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Short-Form Announcement: Net 1 UEPS Technologies, Inc. Reports First Quarter 2021 Results
Net 1 UEPS Technologies, Inc.
Registered in the state of Florida, USA
(IRS Employer Identification No. 98-0171860)
Nasdaq share code: UEPS
JSE share code: NT1
ISIN: US64107N2062
("Net1" or "the Company")
Short-Form Announcement: Net 1 UEPS Technologies, Inc. Reports First Quarter 2021 Results
Q1 2021 Highlights and Recent Developments:
• Revenue of $37.1 million, a constant currency decrease of 12% from Q1 2020, but an increase of 39% from Q4 2020;
• Operating loss of $(10.8) million;
• GAAP EPS of $(0.51) and Fundamental EPS of $(0.23);
• Adjusted EBITDA loss of $(9.8) million, a sequential improvement from a loss of $(12.2) million in Q4 2020; and
• At September 30, 2020, had unrestricted cash of $209 million and no debt
"We are pleased to see some encouraging signs in our operational and financial results this quarter. With the return to full
operations, we have seen increased transaction processing volumes, loan originations, and a significant increase in the utilization of
our ATM infrastructure over Q4 of FY2020," said Alex Smith, Net1’s interim CEO and CFO.
"While we do not yet have a resolution of our Investment Company Act status, we believe we have the right team involved and are
working diligently to resolve this issue as soon as possible. In the meantime, the Board has formed a capital allocation plan to return
capital to shareholders while also providing adequate funds for internal organic growth as well as strategic acquisitions for the
Company," continued Smith.
"Our long-term initiatives remain unchanged – to be the leading financial technology company in South Africa focused on
underserviced customers. We believe that we have the capabilities, technology and infrastructure to make this strategic vision a
reality. We believe that Net1 is better placed than any other business in the country to service that very large total addressable
market and look forward to the journey ahead," concluded Smith.
Summary Financial Metrics
Q1 ’21 vs Q1 ’21 vs Q1 ’21 vs Q1 ’21 vs
Q1 2021 Q1 2020 Q4 2020 Q1 ’20 Q4 ’20 Q1 ’20 Q4 ’20
(All figures in USD ‘000s except per share USD ‘000’s
data) (except per share data) % change in USD % change in ZAR
Revenue 37,113 47,938 25,978 (23%) 43% (12%) 39%
GAAP operating loss (10,775) (6,436) (13,180) 67% (18%) 90% (21%)
Adjusted EBITDA (loss) (1) (9,822) 4,306) (12,184) 128% (19%) 159% (22%)
GAAP (loss) earnings per share ($) (0.51) (0.08) (0.68) 538% (26%) 625% (28%)
Continuing (0.51) (0.13) (0.68) 292% (25%) 346% (27%)
Discontinued - 0.05 (0.00) nm nm nm nm
Fundamental loss per share ($)(1) (0.23) (0.02) (0.22) 1,050% 5% 1,208% 1%
Fully-diluted shares outstanding (‘000’s) 57,119 56,568 57,119 1% - nm nm
Average period USD/ ZAR exchange rate 16.77 14.75 17.28 14% (3%) nm nm
(1) Adjusted EBITDA (loss), fundamental loss and fundamental loss per share are non-GAAP measures and are described below
under "Use of Non-GAAP Measures—EBITDA and Adjusted EBITDA, and —Fundamental net (loss) income and fundamental
(loss) earnings per share." See Attachment B in our full announcement for a reconciliation of GAAP operating loss to EBITDA loss
and Adjusted EBITDA loss, and GAAP net loss to fundamental net loss and loss per share.
Business update related to COVID-19 pandemic
The COVID-19 pandemic did not impact the Company’s South African operations as severely during Q1 2021, as it did in Q4 2020.
Nevertheless, South Africa currently remains under various lockdown restrictions, which continue to affect the broader economy,
and these restrictions affect us to the extent they affect economic activity levels in South Africa. The Company does not believe
there will be any further significant adverse effects on its liquidity from the pandemic, unless there is a resumption of the higher
level of restrictions in South Africa in the event of an increase in the level of infections, as is currently being experienced in Europe
and the United States following the second wave of the pandemic there.
Factors impacting comparability of our Q1 2021 and Q1 2020 results
• Lower revenue: Our revenues decreased 12% in ZAR primarily due to fewer prepaid airtime sales and lower account fee
revenue, which was partially offset by higher transaction fees;
• Ongoing operating losses: Operating costs are largely in line with the prior period in ZAR due to the largely fixed cost
nature of the costs base. As a result, we continue to experience operating losses as a result of depressed revenues; and
• Adverse foreign exchange movements: The U.S. dollar was 14% stronger against the ZAR during Q1 2021, which
adversely impacted our reported results.
Results of Operations by Segment and Liquidity
Processing
Segment revenue was $23.3 million in Q1 2021, down 9%, compared with Q1 2020 but increased 34% compared to Q4 2020 on a
constant currency basis. Excluding IPG, segment revenue decreased primarily due to fewer prepaid airtime sales, which was
partially offset by higher volume-driven transaction fees. Excluding IPG, Processing operating loss has been impacted lower revenue
and by an increase in transaction-based costs. IPG incurred an operating loss but is in the process of being closed down. Our
operating loss margin for Q1 2021 and 2020 was (29.8%) and (18.3%), respectively. Excluding IPG, our operating loss margin for
the Processing segment was (19.5%) and (12.1%) during Q1 2021 and 2020, respectively.
Financial services
Segment revenue from continuing operations was $8.3 million in Q1 2021, down 34% on a constant currency basis compared with
Q1 2020 and down from $8.8 million compared to Q4 2020. Segment revenue decreased due to lower account fee revenue whilst
lending and insurance revenues were relatively flat compared to the prior period. The segment incurred an operating loss compared
with fiscal 2020 primarily due to the reduction in account fee revenue as well as higher employee-related costs and an increase in
insurance claims experience. Operating (loss) income margin for Q1 2021 and 2020 was (28.7%) and 2.4%, respectively.
Technology
Segment revenue was $6.2 million in Q1 2021, down 2% on a constant currency basis compared with Q1 2020 but significantly
higher than the $1.9 million in Q4 2020. Operating income for Q1 2021 improved compared with fiscal 2020 due to improved
margins on the sale of hardware. Operating income margin for the Technology segment was 28.6% and 15.9% during Q1 2021 and
2020, respectively
Corporate/eliminations
Our corporate expenses increased primarily due to foreign exchange losses incurred and higher legal fees, which were partially
offset by lower audit and consulting fees.
Cash flow and liquidity
At September 30, 2020, cash and cash equivalents were $209.2 million and comprised of U.S. dollar-denominated balances of
$174.0 million, ZAR-denominated balances of ZAR 547.2 million ($32.5 million), and other currency deposits, primarily Botswana
pula, of $2.7 million, all amounts translated at exchange rates applicable as of September 30, 2020. The decrease in unrestricted cash
balances from June 30, 2020, was primarily due to the payment of Federal income taxes, weak trading activities and an increase in
our lending book, which was partially offset by the receipt of the outstanding proceeds related to the sale of our Korean business.
Excluding the impact of income taxes, cash used in operating activities during the first quarter of fiscal 2021 was impacted by the
cash losses incurred by the majority of our continuing operations and the growth in our lending book. Net cash used in operating
activities during the first quarter of fiscal 2020 includes the contribution from our Korean operations. We paid income taxes of
approximately $15.4 million during Q1 2021, compared with $1.9 million during Q1 2020. Capital expenditures for Q1 2021 and
2020 were $0.3 million and $2.6 million, respectively.
Use of Non-GAAP Measures
US securities laws require that when we publish any non-GAAP measures, we disclose the reason for using these non -GAAP
measures and provide reconciliations to the directly comparable GAAP measures in our full announcement. The presentation of
negative EBITDA, adjusted negative EBITDA, fundamental net (loss) income and fundamental (loss) earnings per share and
headline (loss) earnings per share are non-GAAP measures.
Headline (loss) 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
loss which has been determined based on GAAP. Accordingly, this may differ to the headline (loss) earnings per share calculat ion of
other companies listed on the JSE as these companies m ay report their financial results under a different financial reporting
framework, including but not limited to, International Financial Reporting Standards.
The table below presents our HEPS for Q1 2021 and Q1 2020
2021 2020
Net loss used to calculate headline earnings (USD’000).............................................................. (13,474) (4,503)
Headline loss per share:............................................................................................
Basic, in USD .................................................................................................... (0.24) (0.08)
Diluted, in USD .................................................................................................. (0.24) (0.08)
Short-form announcement
This short-form announcement is the responsibility of the Net1’s Board of Directors ("Board") and the contents have been approved
by the Board on November 5, 2020. This short-form announcement released on SENS is a summary of the full announcement which
has been published on Net1’s website at www.net1.com and at https://senspdf.jse.co.za/documents/2020/JSE/ISSE/NT1/Q1Res2021.pdf .
This short-form announcement does not contain the complete or full announcement details. Any investment decision by investors and/or
shareholders should be based on consideration of the full announcement. The short-form announcement has not been audited or reviewed
by Net1’s external auditors. The full announcement is available upon request through enquiries directed to either Dara Dierks, Net1’s
investor relations contact, at net1IR@icrinc.com or Net1’s media relations contact at Bridget.vonholdt@bcw-global.com.
Conference Call
We will host a conference call to review these results on November 6, 2020, at 8:00 a.m. Eastern Time. To participate in the call,
dial 1-508-924-4326 (US and Canada), 0333-300-1418 (U.K. only) or 010-201-6800 (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 November 29, 2020.
Participants are now able to pre-register for the November 6, 2020, conference call by navigating to
https://www.diamondpass.net/4251389. Participants utilizing this pre-registration service will receive their dial-in number
upon registration.
About Net1
Net1 is a South African-focused financial technology company with a presence in Africa, Asia and Europe. Net1 utilizes its
proprietary banking and payment technology to distribute low-cost financial and value-added services to underserved consumers and
small businesses. The Company also provides transaction processing services, including being a payment processor and bill payment
platform in South Africa. Net1 leverages its strategic investments in banks, telecom and mobile payment technology companies to
further expand its product offerings or to enter new markets. Net1 has a primary listing on NASDAQ (NasdaqGS: UEPS) and a
secondary listing on the Johannesburg Stock Exchange (JSE: NT1). Visit www.net1.com for additional information about Net1.
Forward-Looking Statements
This announcement contains forward-looking statements that involve known and unknown risks and uncertainties. A discussion of
various factors that may 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.
Investor Relations Contact:
Dara Dierks
Managing Director – ICR
Email: net1IR@icrinc.com
Media Relations Contact:
Bridget von Holdt
Business Director – BCW
Phone: +27-82-610-0650
Email: Bridget.vonholdt@bcw-global.com
Johannesburg
November 6, 2020
Sponsor:
Rand Merchant Bank, a division of FirstRand Bank Limited
Date: 06-11-2020 07:05:00
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