SOURCE: Net 1 UEPS Technologies, Inc.

Net 1 UEPS Technologies, Inc.

August 24, 2017 16:05 ET

Net 1 UEPS Technologies, Inc. Reports Fourth Quarter and Full Year 2017 Results

JOHANNESBURG, SOUTH AFRICA--(Marketwired - August 24, 2017) - Net 1 UEPS Technologies, Inc. (NASDAQ: UEPS) (JSE: NT1) today released results for the fourth quarter and full-year fiscal 2017.

  • Q4 2017 Revenue of $155 million, up 3% in USD but 10% lower in constant currency;
  • Q4 2017 FEPS of $0.41, which reflects the adverse impact of a higher share count, taxes, and provisions
  • Concluded investments in Cell C and DNI for an aggregate purchase price of ZAR 2.95 billion.
 
Summary Financial Metrics
 
   Three months ended June 30,
   2017  2016  % change
in USD
 % change
in ZAR
(All figures in USD '000s except per share data)         
Revenue  155,056  151,259  3%  (10%)
GAAP net income  11,289  24,356  (54%)  (59%)
Fundamental net income (1)  23,185  26,299  (12%)  (23%)
GAAP earnings per share ($)  0.20  0.48  (59%)  (64%)
Fundamental earnings per share ($) (1)  0.41  0.51  (20%)  (31%)
Fully-diluted shares outstanding ('000's)  57,249  51,224  12%   
Average period USD/ ZAR exchange rate  13.19  15.02  (12%)   
   
   Year ended June 30,
   2017  2016  % change
in USD
 % change
in ZAR
(All figures in USD '000s except per share data)         
Revenue  610,066  590,749  3%  (2%)
GAAP net income  72,954  82,454  (12%)  (16%)
Fundamental net income (1)  94,721  92,113  3%  (7%)
GAAP earnings per share ($)  1.34  1.72  (22%)  (26%)
Fundamental earnings per share ($) (1)  1.74  1.92  (9%)  (19%)
Fully-diluted shares outstanding ('000's)  54,648  48,105  14%  14%
Average period USD/ ZAR exchange rate  13.62  14.38  (5%)   
  
(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 2017 and Q4 2016 results

  • Earnings and FEPS dilution impact from issue of additional shares of common stock: Our Q4 2017 fundamental earnings per share was impacted by the weighted average issuance of five million shares of our common stock in February 2017 and 10 million shares in Q4 2016;
  • Separation costs related to former chief executive officer: We paid our former chief executive officer $8 million in cash related to his separation from our company in fiscal 2017. In addition, the vesting of 200,000 shares of restricted stock granted to him in August 2016 was accelerated which resulted in an additional stock-based compensation charge of approximately $1.6 million during fiscal 2017;
  • Favorable impact from the weakening of the U.S. dollar against South African Rand: The U.S. dollar depreciated by 12% against the ZAR during Q4 2017, which positively impacted our reported results;
  • Growth in lending and insurance businesses: We continued to achieve volume growth and operating efficiencies in our lending and insurance businesses during Q4 2017, which has resulted in an improved contribution to our financial inclusion revenue and operating income;
  • Ongoing contributions from EasyPay Everywhere: EPE revenue and operating income growth was driven primarily by ongoing EPE adoption as we further expanded our customer base utilizing our ATM infrastructure;
  • Masterpayment expansion costs and $3.8 million allowance for credit losses: Masterpayment has incurred additional employment costs as it grows its staff complement to execute its expansion plan into new markets. We have provided an allowance for credit losses of $3.8 million;
  • Regulatory changes in South Korea governing fees on card transactions: Regulations governing the fees that may be charged on card transactions have adversely impacted our revenues and operating income in South Korea;
  • Lower prepaid sales resulting from improved security features to our Manje products: The introduction of our new biometric-linking feature adversely impacted the number of transacting users purchasing prepaid products through our mobile channel;
  • Higher transaction-related costs and debt guarantee fee expenses in Q4 2017: We incurred $1.8 million in transaction-related costs pertaining to various acquisition and investment initiatives pursued during 2017 as well as debt guarantee fees that were expensed;
  • 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.

"The past five months have been among the most eventful and turbulent in the Company's history, but despite the multiple challenges, we have successfully steadied the ship and put in place the mechanisms and structure to optimize and consolidate our existing businesses where applicable," said Herman Kotze, CEO of Net1. "We have identified the key opportunities to focus on to create a, sustainable and diversified global financial inclusion solutions company. In fiscal 2018, our focus will be on successfully implementing the identified synergies with Cell C and DNI, expanding our financial inclusion businesses, optimizing our international operations and focusing on key markets and solutions, while actively re-engaging with our shareholders. We also remain fully committed to supporting the South African government to ensure uninterrupted social grant service delivery," he added.

"We expect the funding of our Cell C and DNI investments to be dilutive to our fiscal 2018 fundamental earnings, partially offset by DNI's equity accounted earnings, but to be accretive on a combined basis from fiscal 2019. We therefore anticipate our fundamental earnings per share for fiscal 2018 to be at least $1.61. Our guidance assumes that our contract with SASSA remains in effect for the full year on the existing terms and conditions, an updated constant currency base of ZAR 13.62/$1, a share count of 56.6 million shares, and a tax rate of between 34%-36%," he concluded.

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 $67.7 million in Q4 2017, up 26% compared with Q4 2016 in USD, and 11% 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 2017 and 2016 was 22% and 24%, respectively, and was lower primarily due to annual salary increases granted to our South African employees, but partially offset by and increase in ATM transactions and inter-segment processing.

International transaction processing

Segment revenue was $45.0 million in Q4 2017, down 5% compared with Q4 2016 in USD, and down 16% on a constant currency basis. Segment revenue decreased primarily due to a lower contribution from KSNET due to the regulatory changes implemented by South Korean Regulators which we expect to anniversary in the first quarter of fiscal 2018. This decrease in revenue was partially offset by higher contribution from both Masterpayment and Transact24 compared with Q4 2016. Operating income from this segment during Q4 2017 was lower due to the lower KSNET revenue at KSNET; losses incurred by Masterpayment as it grows its staff complement to execute its expansion plan into new markets and an allowance for credit losses of $3.8 million; and ongoing ZAZOO start-up costs in the UK and India, which was partially offset by a positive contribution by T24. Operating income margin for Q4 2017 decreased to 4% compared to 17% for Q4 2016.

Financial inclusion and applied technologies

Segment revenue was $56.2 million in Q4 2017, down 9% compared with Q4 2016 in USD and down 20% on a constant currency basis. In ZAR, Financial inclusion and applied technologies revenue decreased primarily due to fewer prepaid airtime and other value added services sales, as well as fewer ad-hoc terminal sales, partially offset by increased volumes in our lending and insurance businesses, and an increase in inter-segment revenues. Operating income margin for the Financial inclusion and applied technologies segment was 26% and 22% during Q4 fiscal 2017 and 2016, respectively, and has increased primarily due to improved revenues from our lending and insurance businesses and an increase in inter-segment revenues and fewer low margin prepaid product sales, offset by fewer ad hoc terminal and annual salary increases granted to our South African employees.

Corporate/eliminations

Corporate expenses increased primarily due to the costs associated with the separation of our former chief executive officer from us which included an $8.0 million separation payment as well as an additional stock-based compensation charge of approximately $1.6 million related to the accelerated vesting of restricted stock. We also incurred higher transaction-related expenditures, higher amortization costs and a modest increase in U.S. dollar denominated goods and services purchased from third parties and directors' fees. Our fiscal 2016 corporate expenses include the fair value gain on re-measurement of the previously held interest related to the T24 acquisition and the gain resulting from the change in accounting for Finbond.

Cash flow and liquidity

At June 30, 2017, our cash balances were $258.5 million, which comprised U.S. dollar-denominated balances of $60.0 million, ZAR-denominated balances of ZAR 1.8 billion ($141.5 million), KRW-denominated balances of KRW 55.0 billion ($48.1 million) and other currency deposits, primarily euro, of $8.9 million. The increase in our cash balances from June 30, 2016, was primarily due to the sale of five million shares of our common stock and expansion of most of our core businesses, which was partially offset by the repurchase of shares of our common stock; unscheduled repayments of our Korean debt; payment of taxes; the investment in MobiKwik, Malta FS and Pros Software; a loan to Finbond and capital expenditures.

Excluding the impact of taxes, interest received and interest paid under our Korean debt, the decrease in cash from operating activities relates primarily to the growth of Masterpayment's working capital finance offering and the separation payment made to our former chief executive officer, offset by an increase in cash from operating activities resulted from improved trading activity during fiscal 2017. Capital expenditures for Q4 2017 and 2016 were $2.7 million and $7.1 million, respectively, and have decreased primarily due to the acquisition of fewer payment processing terminals in South Korea. We paid $10.4 million to acquire an additional interest in MobiKwik, with our June 30, 2017, equity interest at 13.50%. We also repurchased 1.32 million shares from our former chief executive officer for $11.5 million, net of the strike paid to exercise certain options. We also made a scheduled $8.8 million Korean debt repayment and paid a $1.5 million dividend to our non-controlling interest shareholders.

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, costs related to the IFC transaction and to acquisitions consummated or ultimately not pursued, and U.S. government investigations-related and US lawsuit expenses. Fiscal 2017 also includes separation costs (net of taxes) paid to our former chief executive officer, a refund (net of taxes) related to Korean industry-wide litigation that has now been finalized and South African debt-related guarantee fees expensed. Fiscal 2016 also includes a fair value gain resulting from the acquisition of Transact24, a gain resulting from the change in accounting for Finbond. 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) loss 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 and year end 2017 results on August 25, 2017, 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 17, 2017.

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, ChinaUnionPay, Alipay and WeChat 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,
    2017   2016   2017   2016
  (In thousands, except per share data) (In thousands, except per share data)
                 
REVENUE $ 155,056 $ 151,259 $ 610,066 $ 590,749
                 
EXPENSE                
                 
 Cost of goods sold, IT processing, servicing and support   73,173   70,785   292,383   290,101
                  
 Selling, general and administration   56,896   37,879   179,262   145,886
                  
 Depreciation and amortization   10,261   10,412   41,378   40,394
                 
OPERATING INCOME   14,726   32,183   97,043   114,368
                 
INTEREST INCOME   6,408   4,008   20,897   15,292
                 
INTEREST EXPENSE   1,711   543   3,484   3,423
                 
INCOME BEFORE INCOME TAX EXPENSE   19,423   35,648   114,456   126,237
                 
INCOME TAX EXPENSE   10,152   10,774   42,472   42,080
                 
NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   9,271   24,874   71,984   84,157
                 
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   1,886   61   2,664   639
                 
NET INCOME   11,157   24,935   74,648   84,796
                 
LESS NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST   (132)   579   1,694   2,342
                 
NET INCOME ATTRIBUTABLE TO NET1 $ 11,289 $ 24,356 $ 72,954 $ 82,454
                 
Net income per share, in United States dollars                
 Basic earnings attributable to Net1 shareholders   $0.20   $0.48   $1.34   $1.72
 Diluted earnings attributable to Net1 shareholders   $0.20   $0.48   $1.33   $1.71
                 
(A) - Derived from audited financial statements        
 
 
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets
 
  (A)
June 30,
2017
(A)
June 30,
2016
 
 
  (In thousands, except share data)
ASSETS    
CURRENT ASSETS        
 Cash and cash equivalents $ 258,457 $ 223,644
 Pre-funded social welfare grants receivable   2,322   1,580
 Accounts receivable, net of allowances of - 2017: $1,255; 2016: $1,669   111,429   107,805
 Finance loans receivable, net of allowances of - 2017: $7,469; 2016: $4,494   80,177   37,009
 Inventory   8,020   10,004
 Deferred income taxes   5,330   6,956
  Total current assets before settlement assets   465,735   386,998
   Settlement assets   640,455   536,725
    Total current assets   1,106,190   923,723
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - 2017: $120,212; 2016: $99,969   39,411   54,977
EQUITY-ACCOUNTED INVESTMENTS   27,862   25,645
GOODWILL   188,833   179,478
INTANGIBLE ASSETS, net of accumulated amortization of - 2017: $108,907; 2016: $91,208   38,764   48,556
OTHER LONG-TERM ASSETS, including reinsurance assets   49,696   31,121
 TOTAL ASSETS   1,450,756   1,263,500
         
LIABILITIES    
CURRENT LIABILITIES        
 Short-term facilities   16,579   -
 Accounts payable   15,136   14,097
 Other payables   34,799   37,479
 Current portion of long-term borrowings   8,738   8,675
 Income taxes payable   5,607   5,235
  Total current liabilities before settlement obligations   80,859   65,486
   Settlement obligations   640,455   536,725
    Total current liabilities   721,314   602,211
DEFERRED INCOME TAXES   11,139   12,559
LONG-TERM BORROWINGS   7,501   43,134
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities   2,795   2,376
 TOTAL LIABILITIES   742,749   660,280
COMMITMENTS AND CONTINGENCIES        
         
EQUITY    
COMMON STOCK        
 Authorized: 200,000,000 with $0.001 par value;        
 Issued and outstanding shares, net of treasury - 2017: 56,369,737; 2016: 55,271,954   80   74
PREFERRED STOCK        
 Authorized shares: 50,000,000 with $0.001 par value;        
 Issued and outstanding shares, net of treasury: 2017: -; 2016: -   -   -
ADDITIONAL PAID-IN-CAPITAL   273,733   223,978
TREASURY SHARES, AT COST: 2017: 24,891,292; 2016: 20,483,932   (286,951)   (241,627)
ACCUMULATED OTHER COMPREHENSIVE LOSS   (162,569)   (189,700)
RETAINED EARNINGS   773,276   700,322
 TOTAL NET1 EQUITY   597,569   493,047
 REDEEMABLE COMMON STOCK   107,672   107,672
 NON-CONTROLLING INTEREST   2,766   2,501
  TOTAL EQUITY   708,007   603,220
         
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,450,756 $ 1,263,500
    -    
(A) - Derived from audited financial statements        
    -    
 
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
 
                 
  Unaudited (A)
  Three months ended Year ended
    June 30,   June 30,
    2017   2016   2017   2016
  (In thousands) (In thousands)
                 
Cash flows from operating activities                
Net Income $ 11,157 $ 24,935 $ 74,648 $ 84,796
 Depreciation and amortization   10,261   10,412   41,378   40,394
 Earnings from equity-accounted investments   (1,886)   (61)   (2,664)   (639)
 Fair value adjustment   (239)   (94)   (300)   519
 Interest payable   (64)   132   20   1,829
 Facility fee amortized   1,232   35   1,326   138
 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   (68)   (173)   (639)   (286)
 Stock compensation charge, net of forfeitures   2,050   953   1,982   3,598
 Dividends received from equity accounted investments   817   -   1,187   -
 (Increase) Decrease in accounts and finance loans receivable, and pre-funded grants receivable   (13,506)   11,810   (15,767)   (3,401)
 Decrease (Increase) in inventory   2,717   1,496   3,025   1,001
 (Decrease) Increase in accounts payable and other payables   (2,075)   (9,403)   (6,461)   (7,840)
 Increase in taxes payable   (6,173)   (2,681)   (354)   763
 Decrease in deferred taxes   1,532   21   (220)   (235)
Net cash provided by operating activities   5,755   35,206   97,161   116,552
                 
Cash flows from investing activities                
Capital expenditures   (2,697)   (7,099)   (11,195)   (35,797)
Proceeds from disposal of property, plant and equipment   238   596   1,592   1,349
Investment in MobiKwik   (10,488)   -   (25,835)   -
Investment in equity and loans in equity-accounted investments   -   -   (12,044)   -
Acquisitions, net of cash acquired   -   (14,101)   (4,651)   (15,767)
Acquisition of available for sale securities   -   -   -   (8,900)
Other investing activities, net   -   -   -   (5)
Net change in settlement assets   (116,755)   (161,343)   (61,938)   53,364
Net cash (used in) provided by investing activities   (129,702)   (181,947)   (114,071)   (5,756)
                 
Cash flows from financing activities                
Proceeds from issue of common stock   2,250   107,682   47,879   111,444
Acquisition of treasury stock   (13,713)   (2,725)   (45,794)   (26,637)
Repayment of long-term borrowings   (8,825)   (8,716)   (37,318)   (8,716)
Proceeds from bank overdraft   16,176   -   16,176   -
Dividends paid to non-controlling interest   (1,454)   -   (2,067)   -
Payment of guarantee fee   -   -   (1,145)   -
Long-term borrowings obtained   279   -   800   2,107
Acquisition of interests in non-controlling interests   -   (11,189)   -   (11,189)
Net change in settlement obligations   116,755   161,343   61,938   (53,364)
Net cash provided by financing activities   111,468   246,395   40,469   13,645
                 
Effect of exchange rate changes on cash   3,229   721   11,254   (18,380)
Net increase in cash and cash equivalents   (9,250)   100,375   34,813   106,061
Cash and cash equivalents - beginning of period   267,707   123,269   223,644   117,583
Cash and cash equivalents - end of period $ 258,457 $ 223,644 $ 258,457 $ 223,644
                 
(A) - Derived from audited financial statements
                 
 
Net 1 UEPS Technologies, Inc.
 
Attachment A
 
Operating segment revenue, operating income and operating margin:
 
Three months ended June 30, 2017 and 2016 and March 31, 2017
 
        Change - actual Change - constant
exchange rate
(1)
Key segmental data, in '000, except margins Q4 '17 Q4 '16 Q3 '17 Q4 '17
vs
Q4'16
Q4 '17
vs
Q3 '17
Q4 '17
vs
Q4'16
Q4 '17
vs
Q3 '17
Revenue:              
South African transaction processing $67,747 $53,577 $63,967 26% 6% 11% 6%
International transaction processing  45,025  47,154  41,514 (5%) 8% (16%) 8%
Financial inclusion and applied technologies  56,220  62,071  56,881 (9%) (1%) (20%) (1%)
 Subtotal: Operating segments  168,992  162,802  162,362 4% 4% (9%) 4%
 Intersegment eliminations  (13,936)  (11,543)  (14,418) 21% (3%) 6% (4%)
  Consolidated revenue $155,056 $151,259 $147,944 3% 5% (10%) 5%
                  
Operating income (loss):                 
South African transaction processing $14,858 $12,662 $15,531 17% (4%) 3% (5%)
International transaction processing  2,016  7,793  1,968 (74%) 2% (77%) 2%
Financial inclusion and applied technologies  14,431  13,457  14,064 7% 3% (6%) 2%
 Subtotal: Operating segments  31,305  33,912  31,563 (8%) (1%) (19%) (1%)
 Corporate/Eliminations  (16,579)  (1,729)  (7,016) 859% 136% 742% 136%
  Consolidated operating income $14,726 $32,183 $24,547 (54%) (40%) (60%) (40%)
                  
Operating income margin (%)                 
South African transaction processing  22%  24%  24%        
International transaction processing  4%  17%  5%        
Financial inclusion and applied technologies  26%  22%  25%        
 Consolidated operating margin  9%  21%  17%        
                  
(1)This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the Q4 2017 also prevailed during Q4 2016 and Q3 2017.
 
Year ended June 30, 2017 and 2016
 
      Change - actual  Change - constant exchange rate(1)
Key segmental data, in '000, except margins F2017 F2016 F2017
vs
F2016
 F2017
vs
F2016
Revenue:           
South African transaction processing $249,144 $212,574 17%  11%
International transaction processing  176,729  169,807 4%  (1%)
Financial inclusion and applied technologies  235,901  249,403 (5%)  (10%)
 Subtotal: Operating segments  661,774  631,784 5%  (1%)
 Intersegment eliminations  (51,708)  (41,035) 26%  19%
  Consolidated revenue $610,066 $590,749 3%  (2%)
            
Operating income:           
South African transaction processing $59,309 $51,386 15%  9%
International transaction processing  13,705  23,389 (41%)  (45%)
Financial inclusion and applied technologies  57,785  54,999 5%  (1%)
 Subtotal: Operating segments  130,799  129,774 1%  (5%)
 Corporate/Eliminations  (33,756)  (15,406) 119%  107%
  Consolidated operating income $97,043 $114,368 (15%)  (20%)
            
Operating income margin (%)           
South African transaction processing  24%  24%     
International transaction processing  8%  14%     
Financial inclusion and applied technologies  24%  22%     
 Overall operating margin  16%  19%     
            
(1)This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during fiscal 2017 also prevailed during fiscal 2016.
 
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, 2017 and 2016
 
  Net income
(USD'000)
EPS, basic
(USD)
 Net income
(ZAR'000)
EPS, basic
(ZAR)
  2017 2016 2017 2016  2017 2016 2017 2016
                  
GAAP 11,289 24,356 0.20 0.48  148,879 365,778 2.60 7.16
                  
 Former CEO separation payment, net of tax 5,200 -      68,578 -    
 Intangible asset amortization, net 2,776 2,213      36,620 33,229    
 Stock-based compensation charge 2,050 954      27,036 14,327    
 South African debt-related guarantee fees expensed 1,210 -      15,960 -    
 Transaction costs 586 473      7,728 7,104    
 US government investigations-related and US lawsuit expenses 46 -      607 -    
 Facility fees for KSNET debt 28 35      369 526    
 Accounting change for Finbond - (1,732)      - (26,011)    
  Fundamental 23,185 26,299 0.41 0.51  305,777 394,953 5.35 7.73
            
 
Year ended June 30, 2017 and 2016
 
  Net income
(USD'000)
EPS, basic
(USD)
 Net income
(ZAR'000)
EPS, basic
(ZAR)
  2017 2016 2017 2016  2017 2016 2017 2016
                  
GAAP 72,954 82,454 1.34 1.72  993,504 1,186,036 18.22 24.78
                  
 Intangible asset amortization, net 10,491 8,413      142,857 120,989    
 Former CEO separation payment, net of tax 5,200 -      70,814 14,643    
 Transaction costs 3,347 1,018      45,580 14,643    
 Stock-based compensation charge 1,982 3,598      26,991 51,754    
 South African debt-related guarantee fees expensed 1,172 -      15,960 51,754    
 Refund related to litigation finalized in Korea, net (643) -      (8,756) -    
 US government investigations-related and US lawsuit expenses 122 138      1,661 1,985    
 Facility fees for KSNET debt 96 133      1,307 1,913    
 Gain resulting from acquisition of Transact24 - (1,909)      - (27,459)    
 Accounting change for Finbond - (1,732)      - (24,913)    
  Fundamental 94,721 92,113 1.74 1.92  1,289,918 1,391,345 23.65 29.07
                  
 
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, 2017 and 2016
 
  2017  2016
      
Net income (USD'000) 11,289  24,356
Adjustments:     
 Accounting change for Finbond -  (1,732)
 Profit on sale of property, plant and equipment (68)  (173)
 Tax effects on above 19  48
Net income used to calculate headline earnings (USD'000) 11,240  22,499
Weighted average number of shares used to calculate net income per share basic earnings
and headline earnings per share basic earnings ('000)
57,196  51,118
Weighted average number of shares used to calculate net income per share diluted earnings
and headline earnings per share diluted earnings ('000)
57,249  51,224
Headline earnings per share:     
 Basic, in USD 0.20  0.44
 Diluted, in USD 0.20  0.44
 
Year ended June 30, 2017 and 2016
  2017   2016
       
Net income (USD'000) 72,954   82,454
Adjustments:      
 Gain resulting from acquisition of Transact24 -   (1,909)
 Accounting change for Finbond -   (2,176)
 Profit on sale of property, plant and equipment (639)   (286)
 Tax effects on above 179   524
Net income used to calculate headline earnings (USD'000) 72,494   78,607
Weighted average number of shares used to calculate net income per share basic earnings
and headline earnings per share basic earnings ('000)
54,539   47,863
Weighted average number of shares used to calculate net income per share diluted earnings
and headline earnings per share diluted earnings ('000)
54,648   48,105
Headline earnings per share:      
 Basic, in USD 1.33   1.64
 Diluted, in USD 1.33   1.63
    
 
Calculation of the denominator for headline diluted earnings per share
 
  Q4 '17 Q4 '16 F2017 F2016
         
Basic weighted-average common shares outstanding and unvested 
restricted shares expected to vest under GAAP
57,196 51,118 54,539 47,863
 Effect of dilutive securities under GAAP 53 106 109 242
  Denominator for headline diluted earnings per share 57,249 51,224 54,648 48,105
       

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