SOURCE: Net 1 UEPS Technologies, Inc.

Net 1 UEPS Technologies, Inc.

May 04, 2017 16:05 ET

Net 1 UEPS Technologies, Inc. Reports Third Quarter 2017 Results

JOHANNESBURG, SOUTH AFRICA--(Marketwired - May 04, 2017) - Net 1 UEPS Technologies, Inc. (NASDAQ: UEPS) (JSE: NT1) today released results for Q3 2017.

  • Q3 2017 Revenue of $147.9 million, an increase of 10%, down 8% in constant currency;
  • Q3 2017 Fundamental net income of $23.5 million, an increase of 19%, down 1% in constant currency; and
  • Q3 2017 FEPS of $0.43, an increase of 0%, which includes a 19% adverse impact related to higher share count.
Summary Financial Metrics            
 
   Three months ended March 31,
         % change  % change
   2017  2016  in USD  in ZAR
(All figures in USD '000s except per share data)            
Revenue  147,944  134,736  10%  (8%)
GAAP net income  18,392  18,420  (0%)  (17%)
Fundamental net income (1)  23,468  19,787  19%  (1%)
GAAP earnings per share ($)  0.34  0.40  (15%)  (29%)
Fundamental earnings per share ($) (1)  0.43  0.43  0%  (16%)
Fully-diluted shares outstanding ('000's)  54,808  46,430  19%   
Average period USD/ ZAR exchange rate  13.22  15.82  (16%)   
 
   Nine months ended March 31,
         % change  % change
   2017  2016  in USD  in ZAR
(All figures in USD '000s except per share data)            
Revenue  455,010  439,490  4%  1%
GAAP net income  61,665  58,098  6%  3%
Fundamental net income (1)  71,859  65,978  9%  6%
GAAP earnings per share ($)  1.15  1.24  (6%)  (9%)
Fundamental earnings per share ($) (1)  1.34  1.41  (5%)  (8%)
Fully-diluted shares outstanding ('000's)  53,088  47,074  13%  13%
Average period USD/ ZAR exchange rate  13.77  14.17  (3%)   
(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 Q3 2017 and Q3 2016 results

  • Earnings and FEPS dilution impact from issue of additional shares of common stock: Our Q3 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, partially offset by buy backs of 5.5 million shares;
  • Favorable impact from the weakening of the U.S. dollar against South African Rand: The U.S. dollar depreciated by 16% against the ZAR during Q3 2017, which positively impacted our reported results;
  • Growth in lending and insurance businesses: We continued to experience volume growth and operating efficiencies in our lending and insurance businesses during Q3 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: Masterpayment incurred additional investment as it grows its staff complement to execute its expansion plan into new markets;
  • Regulatory changes in South Korea pertaining to fees on card transactions: The 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 in fiscal 2017: We incurred $1.4 million in transaction-related costs pertaining to various acquisition and investment initiatives pursued during Q3 2017;
  • Gain on acquisition of T24 during fiscal 2016: We recognized a fair value adjustment gain of $1.9 million related to the acquisition of T24 during Q3 2016. We accounted for T24 as an equity method investment prior to obtaining control and recognized a gain arising from the consolidation and purchase accounting adjustments related to the T24 acquisition; and
  • Tax impact of dividends from South African subsidiary in fiscal 2016: Our income tax expense for Q3 2016 includes approximately $2.1 million related to the tax impact, including withholding taxes, resulting from distributions from our South African subsidiary during fiscal 2016.

"The last few months have been challenging, aggravated by the tarnishing of our reputation and questioning of our business practices due to frivolous and unsubstantiated public attacks. Although we devoted a substantial amount of time to manage these issues, we believe that we have made sufficient progress towards the finalization of our South African and international expansion strategy," said Serge Belamant, CEO of Net1. "Consistent with our service delivery track record over the last five years, the distribution of grants in April and May has gone smoothly and without any delay or interruption and we continue to fulfill our obligations in accordance with the Constitutional Court's order. We remain willing to support a smooth transition to SASSA or whomever they determine to be the most suitable service provider when our current contract expires. In the interim, we continue to provide seamless and timely access to grants for beneficiaries and our technology continues to save the South African government an estimated ZAR 2 billion per annum through the identification and removal of fraudulent beneficiaries," he added.

"We intend to shortly commence with the implementation of our strategic plan to accelerate growth, diversification and geographic footprint," added Serge Belamant. "In South Africa we will partner, invest in or acquire the right institutions to expand our addressable market and fuel innovation, which in turn will lead to the creation of new products and business models. Internationally, our UEPS/EMV banking platform will be the cornerstone from which we can service the needs of the developed and developing world, while also providing the bridge between the two," he concluded.

"We expect to make substantial progress towards completion of a number of investment transactions during the last quarter of fiscal 2017, including Blue Label, DNI and Cell C," said Herman Kotze, Chief Financial Officer of Net1. "These transactions will have a limited impact on our full year results and we reaffirm our fundamental earnings per share guidance for fiscal 2017 to be at least $1.69 using a constant currency base of ZAR 14.38/$1, a share count of 54.5 million shares, and a tax rate between 33%-35%," he concluded.

Recent Developments

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 $64.0 million in Q3 2017, up 26% in USD compared with Q3 2016, and up 6% on a constant currency basis. In ZAR, the increase in segment revenue was primarily due to higher EPE transaction revenue as a result of increased usage of our ATMs, increased inter-segment transaction processing activities and a modest increase in the number of social welfare grants distributed. Operating income decreased primarily due to the impact of annual salary increases granted to our South African employees, partially offset by higher EPE transaction revenue as a result of increased usage of our ATMs and a modest increase in the number of social welfare grants distributed.

Our operating income margin for Q3 2017 and 2016 was 24% and 26%, respectively. Our fiscal 2017 margin includes higher EPE revenue, and an increase in the number of beneficiaries paid in Q3 2017, which was partially offset by annual salary increases granted.

  • International transaction processing

Segment revenue was $41.5 million in Q3 2017, up 2% in USD compared with Q3 2016, and down 15% on a constant currency basis. In calendar 2016, South Korean regulators introduced specific regulations governing the fees that may be charged on card transactions, as is the case in most other developed economies. These regulations have a direct impact on card issuers in South Korea and consistent with global practices, card issuers have renegotiated their fees with South Korean VAN companies, including KSNET, which has had an adverse impact on KSNET's financial performance.

Segment revenue increased during Q3 2017, primarily due to the inclusion of Masterpayment; however, this growth was partially offset by a lower contribution from KSNET due to the regulatory changes described above. Operating income during Q3 2017 was lower due to lower revenue at KSNET, losses incurred by Masterpayment as it grows its staff complement to execute its expansion plan into new markets, 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 Q3 2017 and 2016 was 5% and 12%, respectively.

  • Financial inclusion and applied technologies

Segment revenue was $56.9 million in Q3 2017, up 5% in USD compared with Q3 2016 and down 12% 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 25% and 21% during Q3 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

Our corporate expenses have increased primarily due to higher transaction-related expenditures, higher amortization costs and modest increases in U.S. dollar denominated goods and services purchased from third parties and directors' fees. Our corporate expenses for the third quarter of fiscal 2016, includes a gain related to the acquisition of T24.

  • Cash flow and liquidity

At March 31, 2017, our cash and cash equivalents were $223.0 million, and excludes $44.7 million of restricted cash. The decrease in our cash balances from June 30, 2016, was primarily due to repurchase of shares of our common stock; unscheduled repayments of our Korean debt; payment of taxes; the investment in MobiKwik, C4U Malta and Pros Software; a loan to Finbond and capital expenditures, which was partially offset by the sale of 5 million shares of our common stock and expansion of most of our core businesses.

Excluding the impact of taxes, interest received and interest paid under our Korean debt, the increase in cash from operating activities resulted from improved trading activity during fiscal 2017, offset by the timing of receipt of amounts from customers. Capital expenditures for Q3 2017 and 2016 were $1.9 million and $8.1 million, respectively, and have decreased primarily due to the acquisition of fewer payment processing terminals in South Korea. We provided a $2.0 million loan to KZ One, the holding company of our Nigerian initiative One Credit. We sold 5 million shares of our common stock for $45.0 million and received approximately $0.6 million from the exercise of stock options. We also utilized approximately $0.3 million of our Korean borrowings to pay quarterly interest due.

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 Korean debt facility fees and US government investigations-related expenses as well as, in fiscal 2017, a refund (net of taxes) related to Korean industry-wide litigation that has now been finalized and costs related to transactions and acquisition consummated or ultimately not pursued. 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. 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 Q3 2017 results on May 5, 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 May 28, 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.

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.
Unaudited Condensed Consolidated Statements of Operations
 
   Three months ended  Nine months ended
   March 31,  March 31,
   2017  2016  2017  2016
   (In thousands, except per share data)  (In thousands, except per share data)
REVENUE  $147,944  $134,736  $455,010  $439,490
             
EXPENSE                
             
 Cost of goods sold, IT processing, servicing and support   70,912   63,266   219,210   219,316
             
 Selling, general and administration   42,195   35,998   122,366   108,007
             
 Depreciation and amortization   10,290   9,281   31,117   29,982
             
OPERATING INCOME   24,547   26,191   82,317   82,185
             
INTEREST INCOME   5,124   3,345   14,489   11,284
             
INTEREST EXPENSE   467   852   1,773   2,880
             
INCOME BEFORE INCOME TAX EXPENSE   29,204   28,684   95,033   90,589
             
INCOME TAX EXPENSE   10,233   9,816   32,320   31,306
                 
NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   18,971   18,868   62,713   59,283
                 
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   45   2   778   578
             
NET INCOME   19,016   18,870   63,491   59,861
                 
LESS NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST   624   450   1,826   1,763
             
NET INCOME ATTRIBUTABLE TO NET1  $18,392  $18,420  $61,665  $58,098
             
Net income per share, in U.S. dollars                
 Basic earnings attributable to Net1 shareholders  $0.34  $0.40  $1.16  $1.24
 Diluted earnings attributable to Net1 shareholders  $0.34  $0.40  $1.16  $1.23
 
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets
   Unaudited   (A)  
   March 31,   June 30,  
   2017   2016  
   (In thousands, except share data)  
ASSETS         
CURRENT ASSETS         
 Cash and cash equivalents  $222,972   $223,644  
 Restricted cash   44,735    -  
 Pre-funded social welfare grants receivable   1,615    1,580  
 Accounts receivable, net of allowances of - March: $3,362; June: $1,669   122,540    107,805  
 Finance loans receivable, net of allowances of - March: $3,536; June: $4,494   43,539    37,009  
 Inventory   10,560    10,004  
 Deferred income taxes   6,841    6,956  
  Total current assets before settlement assets   452,802    386,998  
   Settlement assets   513,713    536,725  
    Total current assets   966,515    923,723  
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - March: $124,527; June: $99,969   43,901    54,977  
EQUITY-ACCOUNTED INVESTMENTS   38,920    25,645  
GOODWILL   190,174    179,478  
INTANGIBLE ASSETS, net of accumulated amortization of - March: $105,620; June: $91,208   42,904    48,556  
OTHER LONG-TERM ASSETS, including reinsurance assets   39,281    31,121  
 TOTAL ASSETS   1,321,695    1,263,500  
            
LIABILITIES           
CURRENT LIABILITIES           
 Short-term credit facilities   -    -  
 Accounts payable   13,555    14,097  
 Other payables   38,319    37,479  
 Current portion of long-term borrowings   8,941    8,675  
 Income taxes payable   11,223    5,235  
  Total current liabilities before settlement obligations   72,038    65,486  
   Settlement obligations   513,713    536,725  
    Total current liabilities   585,751    602,211  
DEFERRED INCOME TAXES   11,143    12,559  
LONG-TERM BORROWINGS   16,335    43,134  
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities   2,725    2,376  
 TOTAL LIABILITIES   615,954    660,280  
COMMITMENTS AND CONTINGENCIES           
EQUITY           
 COMMON STOCK           
  Authorized: 200,000,000 with $0.001 par value;           
  Issued and outstanding shares, net of treasury - March: 57,590,085; June: 55,271,954   79    74  
 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   269,533    223,978  
 TREASURY SHARES, AT COST: March: 23,621,541; June: 20,483,932   (273,238 )  (241,627 )
 ACCUMULATED OTHER COMPREHENSIVE LOSS   (164,510 )  (189,700 )
 RETAINED EARNINGS   761,987    700,322  
  TOTAL NET1 EQUITY   593,851    493,047  
  REDEEMABLE COMMON STOCK   107,672    107,672  
  NON-CONTROLLING INTEREST   4,218    2,501  
   TOTAL EQUITY   705,741    603,220  
            
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $1,321,695   $1,263,500  
(A) - Derived from audited financial statements
 
NET 1 UEPS TECHNOLOGIES, INC. 
Unaudited Condensed Consolidated Statements of Cash Flows 
 
   Three months ended   Nine months ended  
   March 31,   March 31,  
   2017   2016   2017   2016  
   (In thousands)   (In thousands)    
Cash flows from operating activities                 
Net income  $19,016   $18,870   $63,491   $59,861  
Depreciation and amortization   10,290    9,281    31,117    29,982  
Earnings from equity-accounted investments   (45 )  (2 )  (778 )  (578 )
Fair value adjustments   (50 )  (2,387 )  (61 )  613  
Interest payable   75    343    84    1,697  
Profit on disposal of property, plant and equipment   (98 )  (29 )  (571 )  (113 )
Gain on fair value of T24   -    (1,909 )  -    (1,909 )
Stock-based compensation charge (reversal), net   621    954    (68 )  2,645  
Facility fee amortized   27    34    94    103  
Dividends received from equity accounted investments   -    -    370    -  
(Increase) Decrease in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable   (16,612 )  15,914    (2,261 )  (15,211 )
Decrease (Increase) in inventory   3,893    (340 )  308    (495 )
(Decrease) Increase in accounts payable and other                     
payables   (1,486 )  4,009    (4,386 )  1,563  
Increase in taxes payable   6,678    4,479    5,819    3,444  
Decrease in deferred taxes   (506 )  (19 )  (1,752 )  (256 )
 Net cash provided by operating activities   21,803    49,198    91,406    81,346  
Cash flows from investing activities                     
Capital expenditures   (1,949 )  (8,053 )  (8,498 )  (28,698 )
Proceeds from disposal of property, plant and equipment   330    136    1,344    753  
Investment in MobiKwik   -    -    (15,347 )  -  
Loans to equity accounted investments   (2,000 )  -    (12,044 )  -  
Acquisitions, net of cash acquired   -    (1,666 )  (4,651 )  (1,666 )
Acquisition of available for sale securities   -    (8,900 )  -    (8,900 )
Other investing activities   -    (5 )  -    (5 )
Net change in settlement assets   (165,945 )  (111,118 )  54,827    171,516  
 Net cash (used in) provided by investing activities   (169,564 )  (129,606 )  15,631    133,000  
Cash flows from financing activities                     
Proceeds from issue of common stock   45,629    -    45,629    3,762  
Acquisition of treasury stock   -    (12,726 )  (32,081 )  (23,912 )
Repayment of long-term borrowings   -    -    (28,493 )  -  
Guarantee fee paid   -    -    (1,145 )  -  
Dividends paid to non-controlling interest   -    -    (613 )  -  
Long-term borrowings utilized   274    676    521    2,107  
Net change in settlement obligations   165,955    111,118    (54,817 )  (171,516 )
 Net provided by (cash used) in financing activities   211,858    99,068    (70,999 )  (189,559 )
Effect of exchange rate changes on cash   4,719    3,192    8,025    (19,101 )
Net increase in cash, cash equivalents and restricted cash   68,816    21,852    44,063    5,686  
Cash, cash equivalents and restricted cash - beginning of period   198,891    101,417    223,644    117,583  
Cash, cash equivalents and restricted cash - end of period  $267,707   $123,269   $267,707   $123,269  
(A) - Net change in settlement assets and net change in settlement obligations included in the unaudited condensed consolidated statement of cash flows for the three and nine months ended March 31, 2016, have been increased by $19.7 million and $59.5 million, respectively, as a result of the restatement described in Note 2 -- (Significant accounting policies -- Settlement assets and settlement obligations) to the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2016.
 
Net 1 UEPS Technologies, Inc.       
 
Attachment A       
 
Operating segment revenue, operating income and operating margin:     
 
Three months ended March 31, 2017 and 2016 and March 31, 2017     
 
                  Change - constant
            Change - actual  exchange rate(1)
            Q3 '17  Q3 '17  Q3 '17  Q3 '17
            vs  vs  vs  vs
Key segmental data, in $ '000,  Q3 '17  Q3 '16  Q2 '17  Q3'16  Q2 '17  Q3'16  Q2 '17
Revenue:                     
South African transaction processing  $63,967  $50,594  $59,862  26%  7%  6%  1%
International transaction processing  41,514  40,588  44,000  2%  (6%)  (15%)  (11%)
Financial inclusion and applied technologies  56,881  54,286  59,258  5%  (4%)  (12%)  (9%)
 Subtotal: Operating segments  162,362  145,468  163,120  12%  (0%)  (7%)  (6%)
 Intersegment eliminations  (14,418)  (10,732)  (11,687)  34%  23%  12%  17%
  Consolidated revenue  $147,944  $134,736  $151,433  10%  (2%)  (8%)  (7%)
                      
Operating income (loss):                     
South African transaction processing  $15,531  $13,133  $15,372  18%  1%  (1%)  (4%)
International transaction processing  1,968  4,813  3,904  (59%)  (50%)  (66%)  (52%)
Financial inclusion and applied technologies  14,064  11,469  14,107  23%  (0%)  3%  (5%)
 Subtotal: Operating segments  31,563  29,415  33,383  7%  (5%)  (10%)  (10%)
 Corporate/Eliminations  (7,016)  (3,224)  (7,794)  118%  (10%)  82%  (15%)
  Consolidated operating income  $24,547  $26,191  $25,589  (6%)  (4%)  (22%)  (9%)
                      
Operating income margin (%)                     
South African transaction processing  24%  26%  26%            
International transaction processing  5%  12%  9%            
Financial inclusion and applied technologies  25%  21%  24%            
 Consolidated operating margin  17%  19%  17%            
(1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the third quarter of fiscal 2017 also prevailed during the third quarter of fiscal 2016 and the second quarter of fiscal 2017.
 
Nine months ended March 31, 2017 and 2016    
 
            Change -
            constant
         Change -  exchange
         actual  rate(1)
         F2017  F2017
         vs  vs
Key segmental data, in '000, except margins  F2017  F2016  F2016  F2016
Revenue:            
South African transaction processing  $181,397  158,997  14%  11%
International transaction processing  131,704  122,653  7%  4%
Financial inclusion and applied technologies  179,681  187,332  (4%)  (7%)
 Subtotal: Operating segments  492,782  468,982  5%  2%
 Intersegment eliminations  (37,772)  (29,492)  28%  24%
  Consolidated revenue  $455,010  439,490  4%  1%
             
Operating income:            
South African transaction processing  $44,451  38,724  15%  12%
International transaction processing  11,689  15,596  (25%)  (27%)
Financial inclusion and applied technologies  43,354  41,542  4%  1%
 Subtotal: Operating segments  99,494  95,862  4%  1%
 Corporate/Eliminations  (17,177)  (13,677)  26%  22%
  Consolidated operating income  $82,317  82,185  0%  (3%)
             
Operating income margin (%)            
South African transaction processing  25%  24%      
International transaction processing  9%  13%      
Financial inclusion and applied technologies  24%  22%      
 Overall operating margin  18%  19%      
(1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the year to date of fiscal 2017 also prevailed during the year to date of 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 March 31, 2017 and 2016
 
         EPS,        EPS,
   Net income  basic  Net income  basic
   (USD'000)  (USD)  (ZAR'000)  (ZAR)
   2017  2016  2017  2016  2017  2016  2017  2016
                         
GAAP  18,392   18,420   0.34  0.40  243,190   291,377   4.45  6.29
                             
 Intangible asset amortization, net  2,772   1,743         36,653   27,586       
 Transaction costs  1,439   545         19,027   8,621       
 Stock-based compensation charge  621   954         8,211   15,091       
 US government investigations-related expenses  217   -         2,869   -       
 Facility fees for Korean debt  27   34         357   538       
 Gain on fair value of T24  -   (1,909 )       -   (30,198 )     
  Fundamental  23,468   19,787   0.43  0.43  310,307   313,015   5.68  6.75
 
 
Nine months ended March 31, 2017 and 2016
 
         EPS,        EPS,
   Net income  basic  Net income  basic
   (USD'000)  (USD)  (ZAR'000)  (ZAR)
   2017  2016  2017  2016  2017  2016  2017  2016
                             
GAAP  61,665   58,098   1.15  1.24  849,009   823,149   15.82  17.59
                             
 Intangible asset amortization, net  7,637   6,182         105,124   87,588       
 Transaction costs  2,928   726         40,313   10,286       
 Stock-based compensation (reversal) charge  (68 ) 2,645         (936 ) 37,475       
 Refund related to litigation finalized in Korea, net  (643 ) -         (8,853 ) -       
 Facility fees for Korean debt  94   103         1,294   1,459       
 US government investigations-related expenses  246   133         3,387   1,884       
 Gain on fair value of T24  -   (1,909 )       -   (27,047 )     
  Fundamental  71,859   65,978   1.34  1.41  989,338   934,794   18.44  19.98
 
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 March 31, 2017 and 2016         
       
   2017   2016  
          
Net income (USD'000)  18,392   18,420  
Adjustments:         
 Gain on fair value of T24  -   (1,909 )
 Profit on sale of property, plant and equipment  (98 ) (29 )
 Tax effects on above  27   8  
Net income used to calculate headline earnings (USD'000)  18,321   16,490  
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000)  54,639   46,341  
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000)  54,808   46,430  
Headline earnings per share:         
 Basic, in USD  0.34   0.36  
 Diluted, in USD  0.33   0.36  
          
Nine months ended March 31, 2017 and 2016         
   
   2017   2016  
          
Net income (USD'000)  61,665   58,098  
Adjustments:         
 Gain on fair value of T24  -   (1,909 )
 Profit on sale of property, plant and equipment  (571 ) (113 )
 Tax effects on above  160   32  
Net income used to calculate headline earnings (USD'000)  61,254   56,108  
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000)  52,961   46,786  
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000)  53,088   47,074  
Headline earnings per share:         
 Basic, in USD  1.16   1.20  
 Diluted, in USD  1.15   1.19  
       
Calculation of the denominator for headline diluted earnings per share         
 
   Q3 '17  Q3 '16  F2017  F2016
             
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP  54,639  46,341  52,961  46,786
 Effect of dilutive securities under GAAP  169  89  127  288
  Denominator for headline diluted earnings per share  54,808  46,430  53,088  47,074

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

    Media Relations Contact:
    Bridget von Holdt
    Business Director
    Burson-Marsteller South Africa
    Phone: +27-82-610-0650
    Email: bridget.vonholdt@bm-africa.com