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NET 1 UEPS TECHNOLOGIES INC - Net1 Reports First Quarter 2014 Results and Signs Letter of Intent for New BEE Transaction

Release Date: 08/11/2013 08:30
Code(s): NT1     PDF:  
Wrap Text
Net1 Reports First Quarter 2014 Results and Signs Letter of Intent for New BEE Transaction

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”)

Net1 Reports First Quarter 2014 Results and Signs Letter of Intent for New BEE Transaction
•    Revenue and Fundamental EPS of $123 million and $0.37, a constant currency increase of 34% and 77%, respectively;
•    On November 6, 2013, signed a letter of intent to issue 4.4 million shares at ZAR 88.50 as part of a BEE transaction.

JOHANNESBURG, November 8, 2013 – Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today released results
for the first quarter of fiscal 2014 and announced that it had signed a letter of intent related to a proposed BEE transaction.

Summary Financial Metrics

                                                            Three months ended September 30,
                                                                            % change % change
                                                         2013      2012      in USD      in ZAR
(All figures in USD ‘000s except per share data)
Revenue                                                 123,494      111,682           11%           34%
GAAP net income                                          11,596        6,744           72%          108%
Fundamental net income (1)                               16,823       11,498           46%           77%
GAAP earnings per share ($)                                0.25         0.15           72%          108%
Fundamental earnings per share ($) (1)                     0.37         0.25           46%           77%
Fully-diluted shares outstanding (‘000’s)                45,801       45,589            1%
Average period USD/ ZAR exchange rate                     10.00         8.26           21%

(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 Q1 2014 and Q1 2013 results

    •    Unfavorable impact from the strengthening of the US dollar against the ZAR: The US dollar appreciated by 21%
         against the ZAR during Q1 2014 which negatively impacted our reported results;
    •    SASSA implementation complete: Our SASSA contract implementation is complete and Q1 2014 was the first full
         quarter without any implementation-related expenditure since the tender was awarded to us in January 2012. We
         incurred implementation-related expenditure, including smart card costs, of approximately $15.8 million during Q1
         2013;
    •    Higher revenue resulting from an increase in low-margin prepaid airtime sales: Our revenue has increased as a
         result of the deployment of our Umoya Manje prepaid airtime offering during the quarter, which has lower margins
         compared with our other South African businesses;
    •    National rollout of our financial services offering: We commenced the national roll out of our financial services
         offering during Q1 2014, which resulted in higher revenue from UEPS-based loans. Profitability in the financial
         services segment however was lower due to rollout costs, including hiring and training of additional staff and
         infrastructure deployment;
    •    Ad hoc hardware sales in fiscal 2014: We sold more terminals and cards during Q1 2014 as a result of ad hoc
         orders received from our customers; and
    •    DOJ and SEC investigation-related expenses: We incurred DOJ and SEC investigation-related expenses of
         $2.1 million during Q1 2014.

Letter of Intent for New Broad-Based Black Economic Empowerment (“BEE”) Transaction

On November 6, 2013, we signed a letter of intent to issue 4,400,000 shares (“BVI Shares”), which will be contractually
restricted as to resale as described below, of our common stock at a price of ZAR 88.50 per share (calculated as 75% of the
closing price of our common stock on the JSE Limited on November 5, 2013) to Business Venture Investments 1567
(Proprietary) Limited (RF) (“BVI”), a special purpose entity owned by a BEE consortium, pursuant to a new BEE
transaction. Issuance of the BVI Shares is subject to the conclusion of a Relationship Agreement before December 1, 2013,
which will include certain conditions, including obtaining the relevant regulatory approvals. Under certain circumstances we
may call the BVI Shares then owned, in exchange for a minority interest in our wholly-owned subsidiary Cash Paymaster
Service Proprietary Limited.
Similar to our January 2012 proposed BEE transaction, the lead partner in the BEE consortium is Mosomo Investment
Holdings (Pty) Ltd, a well-known black empowerment investment company headed by former Net1 non-executive director
Brian Mosehla, with a proven track record in transformation, and with experience in mining, financial services and mass
banking concepts. Other partners in the BEE consortium will include community-focused organizations led by black women
and community development enterprises.

This BEE transaction is part of our efforts to strengthen the development of our business plan, and is in compliance with
South African regulation and business practice. Our actions in support of achieving a stronger BEE standing build on our
prior efforts, and the proposed structure is similar to transactions pursued by other leading South African companies across
multiple industries.

The letter of intent provides that BVI will pay the purchase price of ZAR 88.50 per share in ZAR. The BVI Shares will be
locked-up for a period of five years from date of issue, with the exception of periodic sales in order to fund the repayment of
the loan and related interest as described below.

Our wholly owned subsidiary, Net1 Applied Technologies South Africa Proprietary Limited, will lend BVI the funds to
effect the purchase of the BVI Shares and these shares will act as the collateral on the loan. The key terms of the loan are:

    •    The loan will bear interest at rate equal to Johannesburg Interbank rate (“JIBAR”) (currently 550 basis points) plus
         300 basis points;
    •    The loan principal is to be repaid as follows; 10% each after the first and second years, 15% each after the third and
         fourth years, and 50% after the fifth year. Interest payments on the loan are due semi-annually;
    •    After five years, Net1 will have the right, but not the obligation, to repurchase all or any portion of any remaining
         shares; and
    •    The loan will be repaid in full using the proceeds from the sale of a sufficient amount of BVI Shares if our share
         price is or exceeds ZAR 177.00 per share (200% of ZAR 88.50 per share) on the JSE at any time during term of the
         loan. As of November 5, 2013, our closing price on the JSE was ZAR 118.00 per share.

Comments and Outlook

“I am very pleased with our first quarter 2014 results and the tangible progress we are making on executing our business
strategy now that our SASSA implementation is complete," said Dr. Serge Belamant, Chairman and Chief Executive Officer
of Net1. “Net1 Mobile Solutions has demonstrated significant traction with the roll out of its mobile-based prepaid airtime
product, "Umoya Manje" and our financial services business unit has now commenced its UEPS-based lending activities
nationally. We are also reviewing some of our underperforming businesses and contracts, and have begun to take steps to
rationalize the same in order to focus on our key growth areas,” he concluded.

Regarding the new BEE transaction Dr. Belamant added, “We are delighted to have agreed new terms with our empowerment
partners following the expiration of the previous option transaction. As before, we remain convinced that it is imperative for
us to conclude a meaningful empowerment transaction to express our commitment to the principles and objectives of BEE
and compliance with the established codes of good practice and transformation charters, while balancing the interests of our
global shareholders in order to create a platform for a successful and sustainable South African business. We believe that we
will achieve this goal with the terms we have agreed for this new BEE transaction, including the provision of financial
assistance to our BEE partners to ensure the implementation of the transaction,” he concluded.

 “With our one-time implementation costs now behind us, we expect to continue demonstrating a marked improvement in
year-over-year profitability during fiscal 2014,” said Herman Kotzé, Chief Financial Officer of Net1. “Taking into account
our anticipated issuance of 4.4 million shares as part of our proposed BEE transaction, for fiscal 2014, we continue to expect
fundamental earnings per share of at least $1.50, assuming a constant currency base of ZAR 8.71/$1. The share count
assumption in our guidance represents our fiscal 2013 weighted-average share count of approximately 45.7 million shares
plus approximately 2.5 million weighted-average number of shares related to the proposed BEE transaction,” he concluded.

SASSA tender award litigation: Constitutional Court has not ruled yet

On September 10, 2013, the South African Constitutional Court heard oral arguments on the appeal by AllPay Consolidated
Investment Holdings (Pty) Ltd, or AllPay, against the ruling by the South African Supreme Court of Appeal upholding the
award of the SASSA tender to us. The Constitutional Court has reserved judgment. We cannot predict when or how it will
rule on the matter.
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 $63.0 million in Q1 2014, up 3% compared with Q1 2013 in USD and up 24% on a constant currency
basis. In ZAR, the increases in segment revenue were primarily due to more low-margin transaction fees generated from
beneficiaries using the South African National Payment System, incremental prepaid airtime sales driven by the rollout of our
Umoya Manje product. Segment operating income margin was 21% and 10%, respectively, and increased primarily due to
the elimination of SASSA implementation costs in Q1 2014. Excluding amortization of acquisition-related intangibles, Q1
2014 segment operating income margin was 22% compared with 13% in Q1 2013.

   International transaction-based activities

KSNET continues to contribute the majority of our revenues and operating income in this operating segment. Segment
revenue was $36.8 million in Q1 2014, up 16% compared with Q1 2013 in USD and 41% on a constant currency basis. The
increase in segment revenue was primarily due to KSNET’s revenue growth during Q1 2014 and was offset by the expiration
and non-renewal of NUETS’ contract with its Iraqi customer in Q3 2013. Operating income during Q1 2014 was negatively
impacted by the loss of this contract as well as ongoing losses related to our XeoHealth launch in the United States and at
Net1 Virtual Card as well as ongoing competition in the Korean marketplace, but was partially offset by increased revenue
contributions from KSNET. Excluding the amortization of intangibles, Q1 2014 operating income margin was 14% compared
to 9% during Q1 2013.

   Smart card accounts

Segment revenue was $11.3 million in Q1 2014, up 35% compared with Q1 2013 in USD and 64% on a constant currency
basis and increased as a result of the increase in the number of smart card accounts. Segment operating income margin from
providing smart card accounts for Q1 2014 and 2013 was 28% and 29%, respectively.

   Financial services

UEPS-based lending contributes the majority of the revenue and operating income in this segment. Segment revenue was
$2.4 million in Q1 2014, up 75% compared with Q1 2013 in USD and 112% higher on a constant currency basis, principally
due to the substantial increase in the number of loans granted as we rolled out our product nationally. Q1 2014 segment
operating income margin was 2% compared with 79% during Q1 2013 primarily due to start-up expenses incurred to roll the
product out nationally and the re-allocation of UEPS-based lending corporate and administration overhead expenses. Smart
Life did not contribute to operating income in the first quarter of fiscal 2014 as it is currently unable to issue new insurance
policies as a result of the suspension of its license by the Financial Services Board in fiscal 2013.

   Hardware, software and related technology sales

Segment revenue was $9.9 million in Q1 2014, up 11% compared with Q1 2013 in USD and 34% on a constant currency
basis. The increase in revenue and operating income resulted from more ad hoc terminal and smart card sales. Excluding
amortization of all intangibles, segment operating income margin was 31% compared to 23% during Q1 2013.

   Corporate/eliminations

The increase in our corporate expenses resulted primarily from legal fees we incurred in connection with the DOJ and SEC
investigations and other corporate head office-related expenses.

   Cash flow and liquidity

At September 30, 2013, we had cash and cash equivalents of $47.7 million, down from $53.7 million at June 30, 2013. The
decrease in our cash balances from June 30, 2013, was primarily due to the expansion of our UEPS-based lending business,
offset by cash generated from operations. For Q1 2014, net cash used in operating activities was $1.7 million compared with
net cash provided by operating activities of $25.7 million in Q1 2013.

Excluding the impact of interest received, interest paid under our Korean debt and taxes, the decrease in cash from operating
activities resulted from the expansion of our UEPS-based lending book and the timing of prefunding related to the October
2013 payment cycle, offset by improved cash generated from operating activities and the elimination of implementation costs
related to our SASSA contract in fiscal 2014. Capital expenditures for Q1 2014 and 2013 were $5.6 million and $6.5 million,
respectively, and have decreased primarily due to lower capital expenditures as our SASSA contract implementation is now
complete.
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, as well as (a) in fiscal 2014, DOJ and SEC
investigations-related expenses; and (b) in fiscal 2013, acquisition-related costs. Management believes that the fundamental
net income and earnings per share metric enhances its own evaluation, as well as an investor’s understanding, of our financial
performance. Attachment B presents the reconciliation between GAAP and fundamental net income and earnings per share.

   Headline earnings per share (“HEPS”)

The inclusion of HEPS in this press release is a requirement of our listing on the JSE. HEPS basic and diluted is calculated
using net income which has been determined based on GAAP. Accordingly, this may differ to the headline earnings per share
calculation of other companies listed on the JSE as these companies may report their financial results under a different
financial reporting framework, including but not limited to, International Financial Reporting Standards.

HEPS basic and diluted is calculated as GAAP net income adjusted for the profit on sale of property, plant and equipment,
net of related tax effects. 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 Q1 2014 results on November 8, 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 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, 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. In addition, statements relating to our proposed BEE transaction are forward-looking statements. The letter of
intent described in this announcement is non-binding and is subject to the completion of definitive documentation that will
provide for the satisfaction of conditions to be contained therein before any shares are issued. There can be no assurance that
we will enter into definitive agreements on the terms set forth herein, if at all. We undertake no obligation to revise any of
these statements to reflect future events.

Investor Relations Contact:
Dhruv Chopra
Managing Director
Phone: +1 917-767-6722
Email: dchopra@net1.com
                                     NET 1 UEPS TECHNOLOGIES, INC.
                           Unaudited Condensed Consolidated Statements of Operations
                                                                                       Three months ended
                                                                                           September 30,
                                                                                        2013           2012
                                                                              (In thousands, except per share data)

REVENUE                                                                        $       123,494    $      111,682

EXPENSE

    Cost of goods sold, IT processing, servicing and support                             56,559            45,101

    Selling, general and administration                                                  40,506            47,252

    Depreciation and amortization                                                        10,029            10,004

OPERATING INCOME                                                                         16,400             9,325

INTEREST INCOME                                                                           3,319             3,091

INTEREST EXPENSE                                                                          1,752             2,071

INCOME BEFORE INCOME TAX EXPENSE                                                         17,967            10,345

INCOME TAX EXPENSE                                                                        6,485             3,729

NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED
INVESTMENTS                                                                              11,482             6,616

EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS                                                 103                128

NET INCOME                                                                               11,585             6,744

(ADD) NET (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST                                  (11)                   -

NET INCOME ATTRIBUTABLE TO NET1                                                $         11,596   $         6,744

Net income per share, in United States dollars
     Basic earnings attributable to Net1 shareholders                                     $0.25             $0.15
     Diluted earnings attributable to Net1 shareholders                                   $0.25             $0.15
                                              NET 1 UEPS TECHNOLOGIES, INC.
                                         Unaudited Condensed Consolidated Balance Sheets
                                                                                         Unaudited               (A)
                                                                                       September 30,          June 30,
                                                                                            2013                2013
                                                                                        (In thousands, except share data)
                                                          ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                                           $      47,670      $       53,665
   Pre-funded social welfare grants receivable                                                 4,263               2,934
   Accounts receivable, net of allowances of – September: $935; June: $4,701                 118,025             102,614
   Finance loans receivable, net of allowances of – September: $701; June: $-                 17,338               8,350
   Inventory                                                                                  11,063              12,222
   Deferred income taxes                                                                       5,125               4,938
      Total current assets before settlement assets                                          203,484             184,723
          Settlement assets                                                                  685,305             752,476
             Total current assets                                                            888,789             937,199
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION OF – September: $92,099; June: $84,808                                           48,716              48,301
EQUITY-ACCOUNTED INVESTMENTS                                                                   1,270               1,183
GOODWILL                                                                                     180,950             175,806
INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF –
September: $145,909; June: $141,024                                                           76,915              77,257
OTHER LONG-TERM ASSETS, including reinsurance assets                                          36,150              36,576
   TOTAL ASSETS                                                                            1,232,790           1,276,322
                                                       LIABILITIES                            40,570
CURRENT LIABILITIES
   Accounts payable                                                                           14,036              26,567
   Other payables                                                                             38,802              33,808
   Current portion of long-term borrowings                                                    15,007              14,209
   Income taxes payable                                                                        9,261               2,275
      Total current liabilities before settlement obligations                                 77,106              76,859
          Settlement obligations                                                             685,305             752,476
             Total current liabilities                                                       762,411             829,335
DEFERRED INCOME TAXES                                                                         18,703              18,727
LONG-TERM BORROWINGS                                                                          70,374              66,632
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities                           21,499              21,659
   TOTAL LIABILITIES                                                                         872,987             936,353
COMMITMENTS AND CONTINGENCIES
                                                          EQUITY
   COMMON STOCK
        Authorized: 200,000,000 with $0.001 par value;
        Issued and outstanding shares, net of treasury - September: 45,780,513;
        June: 45,592,550                                                                          59                   59
   PREFERRED STOCK
        Authorized shares: 50,000,000 with $0.001 par value;
        Issued and outstanding shares, net of treasury: September: -; June: -                      -                    -
   ADDITIONAL PAID-IN-CAPITAL                                                                161,605             160,670
   TREASURY SHARES, AT COST: September: 13,455,090; June: 13,455,090                       (175,823)           (175,823)
   ACCUMULATED OTHER COMPREHENSIVE LOSS                                                     (93,544)           (100,858)
   RETAINED EARNINGS                                                                         464,214             452,618
      TOTAL NET1 EQUITY                                                                      356,511             336,666
      NON-CONTROLLING INTEREST                                                                 3,292               3,303
          TOTAL EQUITY                                                                       359,803             339,969
                 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                            $   1,232,790      $    1,276,322
(A) – Derived from audited financial statements
                                          NET 1 UEPS TECHNOLOGIES, INC.
                                Unaudited Condensed Consolidated Statements of Cash Flows
                                                                                              Three months ended
                                                                                                  September 30,
                                                                                               2013           2012
                                                                                                 (In thousands)
Cash flows from operating activities
Net income                                                                                $     11,585 $            6,744
Depreciation and amortization                                                                   10,029             10,004
Earnings from equity-accounted investments                                                       (103)              (128)
Fair value adjustments                                                                           (133)              (293)
Interest payable                                                                                   972              1,192
Profit on disposal of plant and equipment                                                           (1)                 -
Stock-based compensation charge                                                                    930              1,116
Facility fee amortized                                                                              69                 88
(Increase) Decrease in accounts receivable, pre-funded social welfare grants receivable
and finance loans receivable                                                                   (23,101)              5,892
Decrease (Increase) in inventory                                                                  1,011              (959)
Decrease in accounts payable and other payables                                                 (8,668)            (1,349)
Increase in taxes payable                                                                         6,921              5,438
Decrease in deferred taxes                                                                      (1,187)            (2,016)
   Net cash (used in) provided by operating activities                                          (1,676)            25,729
Cash flows from investing activities
Capital expenditures                                                                            (5,616)            (6,453)
Proceeds from disposal of property, plant and equipment                                              48                105
Acquisitions, net of cash acquired                                                                    -            (1,913)
Repayment of loan by equity-accounted investment                                                      -                  3
Other investing activities, net                                                                     (1)                  -
Proceeds from maturity of investments related to insurance business                                   -                545
Net change in settlement assets                                                                 51,773              60,779
  Net cash provided by investing activities                                                     46,204              53,066
Cash flows from financing activities
Proceeds from issue of common stock                                                                   -                240
Net change in settlement obligations                                                           (51,773)           (60,779)
  Net cash used in financing activities                                                        (51,773)           (60,539)
Effect of exchange rate changes on cash                                                          1,250                165
Net (decrease) increase in cash and cash equivalents                                            (5,995)            18,421
Cash and cash equivalents – beginning of period                                                 53,665             39,123
Cash and cash equivalents – end of period                                                 $     47,670    $        57,544
    See Notes to Unaudited Condensed Consolidated Financial Statements
Net 1 UEPS Technologies, Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended September 30, 2013 and 2012 and June 30, 2013

                                                                                                                    Change – constant
                                                                                                  Change - actual    exchange rate(1)
                                                                                                  Q1 ‘14   Q1 ‘14   Q1 ‘14     Q1 ‘14
                                                                                                   vs        vs       vs         vs
Key segmental data, in $ ’000,                                 Q1 ‘14      Q1 ‘13     Q4 ‘13      Q1‘13    Q4 ‘13    Q1‘13     Q4 ‘13
 Revenue:
   SA transaction-based activities ..........                   $63,032     $61,364    $59,268       3%       6%       24%       16%
   International transaction-based
   activities .............................................      36,817      31,649     35,600      16%        3%      41%       13%
   Smart card accounts ...........................               11,329       8,364     11,750      35%      (4%)      64%        5%
   Financial services ...............................             2,427       1,384      2,062      75%      18%      112%       28%
   Hardware, software and related
   technology sales .................................             9,889       8,921      9,202      11%       7%       34%       17%
      Total consolidated revenue ..........                    $123,494    $111,682   $117,882      11%       5%       34%       14%

   Consolidated operating income (loss):
    SA transaction-based activities ..........                  $13,282      $6,400     $9,060     108%      47%      151%       60%
       Operating income (loss) excluding
       amortization....................................          13,808       7,849      9,632       76%     43%      113%       56%
       Amortization of intangible assets ...                      (526)     (1,449)      (572)     (64%)     (8%)     (56%)       0%
    International transaction-based
    activities .............................................      2,051       (171)      1,365       nm      50%         nm      64%
       Operating income excluding
       amortization....................................           5,200       2,981      4,536       74%      15%      111%       25%
       Amortization of intangible assets ...                    (3,149)     (3,152)    (3,171)      (0%)     (1%)       21%        8%
    Smart card accounts ...........................               3,228       2,385      3,349       35%     (4%)       64%        5%
    Financial services ...............................               56       1,097        354     (95%)    (84%)     (94%)     (83%)
    Hardware, software and related
    technology sales .................................            2,948       1,984      2,216      49%      33%       80%       45%
       Operating income (loss) excluding
       amortization....................................            3,021      2,072       2,295      46%     32%       77%       43%
       Amortization of intangible assets ...                        (73)       (88)        (79)    (17%)     (8%)       0%        1%
     Corporate/ Eliminations ....................                (5,165)    (2,370)     (2,753)     118%     88%      164%      104%
      Total operating income (loss) .......                     $16,400     $9,325     $13,591       76%     21%      113%       31%

   Operating income margin (%)
    SA transaction-based activities ..........                     21%         10%        15%
    International transaction-based
    activities .............................................        6%        (1%)         4%
    International transaction-based
    activities excluding amortization ........                     14%          9%        13%
    Smart card accounts ...........................                28%         29%        29%
    Financial services ...............................              2%         79%        17%
    Hardware, software and related
    technology sales .................................             30%         22%        24%
    Overall operating margin....................                   13%          8%        12%

(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during
the first quarter of fiscal 2014 also prevailed during the first quarter of fiscal 2013 and the fourth quarter of fiscal 2013.
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 September 30, 2013 and 2012

                                                                                                    EPS,                                                       EPS,
                                                                 Net income                         basic                         Net income                   basic
                                                                 (USD’000)                         (USD)                          (ZAR’000)                   (ZAR)
                                                               2013      2012                   2013 2012                       2013       2012            2013    2012

GAAP................................................            11,596             6,744         0.25        0.15               115,959         55,709      2.54          1.22

     Intangible asset amortization, net.                          2,832            3,501                                          28,317        28,917
     Stock-based compensation charge                                930            1,116                                           9,300         9,219
     Facility fees for KSNET debt ......                             69               89                                             690           735
     DOJ and SEC investigations-
     related expenses ...........................                1,396                -                                          13,960              -
     Acquisition-related costs ..............                        -               48                                               -            397
           Fundamental ......................                   16,823           11,498          0.37        0.25               168,226         94,977      3.69          2.09


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 September 30, 2013 and 2012

                                                                                                                                              2013           2012
Net income (USD’000)..........................................................................................................                11,596          6,744
Adjustments: ..........................................................................................................................
   Profit on sale of property, plant and equipment ...............................................................                                   (1)              -
   Tax effects on above ........................................................................................................                       -              -
Net income used to calculate headline earnings (USD’000) .................................................                                    11,595          6,744
Weighted average number of shares used to calculate net income per share basic earnings
and headline earnings per share basic earnings (‘000) ..........................................................                              45,613         45,515
Weighted average number of shares used to calculate net income per share diluted
earnings and headline earnings per share diluted earnings (‘000) .........................................                                    45,801         45,589
Headline earnings per share:..................................................................................................
   Basic, in USD ..................................................................................................................             0.25               0.15
   Diluted, in USD ...............................................................................................................              0.25               0.15

Calculation of the denominator for headline diluted earnings per share

Three months ended September 30, 2013 and 2012

                                                                                                             Q1 ‘14                Q1 ‘13
     Basic weighted-average common shares outstanding and unvested
     restricted shares expected to vest under GAAP .............................                                45,613               45,515
         Effect of dilutive securities under GAAP .................................                                188                   74
           Denominator for headline diluted earnings per share ............                                     45,801               45,589

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.
Johannesburg
November 8, 2013

Sponsor:
Deutsche Securities (SA) Proprietary Limited

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