NET 1 UEPS TECHNOLOGIES INC - Net 1 UEPS Technologies, Inc. Reports Third Quarter 2018 Results

Release Date: 11/05/2018 07:05
Code(s): NT1
 
Wrap Text
Net 1 UEPS Technologies, Inc. Reports Third Quarter 2018 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 2018 Results

JOHANNESBURG, May 11, 2018 - Net1 (Nasdaq: UEPS; JSE: NT1) today released results for the third quarter fiscal 2018.
-  Q3 2018 revenue of $163 million, 10% higher in USD and Fundamental EPS of $0.95 (including $0.52 fair value
   adjustment related to Cell C investment);
-  Q3 2018 cash flow from operations of $85.2 million;
-  Reiterate FY 2018 constant currency FEPS guidance of at least $1.61 per share, excluding any fair value adjustments. 

Based on recent public statements by the Minister for Social Development, the South African Post Office and SASSA, we
look forward to being released from the social grants payment contract by the end of September 2018. This will allow us to
refocus our considerable skills and experience in delivering commercially compelling services to the unbanked population of
South Africa and in other emerging countries. Our organic growth developments, along with a number of new opportunities,
will enhance the group's future prospects as we close out on the social grants contract that has become a burden on the
management and financial resources of the group. We believe that we are already the market leaders in terms of cost, scale
and distribution in the provision of bank accounts, credit and insurance products in the market segments we serve, and we
intend to further improve our product offering and our unmatched ability as the "last mile" service provider. 

Summary Financial Metrics
              
                                                                      Three months ended March 31,   
                                                                                            % change   % change   
                                                                    2018          2017        in USD     in ZAR   
(All figures in USD '000s except per share data)                                                                  
Revenue                                                          162,721       147,944           10%       (1%)   
GAAP net income                                                    3,009        18,392         (84%)      (85%)   
Fundamental net income (1)                                        53,759        23,468          129%       109%   
GAAP earnings per share ($)                                         0.05          0.34         (84%)      (86%)   
Fundamental earnings per share ($) (1)                              0.95          0.43          121%       101%   
Fully-diluted shares outstanding ('000's)                         56,777        54,808            4%              
Average period USD/ ZAR exchange rate                              11.95         13.22         (10%)       
                     
                                                                     Nine months ended March 31,   
                                                                                            % change   % change   
                                                                    2018          2017        in USD     in ZAR   
(All figures in USD '000s except per share data)                                                                  
Revenue                                                          463,695       455,010            2%       (5%)   
GAAP net income                                                   32,114        61,665         (48%)      (51%)   
Fundamental net income (1)                                       100,656        71,859           40%        30%   
GAAP earnings per share ($)                                         0.57          1.15         (51%)      (55%)   
Fundamental earnings per share ($) (1)                              1.77          1.34           32%        23%   
Fully-diluted shares outstanding ('000's)                         56,842        53,088            7%              
Average period USD/ ZAR exchange rate                              12.89         13.77          (6%)              

(1) Fundamental net income and earnings per share are non-GAAP measures and are described below under "Use of Non-GAAP
Measures—Fundamental net income and fundamental earnings per share." See Attachment B for a reconciliation of GAAP 
net income to fundamental net income and earnings per share. 

Factors impacting comparability of our Q3 2018 and Q3 2017 results

 -  Growth in insurance and lending businesses: Volume growth and operating efficiencies in our insurance and
    lending businesses during Q3 2018 resulted in an improved contribution to our financial inclusion revenue. 
    However, operating income and operating margin during Q3 2018 was adversely impacted by investments to expand
    our financial services offering;
 -  Ongoing contributions from EasyPay Everywhere: EPE revenue and operating income growth was driven
    primarily by the further expansion of our customer base driven by our ATM infrastructure;
 -  Higher equity-accounted earnings related to DNI and Bank Frick: The acquisition of 49% of DNI and 35% of
    Bank Frick positively impacted our reported results by approximately $4.4 million, before amortization of intangible
    assets, net of deferred taxes;
 -  Favorable impact from the weakening of the U.S.  dollar against South African Rand: The U.S.  dollar depreciated
    by 10% against the ZAR and 8% against the KRW during Q3 2018, which positively impacted our reported results;
 -  Higher revenue from Masterpayment and severance payments: Masterpayment contributed higher revenues as a
    result of an increase in processing activities, particularly related to its crypto-currency processing launched in
    December 2017, which was offset by severance payments to two of its senior managers as a result of our mutual
    agreement to terminate their employment;
 -  Non-cash impairment loss related primarily to Masterpayment intangible assets: We recorded an impairment loss
    of $19.9 million related to Masterpayment and Masterpayment Financial Services goodwill;
 -  Indirect taxes refund in Korea: We received a refund of indirect taxes of approximately $2.5 million during Q3
    2018 which positively impacted our reported results;
 -  Regulatory changes in South Korea pertaining to fees on card transactions: The impact of changes to regulations
    governing the fees that may be charged on card transactions continues to adversely impact our revenues and
    operating income in South Korea as all parties in the payment process adapt to the new laws and renegotiate their
    respective positions in the marketplace;
 -  Lower net interest income resulting from strategic investments: Interest income was $1.8 million lower due to cash
    utilized for strategic investments. Interest expense increased due to the South African lending facility we obtained in
    August 2017 and March 2018 to partially fund our investments. 

"After years of uncertainty and litigation relating to the social services contract held by our subsidiary CPS, we now appear
to have more clarity and are likely to be relieved of our constitutional obligations by September 2018, allowing us to dedicate
all our energies, resources, products and distribution towards our strategy of providing financial inclusion services in South
Africa and internationally," said Herman Kotze, CEO of Net1. "We planned appropriately for this eventuality, and the strides
we have made and traction we have already gained, give us increased confidence that Net1 has never been better positioned
to return to being a sustainable and profitable growth company on an international scale," he concluded.

"For fiscal 2018, we anticipate our fundamental earnings per share to remain at least $1.61 per share excluding any fair value
adjustments and in excess of $2.00 per share including fair value adjustments," said Alex Smith, CFO of Net1. "Our guidance
assumes a constant currency base of ZAR 13.62/$1, a share count of 56.6 million shares, and a tax rate of between 34%-36% 
For clarity, our guidance as always is on a constant currency basis," he concluded.

Increase in Cell C carrying value

We have included the fair value adjustment in respect of our Cell C investment within fundamental earnings per share (under
the line item "net unrealized income on asset available for sale, net of tax" on Attachment B) as we believe that the return on
this significant investment made by the company needs to be factored into an assessment of our overall performance. The
uplift in the fair value reflected in the Q3 results reflects the improving operational performance of Cell C during the period
since our investment. On top of this investment return we are also starting to see the introduction of new product sets
developed through collaboration between Cell C and Net 1 which should contribute to our operational performance in future
periods. We will continue to provide guidance on fundamental earnings per share excluding the fair value adjustments. 

Supplemental Presentation for Q3 2018 Results

A supplemental presentation for Q3 2018 will be posted to the Investor Relations page of our website - ir.net1.com one hour
prior to our earnings call on Friday, May 11, 2018.

Results of Operations by Segment and Liquidity

Our operating metrics will be updated and posted on our website (www.net1.com) 

South African transaction processing

Segment revenue was $73.5 million in Q3 2018, up 15% compared with Q3 2017 in USD, and 4% higher on a constant
currency basis. The increase in segment revenue was primarily due to the continued growth in the number of EPE accounts as
well as higher transaction revenue as a result of increased usage of our ATMs. Operating income decreased however,
primarily due to an increase in inter-segment charges, the impact of annual salary increases granted to our South African
employees in October 2017, increases in goods and services purchased from third parties and declining profitability at CPS
given the fact that its monthly fee per grant recipient has been fixed for the last six years. Our operating income margin for
Q3 2018 and 2017 was 17% and 24%, respectively. 

International transaction processing

Segment revenue of $46.2 million grew modestly during Q3 2018 compared with Q3 2017, due to an increase in processing
activities, particularly related to Masterpayment's crypto-currency processing launched in December 2017. Operating income
during Q3 2018 was adversely impacted by the impairment loss, lower operating income generated in Korea as a result of the
impact on us of changes to regulations governing the fees that may be charged on card transactions and severance payments
to Masterpayment managers, partially offset by an ad hoc refund of indirect taxes of $2.5 million in Korea. Operating (loss)
income margin for Q3 2018 and 2017 was (32%) and 5%, respectively. Excluding the Masterpayment impairment and the
refund of indirect taxes, segment operating income and margin were $2 4 million and 5% respectively.

Financial inclusion and applied technologies

Segment revenue was $59.6 million in Q3 2018, up 5% compared with Q3 2017 in USD and down 5% on a constant currency
basis. Financial inclusion and applied technologies revenue decreased primarily due to fewer prepaid airtime and other value
added services sales, partially offset by increased volumes in our insurance and lending businesses, and an increase in inter-
segment revenues. Operating income was also impacted by these factors as well as an increase in the allowance for doubtful
finance loans receivable resulting from a commensurate increase in our lending book.

Operating income margin for the Financial inclusion and applied technologies segment was stable at 25% during each of Q3
2018 and 2017, respectively, and was impacted by fewer low margin prepaid product sales, improved revenues from our
insurance businesses and an increase in inter-segment revenues, offset by annual salary increases granted to our South
African employees.

Corporate/eliminations

Our corporate expenses have decreased primarily due to lower transaction-related expenditures and lower executive
compensation, which was partially offset by a modest increase in ZAR denominated goods and services purchased from third
parties and directors' fees. 

Cash flow and liquidity

At March 31, 2018, our cash and cash equivalents were $87.2 million and comprised mainly ZAR-denominated balances of
ZAR 528.3 million ($44.7 million), KRW-denominated balances of KRW 32.7 billion ($30.8 million), U.S. dollar-denominated 
balances of $4.7 million, and other currency deposits, primarily Botswana pula, of $7.0 million, all amounts
translated at exchange rates applicable as of March 31, 2018. The decrease in our cash balances from June 30, 2017, was
primarily due to our investments in DNI, Bank Frick, Cell C and a $9.0 million listed note, scheduled repayments of our
South African long-term debt, unscheduled repayment of Korean debt in full, growth in our South African lending book, and
capital expenditures, which were partially offset by cash generated by most of our core businesses. 

Excluding the impact of interest received, interest paid under our Korean and South Africa debt and taxes, the increase in
operating cash flow relates primarily to the receipt of certain working capital loans outstanding, offset partially by the
expansion of our South African lending book and weaker trading activity. Capital expenditures for Q3 2018 and 2017 were
$4.2 million and $1.9 million, respectively, and increased primarily due to the acquisition of data processing computer
equipment and payment processing terminals in Korea and ATMs in South Africa. We also paid approximately $11.1 million
for an additional 5% interest in Bank Frick, provided a $10.6 million (ZAR 126.0 million) loan to DNI and paid $7.5 million
(ZAR 89.3 million) for an additional 4% interest in DNI. Finally, we made a scheduled South African debt facility payment
of $17.7 million (ZAR 187.5 million) and also utilized this facility to fund our additional investment in DNI. We also utilized
$9.8 million of our overdraft facilities and repaid $42.6 million of our European facilities 

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 the amortization of
acquisition-related intangible assets (net of deferred taxes), the amortization of intangible assets (net of deferred taxes) related
to equity-accounted investments, stock-based compensation charges (reversals), the amortization of South African and
Korean debt facility fees and unusual non-recurring items, including costs related to acquisitions and transactions
consummated or ultimately not pursued. 

Fundamental net income and earnings per share for fiscal 2018 also includes the Cell C fair value adjustment (net unrealized
income on asset available for sale, net of tax), as well as adjustments for an impairment loss, an allowance for doubtful
working capital finance receivables, refund of indirect taxes in Korea, the impact of changes in tax laws in the U.S and a gain
realized on the sale of XeoHealth. Fundamental net income and earnings per share for fiscal 2017 also includes adjustments
for a refund (net of taxes) related to Korean industry-wide litigation and US government investigations-related expenses. 

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. 

We provide earnings guidance only on a non-GAAP basis and do not provide a reconciliation of forward-looking
fundamental earnings per share guidance to the most directly comparable GAAP financial measures because of the inherent
difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, the amounts of which,
based on past experience, could be material. 

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 impairment loss and (profit) loss on sale of
property, plant and equipment. Attachment C presents the reconciliation between our net income used to calculate earnings
per share basic and diluted and HEPS basic and diluted and the calculation of the denominator for headline diluted earnings
per share.

Conference Call

We will host a conference call to review these results on May 11, 2018, 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 June 2, 2018.

About Net1 (www.net1.com)

Net1 is a leading provider of alternative payment systems that leverage its Universal Electronic Payment System ("UEPS") or
utilize its proprietary mobile technologies. The Company operates market-leading payment processors in South Africa
and the Republic of Korea. Net1 offers debit, credit and prepaid processing and issuing services for Visa, MasterCard,
ChinaUnionPay, Alipay and WeChat across Asia-Pacific, including China, Europe, Africa, and the United States.

UEPS permits the Company to facilitate biometrically secure, real-time electronic transaction processing to unbanked and
under-banked populations of developing economies around the world in an online or offline environment. Net1's UEPS/EMV
solution is interoperable with global EMV standards that seamlessly enable access to all the UEPS functionality in a
traditional EMV environment. In addition to payments, UEPS can be used for banking, healthcare management, payroll,
remittances, voting and identification.

Net1's mobile technologies include its proprietary mobile payments solution - MVC, which offers secure mobile-based
payments, as well as mobile banking and prepaid value-added services in developed and emerging countries. 

Net1 has a primary listing on the NASDAQ and a secondary listing on the Johannesburg Stock Exchange.

Forward-Looking Statements

This announcement contains forward-looking statements that involve known and unknown risks and uncertainties. A discussion 
of various factors that cause our actual results, levels of activity, performance or achievements to differ materially
from those expressed in such forward-looking statements are included in our filings with the Securities and Exchange
Commission. We undertake no obligation to revise any of these statements to reflect future events.

Investor Relations Contact:

Dhruv Chopra
Head of Investor Relations
Phone: +1 917-767-6722
Email: dchopra@net1.com

Media Relations Contact:

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

                                                                                Three months ended                    Nine months ended   
                                                                                     March 31                              March 31,   
                                                                            2018                 2017                  2018             2017   
                                                                  (In thousands, except per share data) (In thousands, exceptper share data)  
                                                                   
REVENUE                                                              $   162,721           $  147,944            $  463,695       $  455,010   
EXPENSE
 Cost of goods sold, IT processing, servicing and                                                                                              
 support                                                                  77,860               70,912               226,506          219,210   
 Selling, general and administration                                      48,091               42,195               141,417          122,366   
 Depreciation and amortization                                             9,341               10,290                27,030           31,117   
 Impairment loss                                                          19,865                    -                19,865                -   
OPERATING INCOME                                                           7,564               24,547                48,877           82,317   
INTEREST INCOME                                                            5,154                5,124                14,903           14,489   
INTEREST EXPENSE                                                           2,426                  467                 6,872            1,773   
INCOME BEFORE INCOME TAX EXPENSE                                          10,292               29,204                56,908           95,033   
INCOME TAX EXPENSE                                                        10,941               10,233                31,280           32,320   
NET (LOSS) INCOME BEFORE EARNINGS FROM                                                                                                         
EQUITY-ACCOUNTED INVESTMENTS                                               (649)               18,971                25,628           62,713   
EARNINGS FROM EQUITY-ACCOUNTED                                                                                                                 
INVESTMENTS                                                                3,960                   45                 7,389              778   
NET INCOME                                                                 3,311               19,016                33,017           63,491   
LESS NET INCOME ATTRIBUTABLE TO NON-                                                                                                           
CONTROLLING INTEREST                                                         302                  624                   903            1,826   
NET INCOME ATTRIBUTABLE TO NET1                                        $   3,009           $   18,392            $   32,114        $  61,665   
Net income per share, in U.S. dollars                                                                                                          
 Basic earnings attributable to Net1 shareholders                          $0.05                $0.34                 $0.57            $1.16   
 Diluted earnings attributable to Net1 shareholders                        $0.05                $0.34                 $0.56            $1.16   


Unaudited Condensed Consolidated Balance Sheets                      
                                                                                                                Unaudited                (A)   
                                                                                                                March 31,           June 30,   
                                                                                                                     2018               2017   
                                                                                                           (In thousands, except share data)   
                       
ASSETS                                                                                                                                         
CURRENT ASSETS                                                                                                                                 
 Cash and cash equivalents                                                                                     $   87,172        $   258,457   
 Pre-funded social welfare grants receivable                                                                        4,643              2,322   
 Accounts receivable, net of allowances of - March: $966; June: $1,255                                            120,664            111,429   
 Finance loans receivable, net of allowances of - March: $17,622; June: $7,469                                     76,916             80,177   
 Inventory                                                                                                         11,808              8,020   
 Deferred income taxes                                                                                                  -              5,330   
  Total current assets before settlement assets                                                                   301,203            465,735   
   Settlement assets                                                                                              394,138            640,455   
    Total current assets                                                                                          695,341          1,106,190   
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of -                                                                            
March: $145,163; June: $120,212                                                                                    31,592             39,411   
EQUITY-ACCOUNTED INVESTMENTS                                                                                      185,023             27,862   
GOODWILL                                                                                                          182,534            188,833   
INTANGIBLE ASSETS, net of accumulated amortization of - March: $126,533;                                                                      
June: $108,907                                                                                                     31,428             38,764   
DEFERRED INCOME TAXES                                                                                               3,363                  -   
OTHER LONG-TERM ASSETS, including reinsurance assets                                                              271,185             49,696   
 TOTAL ASSETS                                                                                                   1,400,466          1,450,756   
                       
LIABILITIES                                                                                                                                    
CURRENT LIABILITIES                                                                                                                            
 Short-term credit facilities                                                                                       3,400             16,579   
 Accounts payable                                                                                                  16,995             15,136   
 Other payables                                                                                                    43,001             34,799   
 Current portion of long-term borrowings                                                                           56,446              8,738   
 Income taxes payable                                                                                              14,502              5,607   
  Total current liabilities before settlement obligations                                                         134,344             80,859   
   Settlement obligations                                                                                         394,138            640,455   
    Total current liabilities                                                                                     528,482            721,314   
DEFERRED INCOME TAXES                                                                                              17,789             11,139   
LONG-TERM BORROWINGS                                                                                               19,008              7,501   
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities                                                 2,901              2,795   
 TOTAL LIABILITIES                                                                                                568,180            742,749   
COMMITMENTS AND CONTINGENCIES                                                                                                                  
REDEEMABLE COMMON STOCK                                                                                           107,672            107,672
                          
EQUITY                                                                                                                                         
COMMON STOCK                                                                                                                                   
 Authorized: 200,000,000 with $0 001 par value;                                                                                                 
 Issued and outstanding shares, net of treasury - March: 56,855,187; June:                                                                      
 56,369,737                                                                                                            80                 80   
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                                                                                        275,536            273,733   
TREASURY SHARES, AT COST: March: 24,891,292; June: 24,891,292                                                   (286,951)          (286,951)   
ACCUMULATED OTHER COMPREHENSIVE LOSS                                                                             (73,481)          (162,569)   
RETAINED EARNINGS                                                                                                 805,390            773,276   
 TOTAL NET1 EQUITY                                                                                                720,574            597,569   
 NON-CONTROLLING INTEREST                                                                                           4,040              2,766   
  TOTAL EQUITY                                                                                                    724,614            600,335   
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                               $   1,400,466      $   1,450,756   


(A) - Derived from audited financial statements                                                      
During Q2, 2018, we reclassified redeemable common stock out of total equity because redeemable common stock is required to be presented outside 
of permanent equity. We have restated these amounts in our unaudited condensed consolidated balance sheet as at June 30, 2017. Total equity has
decreased by approximately $107.7 million and we have presented the approximately $107.7 million redeemable common stock outside of permanent
equity. This reclassification has no impact on the Company's previously reported consolidated income, comprehensive income or cash flows. 

Unaudited Condensed Consolidated Statements of Cash Flows                             
                                                                                               Three months ended          Nine months ended   
                                                                                                    March 31,                   March 31,   
                                                                                               2018           2017           2018       2017   
                                                                                                (In thousans)                (In thousands)  
                                                                                                 
Cash flows from operating activities                                                                                                           
Net income                                                                                $   3,311      $  19,016      $  33,017  $  63,491   
Depreciation and amortization                                                                 9,341         10,290         27,030     31,117   
Earnings from equity-accounted investments                                                  (3,960)           (45)        (7,389)      (778)   
Interest on Cedar Cellular note                                                               (587)              -          (769)          -   
Fair value adjustments                                                                        (110)           (50)          (209)       (61)   
Interest payable                                                                               (17)             75          (264)         84   
Facility fee amortized                                                                          120             27            467         94   
(Profit) Loss on disposal of property, plant and equipment                                     (50)           (98)             71      (571)   
Profit on disposal of business                                                                    -              -          (463)          -   
Stock-based compensation charge (reversal), net                                                 575            621          2,010       (68)   
Dividends received from equity-accounted investments                                          1,946              -          4,111        370   
Impairment loss                                                                              19,865              -         19,865          -   
Decrease (Increase) in accounts receivable, pre-funded social                                                                                  
welfare grants receivable and finance loans receivable                                       42,558       (16,612)          9,422    (2,261)   
Decrease (Increase) in inventory                                                              1,072          3,893        (2,776)        308   
Increase (Decrease) in accounts payable and other payables                                    2,827        (1,486)          5,775    (4,386)   
Decrease in taxes payable                                                                     9,007          6,678          8,091      5,819   
Decrease in deferred taxes                                                                    (653)          (506)          (225)    (1,752)   
 Net cash provided by operating activities                                                   85,245         21,803         97,764     91,406   
               
Cash flows from investing activities                                                                                                           
Capital expenditures                                                                        (4,225)        (1,949)        (7,801)    (8,498)   
Proceeds from disposal of property, plant and equipment                                         160            330            575      1,344   
Investment in Cell C                                                                              -              -      (151,003)          -   
Investment in equity of equity-accounted investments                                       (18,597)              -      (132,335)          -   
Loans to equity-accounted investments                                                      (10,635)        (2,000)       (10,635)   (12,044)   
Acquisition of held to maturity investment                                                        -              -        (9,000)          -   
Investment in MobiKwik                                                                            -              -              -   (15,347)   
Acquisitions, net of cash acquired                                                                -              -              -    (4,651)   
Other investing activities                                                                        -              -          (154)          -   
 Net change in settlement assets                                                             43,222      (165,945)        280,390     54,827                 
Net cash provided by (used in) investing activities                                           9,925      (169,564)       (29,963)     15,631   

Cash flows from financing activities                                                                                                           
Long-term borrowings utilized                                                                17,726            274        113,157        521   
Repayment of long-term borrowings                                                          (15,826)              -       (60,967)   (28,493)   
Repayment from bank overdraft                                                              (42,650)              -       (56,993)          -   
Proceeds of bank overdraft                                                                    9,802              -         42,372          -   
Guarantee fee paid                                                                            (202)              -          (754)    (1,145)   
Proceeds from issue of common stock                                                               -         45,629              -     45,629   
Acquisition of treasury stock                                                                     -              -              -   (32,081)   
Dividends paid to non-controlling interest                                                        -              -              -      (613)   
Net change in settlement obligations                                                       (43,222)        165,955      (280,390)   (54,817)   
 Net cash (used in) provided by financing activities                                       (74,372)        211,858      (243,575)   (70,999)   
               
Effect of exchange rate changes on cash                                                       1,478          4,719          4,489      8,025   
Net increase (decrease) in cash, cash equivalents and                                                                                          
restricted cash                                                                              22,276         68,816      (171,285)     44,063   
Cash, cash equivalents and restricted cash - beginning of                                                                                      
period                                                                                       64,896        198,891        258,457    223,644   
Cash, cash equivalents and restricted cash - end of period (1)                            $  87,172    $   267,707      $  87,172  $ 267,707   


(1) Cash, cash equivalents and restricted cash as of March 31, 2017, includes restricted cash of approximately $44.7 million related to the 
guarantee issued by FirstRand Bank Limited (acting through its Rand Merchant Bank division). This cash was placed into an escrow account and 
was considered restricted as to use and therefore was classified as restricted cash. The restriction lapsed upon expiry of the guarantee. 

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended March 31, 2018 and 2017 and December 31, 2017
 
                                                                                                                               Change -
                                                                                                                               constant
                                                                                                          Change - actual  exchange rate(1)
                                                                                                            Q3'18   Q3'18     Q3'18   Q3'18
Key segmental data, in '000, except                                                                           vs     vs        vs      vs
margins                                                                      Q3'18      Q3'17      Q2'18    Q3'17   Q2'18     Q3'17   Q2'18
                     
Revenue:                                                                                                                                      
South African transaction processing                                       $73,508    $63,967    $64,148      15%     15%        4%      0%   
International transaction processing                                        46,240     41,514     44,185      11%      5%        1%    (9%)   
Financial inclusion and applied                                                                                                               
technologies                                                                59,574     56,881     54,131       5%     10%      (5%)    (4%)   
 Subtotal: Operating segments                                              179,322    162,362    162,464      10%     10%      (0%)    (4%)   
 Intersegment eliminations                                                (16,601)   (14,418)   (14,048)      15%     18%        4%      3%   
 Consolidated revenue                                                     $162,721   $147,944   $148,416      10%     10%      (1%)    (4%)  
                      
Operating income (loss):                                                                                                                      
South African transaction processing                                       $12,719    $15,531    $13,470    (18%)    (6%)     (26%)   (17%)   
International transaction processing                                      (14,892)      1,968    (4,991)   (857%)    198%    (784%)    161%   
Financial inclusion and applied                                                                                                               
technologies                                                                14,968     14,064     12,737       6%     18%      (4%)      3%   
 Subtotal: Operating segments                                               12,795     31,563     21,216    (59%)   (40%)     (63%)   (47%)   
 Corporate/Eliminations                                                    (5,231)    (7,016)    (4,909)    (25%)      7%     (33%)    (7%)   
  Consolidated operating                                                                                                                        
  income                                                                    $7,564    $24,547    $16,307    (69%)   (54%)     (72%)   (59%)   
                    
Operating income margin (%)                                                                                                                   
South African transaction processing                                           17%        24%        21%                                      
International transaction processing                                         (32%)         5%      (11%)                                      
Financial inclusion and applied                                                                                                               
technologies                                                                   25%        25%        24%                                      
 Consolidated operating margin                                                  5%        17%        11%                                      
                    

(1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed
during the Q3 2018 also prevailed during Q3 2017 and Q2 2018.

Nine months ended March 31, 2018 and 2017

                                                                                                                                 Change -
                                                                                                                                 constant
                                                                                                                      Change -   exchange
                                                                                                                        actual    rate(1)
                                                                                                                         F2018      F2018
                                                                                                                          vs          vs
Key segmental data, in '000, except margins                                                        F2018       F2017     F2017      F2017
                   
Revenue:                   
South African transaction processing                                                            $204,093    $181,397       13%         5%
International transaction processing                                                             136,447     131,704        4%       (3%)
Financial inclusion and applied technologies                                                     168,018     179,681      (6%)      (12%)
      Subtotal: Operating segments                                                               508,558     492,782        3%       (3%)
      Intersegment eliminations                                                                 (44,863)    (37,772)       19%        11%
          Consolidated revenue                                                                  $463,695    $455,010        2%       (5%)
                    
Operating income:                    
South African transaction processing                                                             $38,521     $44,451     (13%)      (19%)
International transaction processing                                                            (14,567)      11,689    (225%)     (217%)
Financial inclusion and applied technologies                                                      41,625      43,354      (4%)      (10%)
      Subtotal: Operating segments                                                                65,579      99,494     (34%)      (38%)
      Corporate/Eliminations                                                                    (16,702)    (17,177)      (3%)       (9%)
         Consolidated operating income                                                           $48,877     $82,317     (41%)      (44%)
                    
Operating income margin (%)                   
South African transaction processing                                                                 19%         25%
International transaction processing                                                               (11%)          9%
Financial inclusion and applied technologies                                                         25%         24%
      Overall operating margin                                                                       11%         18%
                   
(1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that
prevailed during the year to date of fiscal 2018 also prevailed during the year to date of fiscal 2017.

Earnings from equity-accounted investments:

The table below presents the relative earnings (loss) from our equity-accounted investments:

                                                                                                             %                          %   
                                                                                    Q3 2018   Q3 2017   change     F2018   F2017   change   
DNI                                                                                  $3,291        $-       nm    $5,202      $-       nm   
Share of net income                                                                   3,628         -       nm     6,868       -       nm   
Amortization of intangible assets, net                                                                                                      
of deferred tax                                                                       (337)         -       nm   (1,666)       -       nm   
Bank Frick                                                                              653         -       nm       975       -       nm   
Share of net income                                                                     747         -       nm     1,234       -       nm   
Amortization of intangible assets, net                                                                                                      
of deferred tax                                                                        (94)         -       nm     (259)       -       nm   
Finbond                                                                                   -         -       nm     1,101     930      18%   
Other                                                                                    16        45    (64%)       111   (152)   (173%)   
Earnings from equity-accounted                                                                                                              
investments                                                                          $3,960       $45       nm    $7,389    $778     850%   
                   

Attachment B

Reconciliation of GAAP net income and earnings per share, basic, to fundamental net income and earnings per share,
basic:

Three months ended March 31, 2018 and 2017

                                                                                            EPS,                                EPS,
                                                                        Net income         basic        Net income             basic
                                                                        (USD'000)          (USD)         (ZAR'000)             (ZAR)
                                                                      2018      2017     2018 2017      2018       2017     2018   2017
             
GAAP                                                                 3,009    18,392   0.05   0.34    35,951    243,190     0.63   4.45
             
    Net unrealized income on asset             
    available for sale, net of tax                                  29,366         -                 350,863          -
    Impairment loss                                                 19,865         -                 237,345          -
    Intangible asset amortization, net                               2,268     2,772                  27,096     36,653
    Refund related to litigation             
    finalized in Korea, net                                        (1,985)         -                (23,717)          -
    Stock-based compensation charge                                    575       621                   6,870      8,211
    Intangible asset amortization, net             
    related to equity-accounted             
    investments                                                        431         -                  10,701          -
    Facility fees for debt                                             120        27                   1,434        357
    Transaction costs                                                  110     1,439                   1,314     19,027
    US government investigations-             
    related and US lawsuit expenses                                      -       217                       -      2,869
          Fundamental                                               53,759    23,468   0.95   0.43   647,857    310,307    11.40   5.68

Nine months ended March 31, 2018 and 2017
    
                                                                                         EPS,                                 EPS,
                                                                       Net income        basic            Net income          basic
                                                                       (USD'000)        (USD)             (ZAR'000)          (ZAR)
                                                                     2018      2017   2018   2017        2018      2017    2018    2017
           
GAAP                                                               32,114    61,665   0.57   1.15     414,058   849,009    7.29   15.82   
Net unrealized income on asset                                                                                                            
available for sale, net of tax                                     29,366         -                   378,628         -                   
Impairment loss                                                    19,865         -                   256,128         -                   
Non-recurring Mastertrading                                                                                                               
allowance for doubtful accounts                                     7,803         -                   100,607         -                   
Intangible asset amortization, net                                  6,644     7,637                    85,666   105,124                   
Transaction costs                                                   2,050     2,928                    26,432    40,313                   
Stock-based compensation charge                                     2,010      (68)                    25,916     (936)                   
Refund of Korean indirect taxes                                   (1,985)         -                  (25,593)         -                   
Intangible asset amortization, net                                                                                                        
related to equity-accounted                                                                                                               
investments                                                         1,925         -                    17,835         -                   
Change in US tax rate                                                 860         -                    11,088         -                   
Profit on sale of Xeo                                               (463)         -                   (5,970)         -                   
Facility fees for debt                                                467        94                     6,021     1,294                   
Refund related to litigation                                                                                                              
finalized in Korea, net                                                 -     (643)                         -   (8,853)                   
US government investigations-                                                                                                             
related and US lawsuit expenses                                         -       246                         -     3,387                   
 Fundamental                                                      100,656    71,859   1.77   1.34   1,290,816   989,338   22.73   18.44   


Attachment C

Reconciliation of net income used to calculate earnings per share basic and diluted and headline earnings per share
basic and diluted:

Three months ended March 31, 2018 and 2017

                                                                                                                          2018     2017   
Net income (USD'000)                                                                                                     3,009   18,392   
Adjustments:                                                                                                                                                
Impairment loss                                                                                                         19,865        -   
Profit on sale of property, plant and equipment                                                                           (50)     (98)   
Tax effects on above                                                                                                        14       27   
Net income used to calculate headline earnings (USD'000)                                                                22,838   18,321   
Weighted average number of shares used to calculate net income per share basic earnings                                                   
and headline earnings per share basic earnings ('000)                                                                   56,716   54,639   
Weighted average number of shares used to calculate net income per share diluted                                                          
earnings and headline earnings per share diluted earnings ('000)                                                        56,777   54,808   
Headline earnings per share:                                                                                                              
Basic, in USD                                                                                                             0.40     0.34   
Diluted, in USD                                                                                                           0.40     0.33   
Nine months ended March 31, 2018 and 2017                                                                                                                   
                                                                                                                          2018     2017   
Net income (USD'000)                                                                                                    32,114   61,665   
Adjustments:                                                                                                                                                
Impairment loss                                                                                                         19,865        -   
Profit on sale of business                                                                                               (463)        -   
Profit on sale of property, plant and equipment                                                                           (50)    (571)   
Tax effects on above                                                                                                        14      160   
Net income used to calculate headline earnings (USD'000)                                                                51,480   61,254   
Weighted average number of shares used to calculate net income per share basic earnings                                                   
and headline earnings per share basic earnings ('000)                                                                   56,788   52,961   
Weighted average number of shares used to calculate net income per share diluted                                                          
earnings and headline earnings per share diluted earnings ('000)                                                        56,842   53,088   
Headline earnings per share:                                                                                                              
Basic, in USD                                                                                                             0.91     1.16   
Diluted, in USD                                                                                                           0.91     1.15   


Calculation of the denominator for headline diluted earnings per share

                                                                                                       Q3'18    Q3'17     2018     2017   
Basic weighted-average common shares outstanding and unvested                                                                             
restricted shares expected to vest under GAAP                                                         56,716   54,639   56,788   52,961   
Effect of dilutive securities under GAAP                                                                  61      169       54      127   
Denominator for headline diluted earnings per share                                                   56,777   54,808   56,842   53,088   


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
May 11, 2018

Sponsor:
Rand Merchant Bank, a division of FirstRand Bank Limited



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