-controlling interests   (11,189 )  -    (11,189 )  -  
Repayment of long-term borrowings   (8,716 )  -    (8,716 )  (14,128 )
Long-term borrowings obtained   -    789    2,107    3,765  
Sale of equity to non-controlling interest   -         -    1,407  
Dividends paid to non-controlling interest   -    -    -    (1,024 )
Net change in settlement obligations (B)   161,343    24,314    (53,364 )  33,870  
Net cash provided by financing activities   246,395    25,368    13,645    16,784  
                      
Effect of exchange rate changes on cash   721    (1,568 )  (18,380 )  (12,348 )
Net increase in cash and cash equivalents   100,375    6,581    106,061    58,911  
Cash and cash equivalents – beginning of period   123,269    111,002    117,583    58,672  
Cash and cash equivalents – end of period  $223,644   $117,583   $223,644   $117,583  
                      
(A) - Derived from audited financial statements  
   
(B) - As described in Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K, we have restated our settlement assets and obligations balances. The restatement resulted in an increase in cash flows from investing activities and an increase in cash flows from financing activities of $21.3 million during F2015, and an increase in cash flows from investing activities and an increase in cash flows from financing activities of $1.5 million during Q4, 2015.  
  

Net 1 UEPS Technologies, Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

 
Three months ended June 30, 2016 and 2015 and March 31, 2016
                
            Change - actual  Change - constant exchange rate(1)
Key segmental data, in $ '000,  Q4 '16  Q4 '15  Q3 '16  Q4 '16
vs
Q4'15
 Q4 '16
vs
Q3 '16
 Q4 '16
vs
Q4'15
 Q4 '16
vs
Q3 '16
Revenue:                     
South African transaction processing  $53,577  $59,774  $50,594  (10%)  6%  12%  1%
International transaction processing  47,154  42,573  40,588  11%  16%  38%  10%
Financial inclusion and applied technologies  62,071  73,042  54,286  (15%)  14%  6%  9%
 Subtotal: Operating segments  162,802  175,389  145,468  (7%)  12%  16%  6%
 Intersegment eliminations  (11,543)  (11,103)  (10,732)  4%  8%  30%  2%
  Consolidated revenue  $151,259  $164,286  $134,736  (8%)  12%  15%  7%
                      
Operating income (loss):                     
South African transaction processing  $12,662  $11,268  $13,133  12%  (4%)  40%  (8%)
International transaction processing  7,793  7,134  4,813  9%  62%  36%  54%
Financial inclusion and applied technologies  13,457  19,385  11,469  (31%)  17%  (13%)  11%
 Subtotal: Operating segments  33,912  37,787  29,415  (10%)  15%  12%  9%
 Corporate/Eliminations  (1,729)  (5,174)  (3,224)  (67%)  (46%)  (58%)  (49%)
  Consolidated operating income  $32,183  $32,613  $26,191  (1%)  23%  23%  17%
                      
Operating income margin (%)                     
South African transaction processing  24%  19%  26%            
International transaction processing  17%  17%  12%            
Financial inclusion and applied technologies  22%  27%  21%            
 Consolidated operating margin  21%  20%  19%            
                      
(1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the Q4 2016 also prevailed during Q4 2015 and Q3 2016.
 
 
Year ended June 30, 2016 and 2015
             
         Change - actual  Change - constant exchange rate(1)
Key segmental data, in '000, except margins  F2016  F2015  F2016
vs
F2015
 F2016
vs
F2015
Revenue:            
South African transaction processing  $212,574  236,452  (10%)  13%
International transaction processing  169,807  164,554  3%  30%
Financial inclusion and applied technologies  249,403  272,600  (9%)  15%
 Subtotal: Operating segments  631,784  673,606  (6%)  18%
 Intersegment eliminations  (41,035)  (47,627)  (14%)  8%
  Consolidated revenue  $590,749  625,979  (6%)  19%
             
Operating income:            
South African transaction processing  $51,386  51,008  1%  27%
International transaction processing  23,389  26,805  (13%)  10%
Financial inclusion and applied technologies  54,999  72,725  (24%)  (5%)
 Subtotal: Operating segments  129,774  150,538  (14%)  9%
 Corporate/Eliminations  (15,406)  (22,019)  (30%)  (12%)
  Consolidated operating income  $114,368  128,519  (11%)  12%
             
Operating income margin (%)            
South African transaction processing  24%  22%      
International transaction processing  14%  16%      
Financial inclusion and applied technologies  22%  27%      
 Overall operating margin  19%  21%      
             
(1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during fiscal 2016 also prevailed during fiscal 2015.
 

Net 1 UEPS Technologies, Inc.

Attachment B

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

 
Three months ended June 30, 2016 and 2015
             
   Net income
(USD'000)
 EPS, basic
(USD)
 Net income
(ZAR'000)
 EPS, basic
(ZAR)
   2016  2015  2016  2015  2016  2015  2016  2015
                         
GAAP  24,356  23,914  0.48  0.51  365,778  288,035  7.16  6.18
                         
Intangible asset amortization, net  2,213  2,751        33,229  33,131      
Accounting change for Finbond  (1,732)  -        (26,011)  -      
Stock-based compensation charge  954  513        14,327  6,179      
Transaction costs  473  -        7,104  -      
Facility fees for KSNET debt  35  38        526  458      
US government investigations-related and US lawsuit expenses  -  17        -  205      
  Fundamental  26,299  27,233  0.51  0.58  394,953  328,008  7.73  7.04
                         
 
Year ended June 30, 2016 and 2015
             
   Net income
(USD'000)
 EPS, basic
(USD)
 Net income
(ZAR'000)
 EPS, basic
(ZAR)
   2016  2015  2016  2015  2016  2015  2016  2015
                         
GAAP  82,454  94,735  1.72  2.03  1,186,035  1,082,584  24.78  23.17
                         
Intangible asset amortization, net  8,413  11,263        120,989  128,708      
Stock-based compensation charge  3,598  3,195        51,754  36,511      
Gain resulting from acquisition of Transact24  (1,909)  -        (27,459)  -      
Accounting change for Finbond  (1,732)  -        (24,913)  -      
Transaction costs  1,018  -        14,643  -      
US government investigations-related and US lawsuit expenses  133  158        1,913  1,806      
Facility fees for KSNET debt  138  208        1,985  2,377      
Refund related to litigation finalized in Korea, net  -  (1,354)        -  (15,473)      
  Fundamental  92,113  108,205  1.92  2.32  1,324,947  1,236,513  27.68  26.46
                         

Net 1 UEPS Technologies, Inc.

Attachment C

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

 
Three months ended June 30, 2016 and 2015
       
   2016  2015
       
Net income (USD'000)  24,356  23,914
Adjustments:      
 Accounting change for Finbond  (1,732)  -
 Profit on sale of property, plant and equipment  (173)  (64)
 Tax effects on above  48  18
       
Net income used to calculate headline earnings (USD'000)  22,499  23,868
       
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000)  51,118  46,620
       
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000)  51,224  46,944
       
Headline earnings per share:      
 Basic, in USD  0.44  0.51
 Diluted, in USD  0.44  0.51
      
 
Year ended June 30, 2016 and 2015
       
   2016  2015
       
Net income (USD'000)  82,454  94,735
Adjustments:      
 Gain resulting from acquisition of Transact24  (1,909)  -
 Accounting change for Finbond  (2,176)  -
 Profit on sale of property, plant and equipment  (286)  (296)
 Tax effects on above  524  83
       
Net income used to calculate headline earnings (USD'000)  78,607  94,522
       
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000)  47,863  46,733
       
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000)  48,105  46,913
       
Headline earnings per share:      
 Basic, in USD  1.64  2.02
 Diluted, in USD  1.63  2.01
     
 
Calculation of the denominator for headline diluted earnings per share
             
   Q4 '16  Q4 '15  F2016  F2015
             
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP  51,118  46,620  47,863  46,733
 Effect of dilutive securities under GAAP  106  324  242  180
  Denominator for headline diluted earnings per share  51,224  46,944  48,105  46,913
         

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 per share diluted because we do not use the two-class method to calculate headline earnings per share diluted.

Contact Information

  • Investor Relations Contact:
    Dhruv Chopra
    Head of Investor Relations
    Phone: +1 917-767-6722
    Email: dchopra@net1.com