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Net 1 UEPS Technologies, Inc. Reports Preliminary Fourth Quarter and Full Year 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 Preliminary Fourth Quarter and Full Year 2018 Results
JOHANNESBURG, August 30, 2018 – Net1 (Nasdaq: UEPS; JSE: NT1) today released preliminary unaudited results for the
fourth quarter and full-year fiscal 2018.
We are pleased to report another successful quarter and fiscal year as we embark upon our transition to a stable and growing
business, no longer dependent on our SASSA contract in South Africa. Fiscal 2018 was a turbulent year, and one where we have
positioned our company for future growth through our strategic investments and the realignment of our vast payment
infrastructure servicing the rural communities in South Africa. We achieved this result despite the deferral of significant revenue
related to Q4 activities under our SASSA contract, until we receive pricing confirmation from the Constitutional Court.
Fiscal 2018 highlights include:
- Revenue of $612.9 million, and Fundamental EPS of $2.00 ($1.56 excluding fair value adjustments);
- Adjusted EBITDA of $127.2 million;
- Added 0.9 million new EPE accounts. Total accounts as of June 30 were 2.9 million; and
- Spent $291.5 million on strategic investments and acquisitions, including Cell C, DNI and Bank Frick.
Q4 2018 highlights include:
- Revenue of $149.2 million and Fundamental EPS of $0.22 ($0.29 excluding fair value adjustments);
- Adjusted EBITDA of $24.3 million;
- EPE account growth in the quarter of 0.4 million, to a total of 2.9 million at June 30; and
- Stabilization in South Korea and repositioning of the International Payments Group.
Investment portfolio performance:
- Our preliminary results include our share of DNI's net income for 11 months of ZAR 258.4 million, which was well
ahead of its budget and our previously reported guidance for DNI;
- Cell C reported double-digit service revenue and EBITDA growth in the six months ended June 30, 2018;
- Bank Frick continues to rapidly expand its operations, carrying forward the momentum from last year; and
- Finbond generated revenue and net income of $161.9 million (66% increase) and $19.2 million (98% increase) for its
fiscal year ended February 28, 2018.
We achieved the aforementioned results despite CPS revenue declining 81% year-over-year in the fourth quarter, as a result of the
declining number of grant recipients we paid during the phase-out period of our SASSA contract, which is scheduled to terminate
on September 30, 2018.
Looking ahead, and as we have said previously, we expect FY2019 to be both a transitional and a transformational year. While
there is still considerable near-term uncertainty in our South African consumer related businesses, which includes EPE and other
commercial banking accounts, as well as financial inclusion and lifestyle products, we are confident the strategy that we have
implemented over the last few years will yield returns for our shareholders.
"It is with great excitement that we are counting down the days to the end of our SASSA contract on September 30, 2018," said
Herman Kotzé, CEO of Net1. "While many investors have been concerned that the end of this relationship would severely impact
our other South African businesses, I can happily point to our solid Q4 we achieved despite a nearly 80% decline at CPS, as well
as our guidance for fiscal 2019. Furthermore, the elimination of the negative impact that this contract has had on our business,
management's time and shareholder value, should provide a meaningful lift to product refinement and R&D going forward. We
see many opportunities as we look ahead to the next several years. We expect to demonstrate our capabilities as a strong financial
technology and services business with the proven ability to be the last mile provider of transacting, value added and financial
services to the under-serviced individuals and businesses in our markets, regardless of their location. I am confident that our deep
understanding and expertise in the areas of off-line payment systems, biometrics and blockchain applications will be leveraged to
affirm our status as an innovative global fintech business," he concluded.
Preliminary Summary Financial Metrics
Fiscal year ended June 30,
% change % change
2018 2017 in USD in ZAR
(All figures in USD '000s except per share data)
Revenue 612,889 610,066 0% (6%)
GAAP operating income 58,949 97,043 (39%) (43%)
Adjusted EBITDA (1) 127,155 150,018 (15%) (21%)
GAAP net income 39,150 72,954 (46%) (50%)
Fundamental net income (1) 113,823 94,721 20% 12%
GAAP earnings per share ($) 0.69 1.34 (48%) (52%)
Fundamental earnings per share ($) (1) 2.00 1.74 15% 8%
Fully-diluted shares outstanding ('000's) 56,858 54,648 4%
Average period USD/ ZAR exchange rate 12.70 13.62 (7%)
Three months ended June 30,
% change % change
2018 2017 in USD in ZAR
(All figures in USD '000s except per share data)
Revenue 149,194 155,056 (4%) (16%)
GAAP operating income 10,072 14,726 (32%) (41%)
Adjusted EBITDA (1) 24,301 35,143 (31%) (40%)
GAAP net income 7,036 11,289 (38%) (46%)
Fundamental net income (1) 12,687 23,185 (45%) (48%)
GAAP earnings per share ($) 0.12 0.20 (37%) (46%)
Fundamental earnings per share ($) (1) 0.22 0.41 (46%) (48%)
Fully-diluted shares outstanding ('000's) 56,816 57,249 (1%)
Average period USD/ ZAR exchange rate 11.45 13.19 (13%)
(1) Adjusted EBITDA, fundamental net income and earnings per share are non-GAAP measures and are described below under "Use of Non-
GAAP Measures—EBITDA and Adjusted EBITDA, and —Fundamental net income and fundamental earnings per share." See Attachment B for
a reconciliation of GAAP operating income to EBITDA and Adjusted EBITDA, and GAAP net income to fundamental net income and earnings
per share.
Fiscal 2019 guidance
For fiscal year 2019, we are establishing an initial guidance for FEPS of at least $1.05. This guidance is based on the following
expectations:
- EPE accounts remain stable at 2.5 million and at current Average Revenue Per User ("ARPU");
- DNI revenue and earnings growth of 10%;
- South Korea full year results consistent with 2018;
- No contribution for CPS for the full year; and
- A constant currency base of ZAR 12.70/$1, 56.8 million shares and a tax rate of 35%.
Factors impacting comparability of our Q4 2018 and Q4 2017 results
- Growth in non-CPS South African transaction processing businesses: Higher volumes, transaction and fee income due
to the increased utilization by our customers of both the National Payment System and our own distribution networks
(including ATMs) during Q4 2018, resulted in improved contribution to our processing revenue;
- Ongoing contributions from EasyPay Everywhere: EPE revenue and operating income growth was driven primarily by
the expansion of our customer base over the last year and increased utilization of our ATM infrastructure;
- Higher equity-accounted earnings and re-measurement loss: Finbond and our investment in DNI positively impacted
our reported results by approximately $6.9 million, before amortization of intangible assets, net of deferred taxes. The
acquisition of DNI also resulted in a non-cash $4.6 million loss on re-measurement of the previously held equity interest
following the consolidation of its business into our financial statements on June 30, 2018;
- Decline of CPS revenue and operating income due to the expiration of our SASSA contract: CPS revenue and
operating income declined significantly due to 82% fewer grant recipients paid by CPS, being only those recipients paid
at cash pay points as per the Constitutional Court order of March 23, 2018. We have not recognized the additional
revenue per recipient recommended by South Africa's National Treasury as the amounts have not yet been confirmed by
the Constitutional Court. As a result, CPS incurred a significant operating loss during Q4 2018;
- Favorable impact from the weakening of the U.S. dollar against the South African Rand: The U.S. dollar depreciated
13% against the ZAR and 5% against the KRW during Q4 2018 compared with Q4 2017, which positively impacted our
reported results;
- Regulatory changes in South Korea pertaining to fees on card transactions: The regulatory reduction in fees that may
be charged on card transactions that came into effect in October 2017 continued 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; and
- Lower net interest income resulting from strategic investments: Net interest income was $3.8 million lower due to cash
utilized for strategic investments. Interest expense increased due to the South African lending facilities we obtained in
August 2017 and March 2018 to partially fund our investments.
Preliminary results of Operations by Segment and Liquidity
Our operating metrics will be updated and posted on our website at http://ir.net1.com/phoenix.zhtml?c=73876&p=irol-IRHome.
South African transaction processing
Segment revenue was $64.0 million in Q4 2018, down 6% compared with Q4 2017 in USD, and 18% lower on a constant
currency basis. The decrease in segment revenue was primarily due to a significant decline in the number of social welfare grants
billed at the old contract rate as the Constitutional Court has not yet issued an order on National Treasury's price recommendation.
The resulting segment revenue decline was partially offset by higher EPE related transaction revenue and increased inter-segment
transaction processing activities. Operating income decreased, primarily as result of the fees earned from SASSA for paying grant
recipients remaining on the current pricing terms, which is not sufficient to cover CPS' fixed costs and resulted in an operating
loss in CPS for Q4 2018. Our operating income margin for Q4 2018 and 2017 was 6.7% and 21.9%, respectively.
International transaction processing
Segment revenue of $43.6 million in Q4 2018 was down 3% compared with Q4 2017 due to a lower contribution from KSNET.
Operating income during Q4 2018 was higher than Q4 2017 because last year's results include a $3.8 million allowance for
doubtful finance loans receivable. Excluding this allowance, Q4 2018 is lower than the comparative period and was adversely
impacted by lower operating income generated in South Korea as a result of the regulations governing the fees that may be
charged on card transactions and lower contributions from the other international businesses as we restructured various units to
consolidate them under the International Payments Group. Operating income margin for Q4 2018 and 2017 was 4.8% and 4.5%,
respectively.
Financial inclusion and applied technologies
Segment revenue was $53.9 million in Q4 2018, down 4% compared with Q4 2017 in USD and down 17% on a constant currency
basis. Financial inclusion and applied technologies revenue and operating income decreased primarily due to fewer prepaid
airtime and other value added services sales, lower volumes in our lending business as we tightened lending criteria and fewer
inter-segment revenues, partially offset by growth in insurance products and monthly account fees charged to our customers.
Operating income margin for the Financial inclusion and applied technologies segment was 25.5% in Q4 2018 compared with
25.7% in Q4 2017, respectively, and has reduced primarily due to a decrease in inter-segment revenues and inflationary cost
pressures, and partially offset by fewer low-margin prepaid product sales and higher monthly account fee income.
Corporate/eliminations
Our corporate expenses have decreased primarily due to fewer transaction costs and lower intangible asset amortization during Q4
2018. In addition, Q4 2018 included a $4.6 million non-cash loss on re-measurement of DNI as a result of its consolidation into
our financial statements and Q4 2017 included the costs associated with the separation of our former chief executive officer from
us, comprised of an $8.0 million separation payment and a $1.6 million stock-based compensation charge.
Cash flow and liquidity
At June 30, 2018, our cash and cash equivalents were $90.1 million and comprised mainly ZAR-denominated balances of ZAR
648.8 million ($47.3 million), KRW-denominated balances of KRW 32.8 billion ($29.5 million), U.S. dollar-denominated
balances of $6.3 million, and other currency deposits, primarily Botswana pula, of $7.0 million, all amounts translated at exchange
rates applicable as of June 30, 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 million listed note totaling $291.5 million, scheduled repayments of our South African long-
term debt, unscheduled repayment of our South Korean debt in full, repayment of our short-term facilities, growth in our South
African lending book, and capital expenditures, which was partially offset by cash generated by our core businesses and new
South African long-term facilities.
Excluding the impact of interest received, interest paid under our South Korean and South African 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 Q4 2018 and 2017 were $1.9 million and
$2.7 million, respectively, and decreased primarily due to the acquisition of fewer payment processing terminals in South Korea,
partially offset by an increase in ATM and vehicle acquisitions in South Africa. We also paid approximately $9.2 million for an
additional 6% interest in DNI and received $9.2 million related to the loan repayment from DNI. Finally, we made a scheduled
South African debt facility payment of $16.1 million (ZAR 213.8 million) and repaid $3.4 million of our United States overdraft
facilities.
Supplemental Presentation for Q4 2018 Results
A supplemental presentation for preliminary Q4 2018 will be posted to the Investor Relations page of our website at –
http://ir.net1.com/phoenix.zhtml?c=73876&p=irol-presentations - one hour prior to our earnings call on Thursday, August 30, 2018.
Use of Non-GAAP Measures
US securities laws require that when we publish any non-GAAP measures, we disclose the reason for using these non-GAAP
measures and provide reconciliations to the directly comparable GAAP measures. The presentation of EBITDA, adjusted
EBITDA, fundamental net income and fundamental earnings per share and headline earnings per share are non-GAAP measures.
EBITDA and Adjusted EBITDA
Earnings before interest, tax, depreciation and amortization ("EBITDA") is GAAP operating income adjusted for depreciation and
amortization and impairment losses. Adjusted EBITDA is EBITDA adjusted for costs related to acquisitions and transactions
consummated or ultimately not pursued. Fiscal 2018 also includes adjustments for an allowance for doubtful working capital
finance receivables, the non-cash re-measurement loss related to the acquisition of DNI, a refund of indirect taxes in South Korea
and a gain realized on the sale of XeoHealth. Fiscal 2017 also includes adjustments for costs paid and stock-based compensation
charges incurred related to the separation of our former chief executive officer from our company, and stock-based compensation
reversals.
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 and reversals, the amortization of South African and South
Korean debt facility fees, an impairment loss 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 includes the Cell C fair value adjustment (net unrealized income
on asset available for sale, net of tax), as well as adjustments for the non-cash re-measurement loss related to the acquisition of
DNI, an impairment loss, an allowance for doubtful working capital finance receivables, a refund of indirect taxes in South 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 separation costs (net of taxes) paid to our former chief executive officer, adjustments for a
refund (net of taxes) related to South Korean industry-wide litigation and US government investigations-related expenses.
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.
Management believes that the EBITDA, adjusted EBITDA, 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 operating income and EBITDA and adjusted EBITDA; and 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 impairment loss, loss on the acquisition of DNI 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 August 30, 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 September 22, 2018.
About Net1
Net1 is a leading provider of transaction processing services, financial inclusion products and services and secure payment
technology. Net1 operates market-leading payment processors in South Africa and the Republic of Korea. Net1 offers debit, credit
and prepaid processing and issuing services for all major payment networks. In South Africa, Net1 provides innovative low-cost
financial inclusion products, including banking, lending and insurance, and is a leading distributor of mobile subscriber starter
packs for Cell C, a South African mobile network operator. Net1 leverages its strategic equity investments in Finbond and Bank
Frick (both regulated banks), and Cell C to introduce products to new customers and geographies. Net1 has a primary listing on
NASDAQ (NasdaqGS: UEPS) and a secondary listing on the Johannesburg Stock Exchange (JSE: NT1). Visit www.net1.com for
additional information about Net1.
Forward-Looking Statements
This announcement contains forward-looking statements that involve known and unknown risks and uncertainties, including
statements concerning our preliminary financial results for our fourth quarter and full year ended June 30, 2018. The preliminary
financial results for our fourth quarter and full year 2018 included in this press release represent the most current information
available to management. Our actual results, when disclosed in our Form 10-K, may differ from these preliminary results as a
result of the completion of our financial closing procedures, final adjustments, completion of the review by our independent
registered public accounting firm and other developments that may arise between now and the disclosure of the final results. A
discussion of various factors that may cause our preliminary 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
Preliminary Unaudited Consolidated Statements of Operations
Unaudited
Three months ended Year ended
June 30, June 30,
2018 2017 2018 (A) 2017 (B)
(In thousands, except per share data) (In thousands, except per share data)
REVENUE $ 149,194 $ 155,056 $ 612,889 $ 610,066
EXPENSE
Cost of goods sold, IT processing, servicing and support 78,030 73,173 304,536 292,383
Selling, general and administration 51,586 56,896 193,003 179,262
Depreciation and amortization 8,454 10,261 35,484 41,378
Impairment loss 1,052 - 20,917 -
OPERATING INCOME 10,072 14,726 58,949 97,043
INTEREST INCOME 2,982 6,408 17,885 20,897
INTEREST EXPENSE 2,069 1,711 8,941 3,484
INCOME BEFORE INCOME TAX EXPENSE 10,985 19,423 67,893 114,456
INCOME TAX EXPENSE 10,073 10,152 41,353 42,472
NET INCOME BEFORE EARNINGS FROM EQUITY-
ACCOUNTED INVESTMENTS 912 9,271 26,540 71,984
EARNINGS FROM EQUITY-ACCOUNTED
INVESTMENTS 4,341 1,886 11,730 2,664
NET INCOME 5,253 11,157 38,270 74,648
LESS NET INCOME ATTRIBUTABLE TO NON-
CONTROLLING INTEREST (1,783) (132) (880) 1,694
NET INCOME ATTRIBUTABLE TO NET1 $ 7,036 $ 11,289 $ 39,150 $ 72,954
Net income per share, in U.S. dollars
Basic earnings attributable to Net1 shareholders $0.12 $0.20 $0.69 $1.34
Diluted earnings attributable to Net1 shareholders $0.12 $0.20 $0.69 $1.33
(A) – Unaudited
(B) – Derived from audited financial statements
Preliminary Unaudited Consolidated Balance Sheets
Unaudited (A) (R)
June 30, June 30,
2018 2017
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 90,054 $ 258,457
Pre-funded social welfare grants receivable 2,965 2,322
Accounts receivable, net of allowances of – June: $1,101; June: $1,255 109,683 111,429
Finance loans receivable, net of allowances of – June: $16,403; June: $7,469 62,205 80,177
Inventory 12,887 8,020
Deferred income taxes - 5,330
Total current assets before settlement assets 277,794 465,735
Settlement assets 149,047 640,455
Total current assets 426,841 1,106,190
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – June:
$129,185; June: $120,212 27,054 39,411
EQUITY-ACCOUNTED INVESTMENTS 88,331 27,862
GOODWILL 283,240 188,833
INTANGIBLE ASSETS, net of accumulated amortization of – June: $121,466 ; June:
$108,907 131,132 38,764
DEFERRED INCOME TAXES 6,312 -
OTHER LONG-TERM ASSETS, including reinsurance assets 256,380 49,696
TOTAL ASSETS 1,219,290 1,450,756
LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities - 16,579
Accounts payable 35,055 15,136
Other payables 47,994 34,799
Current portion of long-term borrowings 44,695 8,738
Income taxes payable 5,742 5,607
Total current liabilities before settlement obligations 133,486 80,859
Settlement obligations 149,047 640,455
Total current liabilities 282,533 721,314
DEFERRED INCOME TAXES 46,606 11,139
LONG-TERM BORROWINGS 5,469 7,501
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities 38,580 2,795
TOTAL LIABILITIES 373,188 742,749
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 - June: 56,685,925; 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: June: -; June: - - -
ADDITIONAL PAID-IN-CAPITAL 276,201 273,733
TREASURY SHARES, AT COST: June: 24,891,292; June: 24,891,292 (286,951) (286,951)
ACCUMULATED OTHER COMPREHENSIVE LOSS (159,237) (162,569)
RETAINED EARNINGS 812,426 773,276
TOTAL NET1 EQUITY 642,519 597,569
NON-CONTROLLING INTEREST 95,911 2,766
TOTAL EQUITY 738,430 600,335
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,219,290 $ 1,450,756
(A) – Derived from audited financial statements
(R) 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 audited 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.
Preliminary Unaudited Consolidated Statements of Cash Flows
Unaudited
Three months ended Year ended
June 30, June 30,
2018 2017 2018 (A) 2017 (B)
(In thousands) (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,253 $ 11,157 $ 38,270 $ 74,648
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 8,454 10,261 35,484 41,378
Earnings from equity-accounted investments (4,341) (1,886) (11,730) (2,664)
Interest on Cedar Cellular note (587) - (769) -
Fair value adjustment 584 (239) (212) (300)
Interest payable 118 (64) (146) 20
Facility fee amortized 122 1,232 589 1,326
Loss on fair value of DNI 4,614 - 4,614 -
(Profit) Loss on disposal of property, plant and
equipment (31) (68) 40 (639)
Profit on disposal of business - - (463) -
Stock compensation charge, net of forfeitures 597 2,050 2,607 1,982
Dividends received from equity accounted investments - 817 4,111 1,187
Impairment loss 1,052 - 20,917 -
Decrease (Increase) in accounts and finance loans
receivable, and pre-funded grants receivable 21,968 (13,506) 31,390 (15,767)
Decrease (Increase) in inventory 255 2,717 (2,521) 3,025
Increase (Decrease) in accounts payable and other
payables 4,820 (2,075) 10,595 (6,461)
(Decrease) Increase in taxes payable (6,954) (6,173) 1,137 (354)
(Decrease) Increase in deferred taxes (1,083) 1,532 (1,308) (220)
Net cash provided by operating activities 34,841 5,755 132,605 97,161
Cash flows from investing activities
Capital expenditures (1,848) (2,697) (9,649) (11,195)
Proceeds from disposal of property, plant and equipment 83 238 658 1,592
Investment in Cell C - - (151,003) -
Investment in equity of equity-accounted investments - - (133,335) -
Loans to equity-accounted investments (1,000) - (10,635) (12,044)
Repayment of loans by equity-accounted investments 9,180 - 9,180 -
Acquisition of held to maturity investment - - (9,000) -
Acquisitions, net of cash acquired (6,202) - (6,202) (4,651)
Investment in MobiKwik - (10,488) - (25,835)
Other investing activities, net (207) - (361) -
Net change in settlement assets 210,405 (116,755) 490,795 (61,938)
Net cash provided by (used in) investing activities 210,411 (129,702) 180,448 (114,071)
Cash flows from financing activities
Long-term borrowings utilized - 279 113,157 800
Repayment of long-term borrowings (16,095) (8,825) (77,062) (37,318)
Repayment of bank overdraft (5,932) - (62,925) -
Proceeds from bank overdraft 2,528 16,176 44,900 16,176
Payment of guarantee fee - - (754) (1,145)
Proceeds from issue of common stock - 2,250 - 47,879
Acquisition of treasury stock - (13,713) - (45,794)
Dividends paid to non-controlling interest - (1,454) - (2,067)
Net change in settlement obligations (210,405) 116,755 (490,795) 61,938
Net cash (used in) provided by financing activities (229,904) 111,468 (473,479) 40,469
Effect of exchange rate changes on cash (12,466) 3,229 (7,977) 11,254
Net (decrease) increase in cash and cash equivalents 2,882 (9,250) (168,403) 34,813
Cash, cash equivalents and restricted cash – beginning of
period 87,172 267,707 258,457 223,644
Cash and cash equivalents – end of period $ 90,054 $ 258,457 $ 90,054 $ 258,457
(A) – Unaudited
(B) – Derived from audited financial statements
Attachment A
Preliminary Operating segment revenue, operating income and operating margin:
Three months ended June 30, 2018 and 2017 and March 31, 2018
Change –
constant
Change - actual exchange rate(1)
Q4'18 Q4'18 Q4'18 Q4'18
Key segmental data, in '000, except vs vs vs vs
margins Q4'18 Q4'17 Q3'18 Q4'17 Q3'18 Q4'17 Q3'18
Revenue:
South African transaction processing $63,954 $67,747 $73,508 (6%) (13%) (18%) (17%)
International transaction processing 43,580 45,025 46,240 (3%) (6%) (16%) (10%)
Financial inclusion and applied
technologies 53,888 56,220 59,574 (4%) (10%) (17%) (13%)
Subtotal: Operating segments 161,422 168,992 179,322 (4%) (10%) (17%) (14%)
Intersegment eliminations (12,228) (13,936) (16,601) (12%) (26%) (24%) (29%)
Consolidated revenue $149,194 $155,056 $162,721 (4%) (8%) (16%) (12%)
Operating income (loss):
South African transaction processing $4,275 $14,858 $12,719 (71%) (66%) (75%) (68%)
International transaction processing 2,089 2,016 (14,892) 4% (114%) (10%) (113%)
Financial inclusion and applied
technologies 13,747 14,431 14,968 (5%) (8%) (17%) (12%)
Subtotal: Operating segments 20,111 31,305 12,795 (36%) 57% (44%) 51%
Corporate/Eliminations (10,039) (16,579) (5,231) (39%) 92% (47%) 84%
Consolidated operating
income $10,072 $14,726 $7,564 (32%) 33% (41%) 28%
Operating income margin (%)
South African transaction processing 6.7% 21.9% 17.3%
International transaction processing 4.8% 4.5% (32.2%)
Financial inclusion and applied
technologies 25.5% 25.7% 25.1%
Consolidated operating margin. 6.8% 9.5% 4.6%
(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed
during the Q4 2018 also prevailed during Q4 2017 and Q3 2018.
Fiscal year ended June 30, 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 $268,047 $249,144 8% 0%
International transaction processing 180,027 176,729 2% (5%)
Financial inclusion and applied technologies 221,906 235,901 (6%) (12%)
Subtotal: Operating segments 669,980 661,774 1% (6%)
Intersegment eliminations (57,091) (51,708) 10% 3%
Consolidated revenue $612,889 $610,066 0% (6%)
Operating income:
South African transaction processing $42,796 $59,309 (28%) (33%)
International transaction processing (12,478) 13,705 (191%) (185%)
Financial inclusion and applied technologies 55,372 57,785 (4%) (11%)
Subtotal: Operating segments 85,690 130,799 (34%) (39%)
Corporate/Eliminations (26,741) (33,756) (21%) (26%)
Consolidated operating income $58,949 $97,043 (39%) (43%)
Operating income margin (%)
South African transaction processing 16.0% 23.8%
International transaction processing (6.9%) 7.8%
Financial inclusion and applied technologies 25.0% 24.5%
Overall operating margin 9.6% 15.9%
(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that
prevailed during fiscal 2018 also prevailed during fiscal 2017.
Earnings from equity-accounted investments:
The table below presents the relative earnings (loss) from our equity-accounted investments:
% %
Q4 2018 Q4 2017 change F2018 F2017 change
DNI $1,803 $- nm $7,005 $- nm
Share of net income 2,642 - nm 9,510 - nm
Amortization of intangible assets, net
of deferred tax (839) - nm (2,505) - nm
Bank Frick (1,581) - nm (606) - nm
Share of net income (1,033) - nm 201 - nm
Amortization of intangible assets, net
of deferred tax (144) - nm (403) - nm
Other (404) - nm (404) - nm
Finbond 4,226 1,573 nm 5,327 2,503 113%
Other (107) 313 (134%) 4 161 (98%)
Earnings from equity-accounted
investments $4,341 $1,886 130% $11,730 $2,664 340%
Attachment B
Reconciliation of preliminary GAAP operating income to EBITDA and Adjusted EBITDA:
Three months and year ended June 30, 2018 and 2017
Three months ended Year ended
June 30, June 30,
2018 2017 2018 2017
Operating income - GAAP 10,072 14,726 58,949 97,043
Depreciation and amortization 8,454 10,261 35,484 41,378
Impairment loss 1,052 - 20,917 -
EBITDA 19,578 24,987 115,350 138,421
Non-recurring Mastertrading allowance for doubtful accounts - - 7,803 -
Loss resulting from acquisition of DNI 4,614 - 4,614 -
Transaction costs 109 586 2,396 3,347
Refund of South Korean indirect taxes - - (2,545) -
Profit on sale of Xeo - - (463) -
Former CEO separation payment, - 8,000 - 8,000
Stock-based compensation charge related to former CEO and
reversals - 1,570 - 250
Adjusted EBITDA 24,301 35,143 127,155 150,018
Reconciliation of preliminary GAAP net income and earnings per share, basic, to fundamental net income and earnings
per share, basic:
Three months ended June 30, 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 7,036 11,289 0.12 0.20 80,532 148,879 1.42 2.60
Net unrealized income on asset available
for sale, net of tax (4,167) - (47,694) -
Loss resulting from acquisition of DNI 4,614 - 63,332 -
Intangible asset amortization, net 2,261 2,776 25,883 36,620
Impairment loss 1,052 - 14,442 -
Stock-based compensation charge 597 2,050 6,833 27,036
Intangible asset amortization, net related
to equity-accounted investments 983 - 11,251 -
Facility fees for debt 122 1,238 1,396 16,329
Transaction costs 189 586 2,163 7,728
Former CEO separation payment, net of
tax - 5,200 - 68,578
US government investigations-related and
US lawsuit expenses - 46 - 607
Fundamental 12,687 23,185 0.22 0.41 158,138 305,777 2.78 5.35
Fiscal year ended June 30, 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 39,150 72,954 0.69 1.34 497,014 993,504 8.75 18.22
Net unrealized income on asset available
for sale, net of tax 25,199 - 319,904 -
Impairment loss 20,917 - 265,543 -
Non-recurring Mastertrading allowance
for doubtful accounts 7,803 - 99,060 -
Intangible asset amortization, net 9,385 10,491 119,126 142,857
Loss resulting from acquisition of DNI 4,614 - 63,332 -
Transaction costs 2,239 3,347 28,424 45,580
Stock-based compensation charge 2,607 1,982 33,096 26,991
Refund of South Korean indirect taxes (1,985) - (25,200) -
Intangible asset amortization, net related
to equity-accounted investments 2,908 - 36,917 -
Change in US tax rate 860 - 10,918 -
Profit on sale of Xeo (463) - (5,878) -
Facility fees for debt 589 1,294 7,477 17,621
Former CEO separation payment, net of
tax - 5,200 - 70,814
Refund related to litigation finalized in
South Korea, net - (643) - (8,756)
US government investigations-related and
US lawsuit expenses - 96 - 1,307
Fundamental 113,823 94,721 2.00 1.74 1,449,733 1,289,918 25.52 23.65
Attachment C
Reconciliation of preliminary net income used to calculate earnings per share basic and diluted and headline earnings per
share basic and diluted:
Three months ended June 30, 2018 and 2017
2018 2017
Net income (USD'000) 7,036 11,289
Adjustments:
Re-measurement loss resulting from acquisition of DNI 4,614 -
Impairment loss 1,052 -
Profit on sale of property, plant and equipment (31) (68)
Tax effects on above 9 19
Net income used to calculate headline earnings (USD'000) 12,680 11,240
Weighted average number of shares used to calculate net income per share basic earnings
and headline earnings per share basic earnings ('000) 56,773 57,196
Weighted average number of shares used to calculate net income per share diluted
earnings and headline earnings per share diluted earnings ('000) 56,816 57,249
Headline earnings per share:
Basic, in USD 0.22 0.20
Diluted, in USD 0.22 0.20
Fiscal year ended June 30, 2018 and 2017
2018 2017
Net income (USD'000) 39,150 72,954
Adjustments:
Impairment loss 20,917 -
Re-measurement loss resulting from acquisition of DNI 4,614 -
Profit on sale of business (463) -
Loss (Profit) on sale of property, plant and equipment 40 (639)
Tax effects on above (11) 179
Net income used to calculate headline earnings (USD'000) 64,247 72,494
Weighted average number of shares used to calculate net income per share basic earnings
and headline earnings per share basic earnings ('000) 56,807 54,539
Weighted average number of shares used to calculate net income per share diluted
earnings and headline earnings per share diluted earnings ('000) 56,858 54,648
Headline earnings per share:
Basic, in USD 1.13 1.33
Diluted, in USD 1.13 1.33
Calculation of the denominator for headline diluted earnings per share
Q4 '18 Q4 '17 F2018 F2017
Basic weighted-average common shares outstanding and unvested
restricted shares expected to vest under GAAP 56,773 57,196 56,807 54,539
Effect of dilutive securities under GAAP 43 53 51 109
Denominator for headline diluted earnings per share 56,816 57,249 56,858 54,648
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
August 30, 2018
Sponsor:
Rand Merchant Bank, a division of FirstRand Bank Limited
Date: 30/08/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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