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Net 1 UEPS Technologies, Inc. Reports Third Quarter 2013 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”)
Net 1 UEPS Technologies, Inc. Reports Third Quarter 2013 Results
• Bulk enrollment substantially completed; 19 million registrations and 8.5 million cards issued as of March 31, 2013;
• Revenue of $111 million, increased 32% in constant currency; and
• Fundamental EPS of $0.05 including $21 million of direct implementation and smart card costs.
JOHANNESBURG, May 10, 2013 – Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today announced results for
the third quarter fiscal 2013.
Summary Financial Metrics
Three months ended March 31,
% change % change
2013 2012 in USD in ZAR
(All figures in USD ‘000s except per share data)
Revenue 111,141 90,664 23% 32%
GAAP net (loss) income (4,681) 7,766 nm nm
Fundamental net income (1) 2,362 12,450 (81%) (80%)
GAAP loss earnings per share ($) (0.10) 0.17 nm nm
Fundamental earnings per share ($) (1) 0.05 0.28 (82%) (80%)
Fully-diluted shares outstanding (‘000’s) 45,609 45,375 1%
Average period USD/ ZAR exchange rate 8.47 7.85 8%
Nine months ended March 31,
% change % change
2013 2012 in USD in ZAR
(All figures in USD ‘000s except per share data)
Revenue 334,265 282,648 18% 28%
GAAP net income 4,692 52,628 (91%) (90%)
Fundamental net income (1) 21,897 51,769 (58%) (54%)
GAAP earnings per share ($) 0.10 1.17 (91%) (90%)
Fundamental earnings per share ($) (1) 0.48 1.15 (58%) (54%)
Fully-diluted shares outstanding (‘000’s) 45,588 45,140 1%
Average period USD/ ZAR exchange rate 8.46 7.82 8%
(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 (loss) income to fundamental net income and earnings per share.
Factors impacting comparability of our Q3 2013 and Q3 2012 results
• Unfavorable impact from the strengthening of the US dollar: The US dollar appreciated by 8% against the ZAR
during Q3 2013 which negatively impacted our reported results;
• SASSA implementation costs: We substantially completed the implementation of our South African Social Security
Agency (“SASSA”) contract during Q3 2013 and incurred additional implementation and staff costs;
• DOJ and SEC investigation-related expenses: We incurred U.S. Department of Justice (“DOJ”) and Securities and
Exchange Commission (“SEC”) investigation-related expenses of $4.2 million; and
• Bad debt provision for amounts due under expired Iraqi contracts: We have provided $2.3 million related to the
expired NUETS Iraqi customer contracts.
Comments and Outlook
“We are very pleased with the commitment demonstrated by the Net1 team to complete bulk enrollment for our SASSA
implementation on schedule despite having to register nearly 40% more beneficiaries than originally planned,” said Dr. Serge
Belamant, Chairman and Chief Executive Officer of Net1. “By April 30, 2013, we had registered over 20 million
beneficiaries and issued more than 9.1 million cards. We are also delighted that a full bench of the Supreme Court of Appeal
unanimously ruled in favor of Net1 and SASSA. We can now focus exclusively on providing best-in-class service to SASSA
and the citizens of South Africa. Meanwhile, we continue to cooperate with the DOJ and SEC on their investigations, but as a
result of these investigations, we continue to experience some adverse impact from the damage caused to our reputation,
including our ability to execute certain aspects of our strategic plan,” he concluded.
“The successful implementation for SASSA is a one-off event and integral for the smooth transition and operation of South
Africa's social welfare program. Given the critical importance of this roll out, and the higher number of beneficiaries required
to be enrolled in the same time frame, our implementation costs have been materially but proportionally higher than
anticipated,” said Herman Kotzé, Chief Financial Officer of Net1. “In the fourth quarter of fiscal 2013, we expect
fundamental earnings per share of at least $0.20, which includes approximately $7 - $9 million of further implementation and
smart card costs, and also assumes a constant currency base of ZAR 7.72/$1 and a share count of approximately 45 million
shares,” he concluded.
Progress of second phase of our SASSA contract implementation
We commenced the second phase of the enrollment process in early July 2012 and substantially completed bulk enrollment
by March 31, 2013, in accordance with the implementation plan agreed with SASSA. Under our agreement with SASSA, we
have to enroll both the grant recipients as well as their dependents. While the number of grant recipients on a national basis
has consistently been quantified by SASSA at approximately 9.4 million individuals, the number of beneficiaries was revised
higher by SASSA from an initial estimate of approximately 15.5 million, to the current estimate of approximately 21.6
million. In order to complete the second phase of the implementation on time, and given the significantly higher number of
beneficiaries, we increased the number of temporary employees that we hired in the second quarter of fiscal 2013 from 2,500
to approximately 5,500 and retained the higher employee base through all of the third quarter of fiscal 2013. Our temporary
employee headcount has since declined to approximately 3,000 at April 30, 2013. During the third quarter of fiscal 2013, we
enrolled a further 5.8 million grant recipients and an additional 6.7 million beneficiaries, for a total of 12.5 million citizens.
During the third quarter of fiscal 2013, we incurred direct implementation expenses of approximately $16.1 million (ZAR
140.5 million), including staff, travel, temporary infrastructure hire, fixed premises hire for enrollment and stationery costs.
We are unable to quantify the value of time spent by our executives and pension and welfare operations managers and staff
that service the five provinces in which we operated under the previous contract and that have assisted in the implementation
of the national contract. We also expensed $4.5 million (ZAR 39.3 million) related to the cost of the UEPS/EMV smart cards
issued during the quarter, which is not included in the $16.1 million (ZAR 140.5 million) of direct implementation expenses
described above.
We also incurred approximately $1.4 million in capital expenditures related to the implementation during the third quarter of
fiscal 2013. Since inception of the implementation we have incurred cumulative capital expenditures of $26.6 million. We do
not expect any further significant capital expenditures related to this implementation and expect our cumulative capital
expenditure to remain below our prior estimate of $30 million.
During March 2013, the Minister of Social Development and SASSA announced that the deadline for the enrollment of grant
recipients would be extended to April 30, 2013. We therefore continued with the enrollment process for the month of April
2013 and expect no further extensions to be granted by the Minister and SASSA. Those beneficiaries who have not presented
themselves for enrollment at the end of April 2013 will receive grant cancellation notices. This may result in the final total
number of enrolled grant recipients and cardholders being less than the numbers provided in the original database.
Our total cash outlay through March 31, 2013 has been $96 million for direct implementation expenses, smart card costs and
capital expenditures. We would have been in-line with the mid-point of our initial total cash outlay range assuming the
volume of enrollments had not changed. Having to register the incremental beneficiaries and therefore employ our temporary
staff for longer, should result in our total cash outlay for the implementation being between $100 and $105 million.
Update on Government Investigations, SASSA Tender Award Litigation and Suit Against AllPay
Government investigations
We are continuing to cooperate with the investigations being conducted by the DOJ and SEC that we have previously
disclosed. We have produced documents and information to the DOJ and the SEC relating to their investigations and expect
to continue to produce documents over the coming months. We also expect that the DOJ and the SEC will conduct interviews
of some of our personnel as part of their investigations. See also Part II, Item 1A—“Risk Factors.”
In addition, on February 14, 2013, we filed an application pursuant to Section 34 of the South African Prevention of Corrupt
Activities Act in South Africa with the South African Police Service. Section 34 deals with the reporting of suspected fraud,
theft, extortion and forgery. Matters reported under Section 34 are usually referred for investigation to the South African
Directorate for Priority Crime Investigation, known as the Hawks. We filed the Section 34 application to prompt the Hawks
to conduct an investigation into who may have made corruption allegations that appeared in the South African media after we
were awarded the SASSA tender in January 2012. The Hawks have confirmed to us that our Section 34 application has been
accepted for investigation. We have provided certain electronic information to the Hawks at their request and we will
cooperate with the Hawks in their investigation.
SASSA tender award litigation
On March 27, 2013, a full bench of the South African Supreme Court of Appeal dismissed the appeal by AllPay Consolidated
Investment Holdings (Pty) Ltd (“AllPay”), against the earlier ruling by the North Gauteng High Court that the award to us of
the tender by SASSA would not be set aside. The Supreme Court also upheld our and SASSA’s appeal against the High
Court’s orders that the process conducted in awarding the contract was illegal and invalid and that we and SASSA pay
AllPay’s costs occasioned by the court proceedings. The Supreme Court also ordered AllPay to pay our and SASSA’s costs
occasioned by the court proceedings, including the cost of three counsel. The judges presiding at the Supreme Court hearing
unanimously ruled that there were no unlawful irregularities in the tender process followed by SASSA. Accordingly, our
SASSA contract to distribute social welfare grants to ten million South Africans every month, for a period of five years,
remains in full force and effect. On April 18, 2013, AllPay applied for leave to appeal to the South African Constitutional
Court, the highest court in the country, against the judgment of the Supreme Court. We and SASSA have opposed AllPay’s
application. AllPay’s previous approach to the Constitutional Court, before the Supreme Court hearing and ruling, was
rejected at that time. We cannot predict if AllPay’s leave to appeal will be granted or if it is granted, when or how the
Constitutional Court would rule on the matter.
Suit against AllPay
In December 2012 we sued AllPay. In our lawsuit we are alleging that AllPay wrongfully and unlawfully and with the
intention of injuring our reputation, infringing our goodwill and reducing our share price, competed unlawfully with us. We
are seeking damages in the aggregate amount of ZAR 478 million (approximately $55 million based on the ZAR/US dollar
exchange rate on December 11, 2012) plus interest and costs. The damages claimed may increase as we quantify the
continued impact of AllPay’s actions. A trial date will be applied for after the exchange of the required pleadings and
finalization of any interlocutory issues which may arise. It is unlikely that the matter will go to trial before June 30, 2013, the
end of our current financial year.
Results of Operations by Segment and Liquidity
Our frequently asked questions and operating metrics will be updated and posted on our website (www.net1.com).
South African transaction-based activities
Segment revenue was $59 million in Q3 2013, up 27% compared with Q3 2012 in USD and up 37% on a constant currency
basis. In ZAR, the increases in segment revenue were primarily due to higher revenues earned under our new SASSA
contract. Segment operating income margin was (7%) and 19%, respectively, and declined primarily due to SASSA
implementation costs. Excluding amortization of acquisition-related intangibles, Q3 2013 segment operating income margin
was (5%), compared to 23% during Q3 2012.
International transaction-based activities
KSNET continues to contribute the majority of our revenues and operating income in this operating segment. Segment
revenue was $33.1 million in Q3 2013, up 17% compared with Q3 2012 in USD and 27% on a constant currency basis and
was modestly impacted by ISC in Iraq notifying NUETS that it would not renew its contracts upon their expiration. Operating
margin for the segment is lower than most of our South African transaction-based businesses and was negatively impacted by
the expiration of the Iraqi contracts with ISC and the related bad debt provision required as well as on-going competition in
the Korean marketplace, but was partially offset by increased revenue contributions from KSNET. Excluding the amortization
of intangibles, Q3 2013 operating income margin was 6% compared to 12% during Q3 2012.
Smart card accounts
Segment revenue was $8.6 million in Q3 2013, up 15% compared with Q3 2012 in USD and 23% on a constant currency
basis. Q3 2013 segment operating income margin was 29%, compared to 45% during Q3 2012. We have reduced our pricing
for smart card accounts after taking into consideration the lower price and higher volumes of the new SASSA contract.
Financial services
UEPS-based lending contributes the majority of the revenue and operating income in this operating segment. Segment
revenue was $1.6 million in Q3 2013, down 28% compared with Q3 2012 in USD and 22% lower on a constant currency
basis, principally due to a decrease in lending activities. Q3 2013 segment operating income margin was 69% compared with
55% during Q3 2012 primarily as a result of an improved margin in our UEPS-based lending book resulting from a better
loss experience, offset by start-up expenditures related to Smart Life and other financial services offerings. Smart Life did not
contribute to operating income in the third quarter of fiscal 2013 and is currently unable to issue new insurance policies as a
result of the suspension of its license.
Hardware, software and related technology sales
Segment revenue was $8.7 million in Q3 2013, up 40% compared with Q3 2012 in USD and 51% on a constant currency
basis. In constant currency, the increase in revenue resulted primarily from an increase in royalty fees and ad hoc hardware
sales, offset by a lower contribution from most other major contributors to hardware and software sales. Excluding
amortization of all intangibles, segment operating income margin was 20% compared to (21%) during Q3 2012.
Corporate/eliminations
The increase in our corporate expenses resulted primarily from legal fees we incurred in connection with the DOJ and SEC
investigations, stock-based compensation and other corporate head office-related expenses.
Cash flow and liquidity
At March 31, 2013, we had cash and cash equivalents of $43 million, up from $39 million at June 30, 2012. The increase in
our cash balances from June 30, 2012, was primarily from cash generated from operations, offset by implementation costs
and capital expenditures incurred to implement our SASSA contract, a scheduled repayment of our Korean debt and the
acquisition of Pbel and SmartSwitch Botswana. For Q3 2013, net cash provided by operating activities was $12.2 million
compared with $22.0 million in Q3 2012.
Excluding the impact of interest received, interest paid under our Korean debt and taxes paid, the decrease in cash provided
by operating activities resulted from significant implementation costs related to our SASSA contract, partially offset by cash
generated from operations. Capital expenditures for Q3 2013 and 2012 were $5.1 million and $13.9 million, respectively, and
have decreased primarily due to lower capital expenditures related to our SASSA contract and the purchase of fewer payment
processing terminals in Korea in Q3 2013.
Use of Non-GAAP Measures
US securities laws require that when we publish any non-GAAP measures, we disclose the reason for using the non-GAAP
measure and provide reconciliation to the directly comparable GAAP measure. The presentation of fundamental net income
and fundamental earnings per share and headline (loss) 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, as well as (a) in fiscal 2013, DOJ and SEC
investigations-related expenses and acquisition-related costs; and (b) in fiscal 2012, the effects of a change in South African
tax law and the creation of a valuation allowance related to foreign tax credits, the profit on liquidation of SmartSwitch
Nigeria and loss on sale of 10% of Smart Life. Management believes that the fundamental net income and earnings per share
metric enhances its own evaluation, as well as an investor’s understanding, of our financial performance. Attachment B
presents the reconciliation between GAAP and fundamental net income and earnings per share.
Headline loss 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 (loss) income which has been determined based on GAAP. Accordingly, this may differ to the headline (loss)
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 (loss) income adjusted for the loss (profit) on sale of property, plant and
equipment, net of related tax effects, the loss attributable to the sale of 10% of Smart Life and the profit on liquidation of
SmartSwitch Nigeria. Attachment C presents the reconciliation between our net (loss) income used to calculate (loss)
earnings per share basic and diluted and HEPS basic and diluted.
Conference Call
We will host a conference call to review Q3 2013 results on May 10, 2013, at 8:00 Eastern Time. To participate in the call,
dial 1-866-652-5200 (U.S. only), 1-855-669-9657 (Canada only), 0808-162-4061 (U.K. only) or 0-800-200-648 (South
Africa only) ten minutes prior to the start of the call. Callers should request “Net1 call” upon dial-in. The call will also be
webcast on our 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 our website through June 2, 2013.
About Net1 (www.net1.com)
Net1 is a leading provider of alternative payment systems that leverage its Universal Electronic Payment System, or UEPS, to
facilitate biometrically secure, real-time electronic transaction processing to unbanked and under-banked populations of
developing economies around the world in an online or offline environment. Net1’s UEPS/EMV solution is also completely
interoperable with global EMV standards that seamlessly permit access to all the UEPS functionality in a traditional EMV
environment. In addition to payments, UEPS can be used for banking, healthcare management, payroll, remittances, voting
and identification.
Net1 operates market-leading payment processors in South Africa, Republic of Korea, and Ghana. In addition, Net1’s
proprietary Mobile Virtual Card technology offers secure mobile payments and banking services in developed and emerging
countries while its MediKredit and XeoHealth subsidiaries provide its proprietary 5010 and ICD-10 compliant real-time
claims adjudication system.
Net1 has a primary listing on the Nasdaq and a secondary listing on the JSE Limited.
Forward-Looking Statements
This announcement contains forward-looking statements that involve known and unknown risks and uncertainties. A
discussion of various factors that cause our actual results, levels of activity, performance or achievements to differ materially
from those expressed in such forward-looking statements are included in our filings with the Securities and Exchange
Commission. We undertake no obligation to revise any of these statements to reflect future events.
Investor Relations Contact:
Dhruv Chopra
Vice President of Investor Relations
Phone: +1-212-626-6675
Email: dchopra@net1.com
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
Three months ended Nine months ended
March 31, March 31,
2013 2012 2013 2012
(In thousands, except per share data) (In thousands, except per share data)
REVENUE $ 111,141 $ 90,664 $ 334,265 $ 282,648
EXPENSE
Cost of goods sold, IT processing, servicing
and support 51,461 32,493 143,789 99,605
Selling, general and administration 53,846 36,368 149,854 92,297
Depreciation and amortization 10,560 9,325 31,051 27,194
OPERATING (LOSS) INCOME (4,726) 12,478 9,571 63,552
INTEREST INCOME 2,515 2,164 8,195 5,981
INTEREST EXPENSE 2,023 2,244 6,117 7,215
(LOSS) INCOME BEFORE INCOME TAX
EXPENSE (4,234) 12,398 11,649 62,318
INCOME TAX EXPENSE 472 4,611 7,172 9,785
NET (LOSS) INCOME BEFORE EARNINGS
(LOSS) FROM EQUITY-ACCOUNTED
INVESTMENTS (4,706) 7,787 4,477 52,533
EARNINGS (LOSS) FROM EQUITY-
ACCOUNTED INVESTMENTS 22 (4) 204 100
NET (LOSS) INCOME (4,684) 7,783 4,681 52,633
(ADD) LESS NET (LOSS) INCOME
ATTRIBUTABLE TO NON-CONTROLLING
INTEREST (3) 17 (11) 5
NET (LOSS) INCOME ATTRIBUTABLE TO
NET1 $ (4,681) $ 7,766 $ 4,692 $ 52,628
Net (loss) income per share, in United States
dollars
Basic (loss) earnings attributable to Net1
shareholders $(0.10) $0.17 $0.10 $1.17
Diluted (loss) earnings attributable to Net1
shareholders $(0.10) $0.17 $0.10 $1.17
NET 1 UEPS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
Unaudited (A)
March 31, June 30,
2013 2012
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 42,616 $ 39,123
Pre-funded social welfare grants receivable 6,954 9,684
Accounts receivable, net of allowances of – March: $3,272; June: $788 101,609 101,918
Finance loans receivable 8,773 8,141
Deferred expenditure on smart cards 3,915 4,587
Inventory 8,415 6,192
Deferred income taxes 6,927 5,591
Total current assets before settlement assets 179,209 175,236
Settlement assets 538,318 409,166
Total current assets 717,527 584,402
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION OF – March: $85,318; June: $74,242 50,682 52,616
EQUITY-ACCOUNTED INVESTMENTS 1,112 1,508
GOODWILL 182,066 182,737
INTANGIBLE ASSETS, net 83,193 93,930
OTHER LONG-TERM ASSETS, including reinsurance assets 38,426 40,700
TOTAL ASSETS 1,073,006 955,893
LIABILITIES 40,570
CURRENT LIABILITIES
Accounts payable 18,681 13,172
Other payables 33,324 40,167
Current portion of long-term borrowings 14,502 14,019
Income taxes payable 5,879 6,019
Total current liabilities before settlement obligations 72,386 73,377
Settlement obligations 538,318 409,166
Total current liabilities 610,704 482,543
DEFERRED INCOME TAXES 20,033 20,988
LONG-TERM BORROWINGS 75,255 79,760
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities 23,331 25,791
TOTAL LIABILITIES 729,323 609,082
COMMITMENTS AND CONTINGENCIES
EQUITY
NET1 EQUITY:
COMMON STOCK
Authorized: 200,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury - March: 45,742,707; June:
45,548,902 59 59
PREFERRED STOCK
Authorized shares: 50,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury: March: -; June: - - -
ADDITIONAL PAID-IN-CAPITAL 160,094 155,350
TREASURY SHARES, AT COST: March: 13,455,090; June: 13,455,090 (175,823) (175,823)
ACCUMULATED OTHER COMPREHENSIVE LOSS (88,275) (75,722)
RETAINED EARNINGS 444,333 439,641
TOTAL NET1 EQUITY 340,388 343,505
NON-CONTROLLING INTEREST 3,295 3,306
TOTAL EQUITY 343,683 346,811
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 1,073,006 $ 955,893
(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,
2013 2012 2013 2012
(In thousands) (In thousands)
Cash flows from operating activities
Net (loss) income $ (4,684) $ 7,783 $ 4,681 $ 52,633
Depreciation and amortization 10,560 9,325 31,051 27,194
Earnings (Loss) from equity-accounted investments (22) 4 (204) (100)
Fair value adjustments (299) (1,211) 408 (1,983)
Interest payable 1,054 694 3,363 4,469
Loss (Profit) on disposal of plant and equipment 3 (23) (83) (57)
Net loss on sale of 10% of Smart Life - - - 81
Profit on liquidation of SmartSwitch Nigeria - - - (3,994)
Realized loss on sale of Smart Life investments - - - 25
Stock-based compensation charge 1,092 843 3,325 1,882
Facility fee amortized 71 316 235 515
(Increase) Decrease in accounts receivable, pre-
funded social welfare grants receivable and finance
loans receivable (4,818) 474 (3,987) (15,321)
Decrease (Increase) in deferred expenditure on smart
cards 3,800 (56) 99 (70)
Decrease (Increase) in inventory 1,149 (862) (2,359) (261)
Increase (Decrease) in accounts payable and other
payables 4,533 583 (1,755) (1,765)
Increase (Decrease) in taxes payable 948 5,626 354 (5,336)
Decrease in deferred taxes (1,201) (1,532) (4,133) (14,928)
Net cash provided by operating activities 12,186 21,964 30,995 42,984
Cash flows from investing activities
Capital expenditures (5,053) (13,879) (17,103) (23,465)
Proceeds from disposal of property, plant and
equipment 31 117 387 385
Acquisitions, net of cash acquired - - (2,143) -
Acquisition of prepaid business, net of cash acquired - - - (4,481)
Acquisition of Smart Life, net of cash acquired - - - (1,673)
Acquisition of available for sale securities - (948) - (948)
Settlement from former shareholders of KSNET - - - 4,945
Repayment of loan by equity-accounted investment - 30 3 93
Purchase of investments related to insurance business - - - (2,320)
Proceeds from maturity of investments related to
insurance business - - 545 2,321
Net change in settlement assets (156,363) 95,165 (168,419) 128,961
Net cash (used in) provided by investing
activities (161,385) 80,485 (186,730) 103,818
Cash flows from financing activities
Repayment of long-term borrowings - (4,842) (7,307) (12,027)
Proceeds from issue of common stock - - 240 -
Proceeds on sale of 10% of Smart Life - - - 107
Acquisition of treasury stock - - - (1,129)
Net change in settlement obligations 156,363 (95,165) 168,419 (128,961)
Net cash provided by (used in) financing
activities 156,363 (100,007) 161,352 (142,010)
Effect of exchange rate changes on cash (2,664) 4,944 (2,124) (11,805)
Net increase (decrease) in cash and cash
equivalents 4,500 7,386 3,493 (7,013)
Cash and cash equivalents – beginning of period 38,116 80,864 39,123 95,263
Cash and cash equivalents – end of period $ 42,616 $ 88,250 $ 42,616 $ 88,250
Net 1 UEPS Technologies, Inc.
Attachment A
Operating segment revenue, operating income and operating margin:
Three months ended March 31, 2013 and 2012 and December 31, 2012
Change – constant
Change - actual exchange rate(1)
Q3 ‘13 Q3 ‘13 Q3 ‘13 Q3 ‘13
vs vs vs vs
Key segmental data, in $ ’000, Q3 ‘13 Q3 ‘12 Q2 ‘13 Q3‘12 Q2 ‘13 Q3‘12 Q2 ‘13
Revenue:
SA transaction-based activities .......... $59,009 $46,423 $60,764 27% (3%) 37% (6%)
International transaction-based
activities ............................................. 33,119 28,188 33,113 17% 0% 27% (3%)
Smart card accounts ........................... 8,657 7,558 8,219 15% 5% 23% 2%
Financial services ............................... 1,651 2,289 1,448 (28%) 14% (22%) 10%
Hardware, software and related
technology sales ................................. 8,705 6,206 7,898 40% 10% 51% 7%
Total consolidated revenue .......... $111,141 $90,664 $111,442 23% (0%) 32% (3%)
Consolidated operating (loss) income:
SA transaction-based activities .......... ($4,197) $8,694 $1,933 nm nm nm nm
Operating (loss) income excluding
amortization.................................... (3,127) 10,452 3,398 nm nm nm nm
Amortization of intangible assets ... (1,070) (1,758) (1,465) (39%) (27%) (34%) (29%)
International transaction-based
activities ............................................. (1,362) 195 202 nm nm nm nm
Operating income excluding
amortization.................................... 1,866 3,387 3,515 (45%) (47%) (41%) (49%)
Amortization of intangible assets ... (3,228) (3,192) (3,313) 1% (3%) 9% (6%)
Smart card accounts ........................... 2,467 3,435 2,342 (28%) 5% (23%) 2%
Financial services ............................... 1,147 1,248 1,048 (8%) 9% (1%) 6%
Hardware, software and related
technology sales ................................. 1,699 (1,301) 795 nm 114% nm 107%
Operating income (loss) excluding
amortization.................................... 1,785 (1,209) 878 nm 103% nm 97%
Amortization of intangible assets ... (86) (92) (83) (7%) 4% 1% 0%
Corporate/ Eliminations .................... (4,480) 207 (1,348) nm 232% nm 222%
Total operating (loss) income ....... ($4,726) $12,478 $4,972 nm nm nm nm
Operating income margin (%)
SA transaction-based activities .......... (7%) 19% 3%
International transaction-based
activities ............................................. (4%) 1% 1%
International transaction-based
activities excluding amortization ........ 6% 12% 11%
Smart card accounts ........................... 29% 45% 28%
Financial services ............................... 69% 55% 72%
Hardware, software and related
technology sales ................................. 20% (21%) 10%
Overall operating margin.................... (4%) 14% 4%
(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 2013 also prevailed during the third quarter of fiscal 2012 and the second quarter of fiscal 2013.
Nine months ended March 31, 2013 and 2012
Change –
constant
Change - exchange
actual rate(1)
F2013 F2013
Key segmental data, in ’000, except vs vs
margins F2013 F2012 F2013 F2013
Revenue:
SA transaction-based activities .......... $181,137 $142,773 27% 37%
International transaction-based
activities ............................................. 97,881 87,278 12% 21%
Smart card accounts ........................... 25,240 23,074 9% 18%
Financial services ............................... 4,483 6,344 (29%) (24%)
Hardware, software and related
technology sales ................................. 25,524 23,179 10% 19%
Total consolidated revenue .......... $334,265 $282,648 18% 28%
Consolidated operating income (loss):
SA transaction-based activities .......... $4,136 $44,643 (91%) (90%)
Operating income excluding
amortization.................................... 8,139 49,448 (84%) (82%)
Amortization of intangible assets ... (4,003) (4,805) (17%) (10%)
International transaction-based
activities ............................................. (1,331) 1,120 nm nm
Operating income excluding
amortization.................................... 8,366 10,750 (22%) (16%)
Amortization of intangible assets ... (9,697) (9,630) 1% 9%
Smart card accounts ........................... 7,194 10,487 (31%) (26%)
Financial services ............................... 3,292 3,685 (11%) (3%)
Hardware, software and related
technology sales ................................. 4,478 1,545 190% 213%
Operating income excluding
amortization.................................... 4,732 1,819 160% 181%
Amortization of intangible assets ... (254) (274) (7%) 0%
Corporate/ Eliminations ..................... (8,198) 2,072 nm nm
Total operating income ................. $9,571 $63,552 (85%) (84%)
Operating income margin (%)
SA transaction-based activities .......... 2% 31%
International transaction-based
activities ............................................. (1%) 1%
International transaction-based
activities excluding amortization ........ 9% 12%
Smart card accounts ........................... 29% 45%
Financial services ............................... 73% 58%
Hardware, software and related
technology sales ................................. 18% 7%
Overall operating margin.................... 3% 22%
(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange
rate that prevailed during year to date fiscal 2013 also prevailed during year to date fiscal 2012.
Net 1 UEPS Technologies, Inc.
Attachment B
Reconciliation of GAAP net (loss) income and (loss) earnings per share, basic, to fundamental net income and
earnings per share, basic:
Three months ended March 31, 2013 and 2012
(L)EPS, (L)EPS,
Net (loss) income basic Net (loss) income basic
(USD’000) (USD) (ZAR’000) (ZAR)
2013 2012 2013 2012 2013 2012 2013 2012
GAAP................................................ (4,681) 7,766 (0.10) 0.17 (39,632) 60,979 (0.87) 1.35
Intangible asset amortization, net. 3,295 3,751 27,898 29,463
Stock-based compensation charge 1,092 843 9,245 6,619
Facility fees for KSNET debt ...... 71 90 601 707
DOJ and SEC investigations-
related expenses ........................... 2,557 - 21,648 -
Acquisition-related costs .............. 28 - 237 -
Fundamental ...................... 2,362 12,450 0.05 0.28 19,997 97,768 0.44 2.16
Nine months ended March 31, 2013 and 2012
EPS,
Net income EPS, basic Net income basic
(USD’000) (USD) (ZAR’000) (ZAR)
2013 2012 2013 2012 2013 2012 2013 2012
GAAP................................................ 4,692 52,628 0.10 1.17 39,684 411,787 0.87 9.13
Intangible asset amortization, net. 10,453 10,957 88,403 85,733
Stock-based compensation charge 3,325 1,883 28,122 14,734
Facility fees for KSNET debt ...... 235 301 1,988 2,355
DOJ and SEC investigations-
related expenses ........................... 3,117 - 26,363 -
Acquisition-related costs .............. 75 - 634 -
Change in tax law ........................ - (18,315) - (150,373)
Create FTC valuation allowance .. - 8,232 - 67,588
Profit on liquidation of subsidiary - (3,994) - (31,251)
Loss on sale of 10% of Smart Life . - 77 - 602
Fundamental ...................... 21,897 51,769 0.48 1.15 185,194 401,175 4.07 8.90
Net 1 UEPS Technologies, Inc.
Attachment C
Reconciliation of net (loss) income used to calculate (loss) earnings per share basic and diluted and headline (loss)
earnings per share basic and diluted:
Three months ended March 31, 2013 and 2012
2013 2012
Net (loss) income (USD’000) ............................................................................................... (4,681) 7,766
Adjustments: ..........................................................................................................................
Loss (Profit) on sale of property, plant and equipment .................................................... 3 (23)
Tax effects on above ........................................................................................................ (1) 6
Net (loss) income used to calculate headline earnings (USD’000) ....................................... (4,679) 7,749
Weighted average number of shares used to calculate net income per share basic earnings
and headline earnings per share basic earnings (‘000) .......................................................... 45,561 45,268
Weighted average number of shares used to calculate net income per share diluted
earnings and headline earnings per share diluted earnings (‘000) ......................................... 45,609 45,375
Headline (loss) earnings per share: ........................................................................................
Basic, in USD .................................................................................................................. (0.10) 0.17
Diluted, in USD ............................................................................................................... (0.10) 0.17
Nine months ended March 31, 2013 and 2012
2013 2012
Net income (USD’000)......................................................................................................... 4,692 52,628
Adjustments: ..........................................................................................................................
Profit on liquidation of SmartSwitch Nigeria .................................................................. - (3,994)
Loss on sale of 10% of Smart Life ................................................................................... - 77
Profit on sale of property, plant and equipment ............................................................... (83) (57)
Tax effects on above ........................................................................................................ 23 16
Net income used to calculate headline earnings (USD’000) ................................................. 4,632 48,670
Weighted average number of shares used to calculate net income per share basic earnings
and headline earnings per share basic earnings (‘000) .......................................................... 45,540 45,083
Weighted average number of shares used to calculate net income per share diluted
earnings and headline earnings per share diluted earnings (‘000) ......................................... 45,588 45,140
Headline earnings per share:..................................................................................................
Basic, in USD .................................................................................................................. 0.10 1.08
Diluted, in USD ............................................................................................................... 0.10 1.08
Johannesburg
May 10, 2013
Sponsor:
Deutsche Securities (SA) (Proprietary) Limited
Date: 10/05/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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