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Net 1 UEPS Technologies, Inc. Reports Third Quarter 2019 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 2019 Results
JOHANNESBURG, May 10, 2019 - Net1 (Nasdaq: UEPS; JSE: NT1) today released results for the third fiscal quarter ended March 31, 2019.
Q3 2019 Highlights:
- Revenue of $86.5 million, GAAP EPS of $(0.96) and Fundamental EPS of $(0.62);
- Fundamental EPS of ($0.62) includes $25.2 million, or $0.44 per share of non-cash fair value loss adjustments for Cell C,
net of tax, and the impairment of the Cedar Cell note;
- Operating loss of $21.7 million, Adjusted EBITDA improved sequentially to a loss of $(1.1) million;
- Early-settlement of long-term South African debt on May 3, 2019; net cash of $24 million at March 31, 2019;
- Monetization of DNI commenced with reduction of ownership from 55% to 30.4% since March 2019; DNI given a call option to acquire
the remaining 30.4% at an exercise price of $59.3 million prior to December 31, 2019; and
- Active EPE accounts remained stable at 1.1 million as of March 31, 2019.
"We are pleased that our core South African operations demonstrated far more stability during the third-quarter, allowing us to focus on our
extensive cost-containment exercise, a significant reduction of debt and other obligations, and the first steps towards the realization of
value of some of our assets," said Herman Kotze, CEO. "The retrenchment of thousands of Net1 family members has been one of the most difficult
processes we have ever faced, and we completed the necessary actions to remain on track to achieve a monthly EBITDA-neutral position for our
South African operations by the end of Q4 2019. The Board and management remain squarely focused on reviewing all options available for the
Group, and will provide updates when there are tangible actions to report."
"In Korea, our advisors are actively engaged with management to execute the near-term action items to drive higher growth and profitability,
and in parallel, our Board, with financial advisors, is reviewing the strategic alternatives for this business. Cell C is focused on managing
its near-term liquidity constraints, closing its transaction with a new minority investor and improving the performance of the business.
Our other equity investments continued to perform in line with expectations during the quarter," continued Kotze. "With the deleveraging of
the balance sheet that has been achieved since our last report, we remain comfortable with our liquidity position for the next 12 months."
Subsequent Event
On February 28, 2019, we entered into a transaction which reduced our shareholding in DNI from 55% to 38%. The transaction closed on
March 31, 2019. On May 3, 2019, we entered into an agreement which further reduced our shareholding in DNI from 38% to 30.4% through the
sale of shares in DNI to FirstRand Bank Limited, acting through its Rand Merchant Bank division, for a transaction consideration of
ZAR 215.0 million ($14.9 million, translated at exchange rates applicable as of May 3, 2019). The company utilized the sale proceeds and
ZAR 15.0 million ($1.0 million, translated at exchange rates applicable as of May 3, 2019) of its cash reserves to early-settle its
outstanding long-term borrowings. On May 3, 2019, we also entered into an agreement, in which we granted a call option to DNI to acquire
our retained 30.4% interest in DNI. The option expires on December 31, 2019, and may be exercised at any time during this period. The option
strike price for our remaining 30.4% interest is ZAR 859.3 million, or $59.3 million, translated at exchange rates applicable as of
May 3, 2019, less any special distributions made by DNI.
Summary Financial Metrics
Three months ended March 31,
2019 2018
As % change % change
restated(1) in USD in ZAR
(All figures in USD '000s except per share data)
Revenue 86,484 162,721 (47%) (37%)
GAAP operating (loss) income (21,683) 7,564 nm nm
Adjusted (negative) EBITDA(2) (1,082) 34,335 nm nm
GAAP (loss) earnings per share ($) (0.96) 0.57 nm nm
Continuing (0.88) 0.51 nm nm
Discontinued (0.08) 0.06 nm nm
Fundamental (loss) earnings per share ($)(2) (0.62) 0.95 nm nm
Fully-diluted shares outstanding ('000's) 56,828 56,777 0%
Average period USD/ZAR exchange rate 14.17 11.95 19%
Non-cash adjustments included (before tax impact): 39,726 (17,399) nm
Allowance for doubtful finance loans receivables 396 579 (32%)
Change in fair value of equity securities 26,263 (37,843) nm
Loss on disposal of DNI 5,140 - nm
Impairment loss 5,305 19,865 (73%)
Impairment of Cedar Cell note 2,622 - nm
Nine months ended March 31,
2019 2018
As % change % change
restated(1) in USD in ZAR
(All figures in USD '000s except per share data)
Revenue 309,518 463,695 (33%) (26%)
GAAP operating (loss) income (63,862) 48,877 nm nm
Adjusted (negative) EBITDA(2) (11,872) 102,774 nm nm
GAAP (loss) earnings per share ($) (2.18) 1.08 nm nm
Continuing (2.16) 1.02 nm nm
Discontinued (0.02) 0.06 nm nm
Fundamental (loss) earnings per share ($)(2) (1.48) 1.77 nm (188%)
Fully-diluted shares outstanding ('000's) 56,819 56,842 (0%)
Average period USD/ZAR exchange rate 14.27 12.89 11%
Non-cash adjustments included (before tax impact): 97,727 (6,418) nm
Allowance for doubtful finance loans receivables 31,638 11,560 174%
Change in fair value of equity securities 42,099 (37,843) nm
Loss on disposal of DNI 5,140 - nm
Impairment loss 13,496 19,865 (32%)
Impairment of Cedar Cell note 5,354 - nm
(1) As previously reported and more fully described in Note 1 to the consolidated financial statements contained in the Form 10-K/A filed on
December 6, 2018, the Company restated its 2018 consolidated financial statements, to correctly classify and record the change in fair
value of its investment in Cell C. The financial information for the three and nine months ended March 31, 2018, has been restated with
the effect of increasing GAAP net (loss) income by $29,366, and GAAP (loss) net income by $0.52.
(2) Adjusted negative EBITDA and fundamental (loss) earnings per share are non-GAAP measures and are described below under "Use of Non-GAAP
Measures-negative EBITDA and Adjusted negative EBITDA, and - Fundamental net (loss) income and fundamental (loss) earnings per share."
See Attachment B for a reconciliation of GAAP operating (loss) income to negative EBITDA and Adjusted negative EBITDA, and GAAP net (loss)
income to fundamental net (loss) income and (loss) earnings per share.
Factors impacting comparability of our Q3 2019 and Q3 2018 results
- Decline in revenue: Our revenues declined 37% in ZAR primarily due to the expiration of our SASSA contract, significant
decline in EPE account numbers driven by SASSA's auto-migration of accounts to SAPO, and a reduction in EPE-related financial and
value-added services and transaction fees due to a smaller customer base, but partially offset by the inclusion of DNI;
- Increase in operating losses: Lower revenue, coupled with a high-fixed cost infrastructure and write-downs due to limited recoverability
of dues from customers, resulted in an operating loss. During the Q3 2019, we commenced with a restructuring of our
South African operations to bring our cost structure in-line with our current customer base, and expect to reach break-even on
a cash basis by the end of the Q4 2019. We incurred $4.5 million in retrenchment costs during the Q3 2019;
- Non-cash losses, impairments and fair-value adjustments: We incurred a $5.1 million non-cash loss on disposal of DNI, an impairment
loss of $5.3 million related to DNI intangibles, a fair value adjustment loss of $26.3 million for Cell C and a $2.6 million impairment
of our Cedar Cell note; and
- Adverse foreign exchange movements: The U.S. dollar appreciated 19% against the ZAR and 6% against the KRW during the Q3 2019,
which adversely impacted our reported results.
Results of Operations by Segment and Liquidity
South African transaction processing
Segment revenue was $17.4 million in Q3 2019, down 72% on a constant currency basis compared with Q3 2018. The decrease in segment revenue and
operating income was primarily due to the substantial decrease in the number of SASSA grant recipients paid under our SASSA contract as the
contract ended at the end of Q1 2019. Our revenue and operating income was also adversely impacted by the significant reduction in the
number of SASSA grant recipients with SASSA-branded Grindrod cards linked to Grindrod bank accounts as well as a lower number of EPE accounts.
These decreases in revenue and operating income were partially offset by higher transaction revenue as a result of increased usage of our ATMs.
Operating income for this operating segment for Q3 2019 included retrenchment costs of $3.0 million (ZAR 41.7 million). Our operating (loss)
income margin for Q3 2019 and 2018 was (74.6%) and 17.3%, respectively. Excluding restructuring costs, the operating loss margin for
Q3 2019 was (57.5%).
International transaction processing
Segment revenue was $34.4 million in Q3 2019, down 12% compared with Q3 2018 in constant currency. Segment revenue was lower
during Q3 2019, primarily due to a contraction in IPG transactions processed, specifically meaningfully lower crypto-exchange and
China processing activity, and modestly lower KSNET revenue as a result of lower transaction values processed. Operating income during
Q3 2018 was adversely impacted by a $19.9 million impairment loss and positively impacted by an ad hoc refund of indirect taxes of
$2.5 million in Korea. Excluding the impact of the impairment loss and the ad hoc tax refund, operating income during the Q3 2019 was
lower compared to fiscal 2018 due to the decrease in IPG revenues and resulting from these lower revenues, and partially offset by an
improved contribution from KSNET, primarily as a result of a lower depreciation expense. Operating income (loss) margin for Q3 2019 and
2018 was 5.6% and (32.2%), respectively. Excluding the goodwill impairment and ad hoc tax refund, segment operating income and margin
for fiscal 2018 were $2.4 million and 5.2%, respectively.
Financial inclusion and applied technologies
Segment revenue was $36.7 million in Q3 2019, down 27% compared with Q3 2018 in constant currency. Segment revenue decreased primarily due to
fewer prepaid airtime and value-added services sales, lower lending and insurance revenue, and a decrease in inter-segment revenues, partially
offset by the inclusion of DNI. Operating income was significantly lower than Q3 2018, primarily due to lower revenue generation
and higher expenses incurred to maintain and expand our financial service infrastructure, partially offset by the contribution from DNI.
Operating income for this operating segment for Q3 2019 included retrenchment costs of $1.6 million (ZAR 22.1 million).
Excluding the retrenchment costs, segment operating income and margin for fiscal 2019 were $4.8 million and 13.2% respectively.
Corporate/eliminations
Our corporate expenses increased primarily due to a $5.3 million impairment loss as well as higher acquired intangible asset amortization,
non-employee director expenses, transaction-related expenditures and external service provider fees.
Cash flow and liquidity
At March 31, 2019, our cash and cash equivalents were $48.8 million and comprised ZAR-denominated balances of ZAR 263.0 million ($18.2 million),
KRW-denominated balances of KRW 17.2 billion ($15.1 million), U.S. dollar-denominated balances of $10.7 million, and other currency
deposits, primarily Botswana pula, of $4.7 million, all amounts translated at exchange rates applicable as of March 31, 2019. The decrease
in our unrestricted cash balances from June 30, 2018, was primarily due to significantly weaker trading activities, scheduled debt repayments,
dividend payments to non-controlling interests and capital expenditures, which was partially offset by the contribution from the inclusion of DNI,
and a decrease in our South African lending book.
Excluding the impact of interest received, interest paid under our South Africa debt and taxes, the decrease in cash provided is primarily
due to significantly weaker trading activity during fiscal 2019 compared to 2018. Capital expenditures for Q3 2019 and 2018 were $1.6 million
and $4.2 million, respectively, and have decreased primarily due to the acquisition of fewer ATMs in South Africa and computer equipment to
maintain our processing activities. We made a scheduled South African debt facility payment of $10.5 million (ZAR 151 million).
Operating metrics and supplemental presentation for Q3 2019 Results
Our updated operating metrics have been posted on our website (www.net1.com). A supplemental presentation for Q3 2019 will be posted to the
Investor Relations page of our website - ir.net1.com one hour prior to our earnings call on Friday, May 10, 2019.
Conference Call
We will host a conference call to review these results on May 10, 2019, 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 080-020-0648 (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 May 30, 2019.
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 negative EBITDA, adjusted negative EBITDA, fundamental net
(loss) income and fundamental (loss) earnings per share and headline (loss) earnings per share are non-GAAP measures.
EBITDA and adjusted EBITDA
(Loss) Earnings before interest, tax, depreciation and amortization ("EBITDA") is GAAP operating (loss) income adjusted for depreciation and
amortization and, if applicable, impairment losses. Adjusted EBITDA is EBITDA adjusted for costs related to acquisitions and transactions
consummated or ultimately not pursued, retrenchment costs incurred, an allowance for doubtful Mastertrading working capital finance
loans receivable, a refund of indirect taxes in Korea, and (loss) profits realized on the sale of a business.
Fundamental net (loss) income and fundamental (loss) earnings per share
Fundamental net (loss) income and (loss) earnings per share is GAAP net (loss) income and (loss) 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 and unusual non-recurring items, including the impairment loss, costs related to acquisitions and transactions consummated
or ultimately not pursued.
Fundamental net (loss) income and (loss) earnings per share for fiscal 2019 also includes an adjustment for the loss incurred on the disposal of
DNI, retrenchment costs incurred, accretion of interest related to the DNI contingent consideration, and for the non-controlling interest portion
of the amortization of intangible assets (net of deferred taxes). Fundamental net income and earnings per share for fiscal 2018 also includes
adjustments for 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.
We provide earnings guidance only on a non-GAAP basis and do not provide a reconciliation of forward-looking fundamental (loss) 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 (loss) income and (loss) 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 net (loss) income and (loss) earnings per share and fundamental net (loss) income and (loss) earnings per share.
Headline (loss) earnings per share ("H(L)EPS")
The inclusion of H(L)EPS in this press release is a requirement of our listing on the JSE. H(L)EPS basic and diluted is calculated using
net (loss) income which has been determined based on GAAP. Accordingly, this may differ to the headline (loss) earnings per share calculation
of other companies listed on the JSE as these companies may report their financial results under a different financial reporting framework,
including but not limited to, International Financial Reporting Standards.
H(L)EPS basic and diluted is calculated as GAAP net (loss) income adjusted for the impairment loss and (profit) loss on sale of
property, plant and equipment. Attachment C presents the reconciliation between our net (loss) income used to calculate (loss)
earnings per share basic and diluted and HE(L)PS basic and diluted and the calculation of the denominator for headline diluted (loss)
earnings per share.
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 through DNI 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. 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
Group Vice President, Investor Relations
Phone: +1 917-767-6722
Email: dchopra@net1.com
Media Relations Contact:
Bridget von Holdt
Business Director - BCW
Phone: +27-82-610-0650
Email: bridget.vonholdt@bm-africa.com
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
Three months ended Nine months ended
March 31, March 31,
2019 2018 2019 2018
(As restated) (As restated)
(In thousands, except per share data) (In thousands, except per share data)
REVENUE $ 86,484 $ 162,721 $ 309,518 $ 463,695
EXPENSE
Cost of goods sold, IT processing, servicing and support 50,179 77,860 173,680 226,506
Selling, general and administration 42,802 48,091 155,676 141,417
Depreciation and amortization 9,881 9,341 30,528 27,030
Impairment loss 5,305 19,865 13,496 19,865
OPERATING (LOSS) INCOME (21,683) 7,564 (63,862) 48,877
CHANGE IN FAIR VALUE OF EQUITY SECURITIES (26,263) 37,843 (42,099) 37,843
LOSS ON DISPOSAL OF DNI 5,140 - 5,140 -
INTEREST INCOME, net of impairment (959) 5,154 586 14,903
INTEREST EXPENSE 3,493 2,426 9,030 6,872
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE (57,538) 48,135 (119,545) 94,751
INCOME TAX (BENEFIT) EXPENSE (2,490) 19,418 1,702 39,757
NET (LOSS) INCOME BEFORE EARNINGS FROM EQUITY-
ACCOUNTED INVESTMENTS (55,048) 28,717 (121,247) 54,994
(LOSS) EARNINGS FROM EQUITY-ACCOUNTED
INVESTMENTS (464) 3,960 (338) 7,389
NET (LOSS) INCOME (55,512) 32,677 (121,585) 62,383
Continuing (50,784) 29,386 (124,275) 57,181
Discontinued (4,728) 3,291 2,690 5,202
(ADD) LESS NET (LOSS) INCOME ATTRIBUTABLE TO NON-
CONTROLLING INTEREST (728) 302 2,339 903
Continuing (485) 302 (1,362) 903
Discontinued (243) - 3,701 -
NET (LOSS) INCOME ATTRIBUTABLE TO NET1 $ (54,784) $ 32,375 $ (123,924) $ 61,480
Continuing (50,299) 29,084 (122,913) 56,278
Discontinued (4,485) 3,291 (1,011) 5,202
Net (loss) income per share, in U.S. dollars
Basic (loss) earnings attributable to Net1 shareholders $(0.96) $0.57 $(2.18) $1.08
Continuing $(0.88) $0.51 $(2.16) $1.02
Discontinued $(0.08) $0.06 $(0.02) $0.06
Diluted (loss) earnings attributable to Net1 shareholders $(0.96) $0.57 $(2.18) $1.08
Continuing $(0.88) $0.51 $(2.16) $1.02
Discontinued $(0.08) $0.06 $(0.02) $0.06
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets
March 31, June 30,
2019 2018(A)
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 48,757 $ 87,075
Restricted cash 74,181 -
Pre-funded social welfare grants receivable - 2,965
Accounts receivable, net and other receivables 80,150 93,448
Finance loans receivable, net 25,217 61,463
Inventory 7,861 10,361
Current assets of discontinued operation - 22,482
Total current assets before settlement assets 236,166 277,794
Settlement assets 66,222 149,047
Total current assets 302,388 426,841
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - March: $131,212; June: $126,026 19,889 25,737
EQUITY-ACCOUNTED INVESTMENTS 167,497 87,992
GOODWILL 156,499 169,079
INTANGIBLE ASSETS, net of accumulated amortization of - March: $128,724; June: $121,466 15,719 27,129
DEFERRED INCOME TAXES 2,862 5,751
OTHER LONG-TERM ASSETS, including reinsurance assets 174,903 235,032
LONG-TERM ASSETS OF DISCONTINUED OPERATION - 241,729
TOTAL ASSETS 839,757 1,219,290
LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities for ATM funding 74,181 -
Short-term credit facilities 8,865 -
Accounts payable 14,743 21,106
Other payables 37,936 41,645
Current portion of long-term borrowings 15,823 44,079
Income taxes payable 4,958 5,742
Current liabilities of discontinued operation - 20,914
Total current liabilities before settlement obligations 156,506 133,486
Settlement obligations 66,222 149,047
Total current liabilities 222,728 282,533
DEFERRED INCOME TAXES 6,299 17,485
LONG-TERM BORROWINGS - 5,469
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities 2,273 30,289
LONG-TERM LIABILITIES OF DISCONTINUED OPERATION - 37,412
TOTAL LIABILITIES 231,300 373,188
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: 56,815,925; June: 56,685,925 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 277,950 276,201
TREASURY SHARES, AT COST: March: 24,891,292; June: 24,891,292 (286,951) (286,951)
ACCUMULATED OTHER COMPREHENSIVE LOSS (204,338) (184,436)
RETAINED EARNINGS 713,701 837,625
TOTAL NET1 EQUITY 500,442 642,519
NON-CONTROLLING INTEREST 343 95,911
TOTAL EQUITY 500,785 738,430
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY $ 839,757 $ 1,219,290
(A) - Derived from audited financial statements filed on Form 10-K/A on December 6, 2018.
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Three months ended Nine months ended
March 31, March 31,
2019 2018 2019 2018
(as restated) (as restated)
(In thousands) (In thousands)
Cash flows from operating activities
Net (loss) income $ (55,512) $ 32,677 $ (121,585) $ 62,383
Depreciation and amortization 9,881 9,341 30,528 27,030
Impairment loss 5,305 19,865 13,496 19,865
Allowance for doubtful accounts receivable charged 396 579 31,638 11,560
Loss (Earnings) from equity-accounted investments 464 (3,960) 338 (7,389)
Interest on Cedar Cell note, net of impairment 2,044 (587) 3,404 (769)
Change in fair value of equity securities 26,263 (37,843) 42,099 (37,843)
Fair value adjustments and foreign currency re-measurements 90 (110) 91 (209)
Interest payable 53 (17) 294 (264)
Facility fee amortized 51 120 206 467
(Profit) Loss on disposal of property, plant and equipment (147) (50) (413) 71
Loss (Profit) on disposal of business 5,140 - 5,140 (463)
Stock-based compensation charge, net 487 575 1,672 2,010
Dividends received from equity accounted investments - 1,946 454 4,111
Decrease (Increase) in accounts receivable, pre-funded social welfare grants
receivable and finance loans receivable (14,938) 41,679 6,533 (2,438)
Decrease (Increase) in inventory 1,451 1,072 3,612 (2,776)
Increase (Decrease) in accounts payable and other payables 8,196 2,827 (11,339) 5,775
Increase in taxes payable 795 9,007 2,142 8,091
(Decrease) Increase in deferred taxes (4,153) 7,824 (11,223) 8,252
Net cash (used in) provided by operating activities (14,134) 84,945 (2,913) 97,464
Cash flows from investing activities
Capital expenditures (1,615) (4,225) (7,280) (7,801)
Proceeds from disposal of property, plant and equipment 295 160 781 575
Disposal of DNI (2,114) - (2,114) -
Investment in equity of equity-accounted investments (489) (18,597) (2,989) (132,335)
Acquisition of intangible assets - - (1,384) -
Investment in MobiKwik - - (1,056) -
Proceeds on return of investment - - 284 -
Investment in Cell C - - - (151,003)
Loans to equity-accounted investments - (10,635) - (10,635)
Acquisition of held to maturity investment - - - (9,000)
Other investing activities - 300 - 146
Net change in settlement assets (1,083) 43,222 76,879 280,390
Net cash (used in) provided by investing activities (5,006) 10,225 63,121 (29,663)
Cash flows from financing activities
Proceeds from bank overdraft 278,288 9,802 584,525 42,372
Repayment of bank overdraft (257,097) (42,650) (502,823) (56,993)
Repayment of long-term borrowings (12,499) (15,826) (36,310) (60,967)
Long-term borrowings utilized 3,609 17,726 14,613 113,157
Dividends paid to non-controlling interest (1,148) - (4,085) -
Payment of guarantee fee - (202) (394) (754)
Net change in settlement obligations 1,083 (43,222) (76,879) (280,390)
Net cash provided by (used in) financing activities 12,236 (74,372) (21,353) (243,575)
Effect of exchange rate changes on cash (3,199) 1,478 (5,971) 4,489
Net (decrease) increase in cash, cash equivalents and restricted cash (10,103) 22,276 32,884 (171,285)
Cash, cash equivalents and restricted cash - beginning 133,041 64,896 90,054 258,457
Cash, cash equivalents and restricted cash - end of period (1) $ 122,938 $ 87,172 $ 122,938 $ 87,172
(1) Cash, cash equivalents and restricted cash as of March 31, 2019, includes restricted cash of approximately $74.2 million related to cash
withdrawn from the Company's various debt facilities to fund ATMs. This cash may only be used to fund ATMs and is considered restricted
as to use and therefore is classified as restricted cash.
Net 1 UEPS Technologies, Inc.
Attachment A
Operating segment revenue, operating income and operating margin:
Three months ended March 31, 2019 and 2018 and December 31, 2018
Change - constant
Change - actual exchange rate(1)
Q3 '19 Q3 '19 Q3 '19 Q3 '19
vs vs vs vs
Key segmental data, in '000, except margins Q3 '19 Q3 '18 Q2 '19 Q3 '18 Q2 '19 Q3 '18 Q2 '19
Revenue:
South African transaction processing $17,374 $73,508 $21,970 (76%) (21%) (72%) (22%)
International transaction processing . 34,358 46,240 38,124 (26%) (10%) (12%) (11%)
Financial inclusion and applied technologies 36,650 59,574 38,755 (38%) (5%) (27%) (6%)
Continuing .................................. 18,808 59,574 19,047 (68%) (1%) (63%) (2%)
Discontinued ............................... 17,842 - 19,708 nm (9%) nm (10%)
Subtotal: Operating segments .. 88,382 179,322 98,849 (51%) (11%) (42%) (12%)
Intersegment eliminations ........ (1,898) (16,601) (1,699) (89%) 12% (86%) 11%
Consolidated revenue ....... 86,484 162,721 97,150 (47%) (11%) (37%) (12%)
Continuing ................... 68,642 162,721 77,442 (58%) (11%) (50%) (12%)
Discontinued ................ $17,842 $- $19,708 nm (9%) nm (10%)
Operating (loss) income:
South African transaction processing ($12,954) $12,719 ($11,830) nm 10% nm 8%
International transaction processing . 1,909 (14,892) (4,043) nm nm nm nm
Financial inclusion and applied technologies 3,227 14,968 (18,538) (78%) nm (74%) nm
Continuing .................................. (4,911) 14,968 (26,968) (133%) nm (139%) nm
Discontinued ............................... 8,138 - 8,430 nm (3%) nm (4%)
Subtotal: Operating segments .. (7,818) 12,795 (34,411) nm (77%) nm (78%)
Corporate/Eliminations ............ (13,865) (5,231) (8,664) 165% 60% 214% 58%
Continuing .................................. (6,399) (5,231) (6,061) 22% 6% 45% 4%
Discontinued ............................... (7,466) - (2,603) nm 187% nm 184%
Consolidated operating (loss) income
............................................ (21,683) 7,564 (43,075) nm (50%) nm (50%)
Continuing ................... (22,355) 7,564 (48,902) nm (54%) nm (55%)
Discontinued ................ $672 $- $5,827 nm (88%) nm (89%)
Operating (loss) income margin (%)
South African transaction processing (74.6%) 17.3% (53.8%)
International transaction processing . 5.6% (32.2%) (10.6%)
Financial inclusion and applied technologies 8.8% 25.1% (47.8%)
Continuing .................................. (26.1%) 25.1% (141.6%)
Discontinued ............................... 45.6% nm 42.8%
Consolidated operating margin (25.1%) 4.6% (44.3%)
Continuing .......................... (32.6%) 4.6% (63.1%)
Discontinued ....................... 3.8% nm 29.6%
(1) - This information shows what the change in these items would have been if the USD/ZAR exchange rate that prevailed during Q3 2019 also
prevailed during Q3 2018 and Q2 2019.
Nine months ended March 31, 2019 and 2018
Change -
constant
Change - actual exchange rate(1)
F2019 F2019
vs vs
Key segmental data, in '000, except margins F2019 F2018 F2018 F2018
Revenue:
South African transaction processing ............................... $77,093 $204,093 (62%) (58%)
International transaction processing ................................. 111,869 136,447 (18%) (9%)
Financial inclusion and applied technologies ................... 128,611 168,018 (23%) (15%)
Continuing .................................................................. 72,274 168,018 (57%) (52%)
Discontinued .............................................................. 56,337 - nm nm
Subtotal: Operating segments .................................. 317,573 508,558 (38%) (31%)
Intersegment eliminations ........................................ (8,055) (44,863) (82%) (80%)
Consolidated revenue ....................................... 309,518 463,695 (33%) (26%)
Continuing .................................................... 253,181 463,695 (45%) (40%)
Discontinued ................................................ $56,337 $- nm nm
Operating (loss) income:
South African transaction processing ............................... ($28,297) $38,521 (173%) (181%)
International transaction processing ................................. 628 (14,567) (104%) (105%)
Financial inclusion and applied technologies ................... (4,009) 41,625 (110%) (111%)
Continuing .................................................................. (28,409) 41,625 (168%) (176%)
Discontinued .............................................................. 24,400 - nm nm
Subtotal: Operating segments .................................. (31,678) 65,579 (148%) (153%)
Corporate/Eliminations ............................................ (32,184) (16,702) 93% 113%
Continuing .......................................................... (19,465) (16,702) 17% 29%
Discontinued ...................................................... (12,719) - nm nm
Consolidated operating (loss) income ............. (63,862) 48,877 (231%) (245%)
Continuing .................................................... (75,543) 48,877 (255%) (271%)
Discontinued ................................................ $11,681 $- nm nm
Operating (loss) income margin (%)
South African transaction processing ............................... (36.7%) 18.9%
International transaction processing ................................. 0.6% (10.7%)
Financial inclusion and applied technologies ................... (3.1%) 24.8%
Continuing ............................................................... (39.3%) 24.8%
Discontinued ........................................................... 43.3% nm
Consolidated operating margin (20.6%) 10.5%
Continuing .......................................................... (29.8%) 10.5%
Discontinued ...................................................... 20.7% nm
(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
fiscal 2019 also prevailed during the year to date fiscal 2018.
(Loss) Earnings from equity-accounted investments:
The table below presents the relative (loss) earnings from our equity-accounted investments:
Q3 2019 Q3 2018 % change F2019 F2018 % change
Bank Frick ............................................... ($90) $653 nm ($1,895) $975 nm
Share of net income .......................... 52 747 (93%) 616 1,234 (50%)
Amortization of intangible assets, net of deferred tax ....... (142) (94) 51% (427) (259) 65%
Other ................................................. - - nm (2,084) - nm
DNI(1)....................................................... - 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
Finbond(2) - - nm 1,875 1,101 70%
Other ........................................................ (374) 16 nm (318) 111 nm
(Loss) earnings from equity-accounted investments......... ($464) $3,960 nm ($338) $7,389 nm
(1) DNI was accounted for using the equity method in fiscal 2018 and has been consolidated from June 30, 2018, following the acquisition of a
controlling interest in the company. DNI is included in our Financial inclusion and applied technologies operating segment from the
acquisition date.
(2) Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first quarter and its annual results
during our fourth quarter and we record those results in our results during those quarters.
Net 1 UEPS Technologies, Inc.
Attachment B
Reconciliation of GAAP operating (loss) income to negative EBITDA and adjusted negative EBITDA:
Three and nine months and year ended March 31, 2019 and 2018
Three months ended Nine months ended
March 31, March 31,
2019 2018 2019 2018
Operating (loss) income - GAAP ................................................ (21,683) 7,564 (63,862) 48,877
Depreciation and amortization ................................................. 9,881 9,341 30,528 27,030
Impairment loss ....................................................................... 5,305 19,865 13,496 19,865
(Negative) EBITDA ............................................................. (6,497) 36,770 (19,838) 95,772
Retrenchment costs ............................................................ 4,542 - 5,243 -
Transaction costs ............................................................. 873 110 2,723 2,207
Refund of Korean indirect taxes - (2,545) - (2,545)
Non-recurring Mastertrading allowance for doubtful accounts ........ - - - 7,803
(Loss) Profit on disposal of subsidiary ....................................... - - - (463)
Adjusted (negative) EBITDA ................................................... (1,082) 34,335 (11,872) 102,774
Reconciliation of GAAP net (loss) income and (loss) earnings per share, basic, to fundamental net (loss) income and (loss)
earnings per share, basic:
Three months ended March 31, 2019 and 2018
(L)EPS, (L)EPS,
Net (loss) income basic Net (loss) income basic
(USD'000) (USD) (ZAR'000) (ZAR)
2019 2018 2019 2018 2019 2018 2019 2018
GAAP ................................................ (54,784) 32,375 (0.96) 0.57 (815,439) 386,814 (14.35) 6.80
Impairment loss ........................... 5,305 19,865 75,184 237,345
Loss on disposal of DNI .............. 5,140 - 72,845 -
Intangible asset amortization, net 4,380 2,268 62,080 27,096
Retrenchment costs, net ............... 3,270 - 45,915 -
Accreted interest on DNI contingent
consideration ................................ 1,012 - 14,335 -
Intangible asset amortization, net related to
non-controlling interest ................ (918) - (13,008) -
Stock-based compensation charge 578 575 8,190 6,870
Transaction costs ......................... 873 110 12,371 1,314
Intangible asset amortization, net related to
equity accounted investments ...... 142 431 2,012 10,701
Facility fees for debt .................... 51 120 723 1,434
Refund related to litigation finalized in Korea,
net ................................................ - (1,985) - (23,717)
Fundamental ...................... (34,951) 53,759 (0.62) 0.95 (534,792) 647,857 (9.41) 11.40
Nine months ended March 31, 2019 and 2018
(L)EPS, (L)EPS,
Net (loss) income basic Net (loss) income basic
(USD'000) (USD) (ZAR'000) (ZAR)
2019 2018 2019 2018 2019 2018 2019 2018
GAAP ............................................. (123,924) 61,480 (2.18) 1.08 (1,705,572) 792,686 (30.03) 13.96
Intangible asset amortization, net 13,502 6,644 192,633 85,666
Impairment loss .......................... 13,496 19,865 192,551 256,128
Loss on disposal of DNI ............. 5,140 - 73,333 -
Retrenchment costs, net .............. 3,775 - 53,087 -
Intangible asset amortization, net related
to non-controlling interest ........... (2,737) - (39,047) -
Transaction costs ........................ 2,723 2,050 38,848 26,432
Accreted interest on DNI contingent
consideration ............................... 1,848 - 26,360 -
Stock-based compensation charge 1,763 2,010 25,152 25,916
Intangible asset amortization, net related
to equity accounted investments . 427 1,925 6,092 17,835
Facility fees for debt ................... 206 467 2,939 6,021
Non-recurring Mastertrading allowance
for doubtful accounts .................. - 7,803 - 100,607
Refund related to litigation finalized in
Korea, net .................................... - (1,985) - (25,593)
Change in US tax rate ................. - 860 - 11,088
Profit on disposal of subsidiary ... - (463) - (5,970)
Fundamental ..................... (83,781) 100,656 (1.48) 1.77 (1,133,624) 1,290,816 (19.96) 22.73
Net 1 UEPS Technologies, Inc.
Attachment C
Reconciliation of net (loss) income used to calculate (loss) earnings per share basic and diluted and headline (loss)
earnings per share basic and diluted:
Three months ended March 31, 2019 and 2018
2019 2018
Net (loss) income (USD'000) ........................................................................................... (54,784) 32,375
Adjustments: ..........................................................................................................
Impairment loss ....................................................................................................... 5,305 19,865
Loss on sale of business .............................................................................................. 5,140 -
Profit on sale of property, plant and equipment ............................................................... (147) (50)
Tax effects on above .................................................................................................. 41 14
Net (loss) income used to calculate headline earnings (USD'000) ....................................... (44,445) 52,204
Weighted average number of shares used to calculate net income per share basic (loss) earnings and headline (loss)
earnings per share basic (loss) earnings ('000) ...................................................................... 56,828 56,716
Weighted average number of shares used to calculate net income per share diluted (loss) earnings and headline (loss)
earnings per share diluted (loss) earnings ('000) .................................................................... 56,828 56,777
Basic, in USD ......................................................................................................... (0.78) 0.92
Diluted, in USD ....................................................................................................... (0.78) 0.92
Nine months ended March 31, 2019 and 2018
2019 2018
Net (loss) income (USD'000) ........................................................................................... (123,924) 61,480
Adjustments: ..........................................................................................................
Impairment loss ....................................................................................................... 13,496 19,865
Loss (Profit) on sale of business ..................................................................................... 5,140 (463)
Profit on sale of property, plant and equipment ............................................................... (413) (50)
Tax effects on above .................................................................................................. 116 14
Net (loss) income used to calculate headline earnings (USD'000) ....................................... (105,585) 80,846
Weighted average number of shares used to calculate net income per share basic (loss) earnings and headline (loss)
earnings per share basic (loss) earnings ('000) ...................................................................... 56,795 56,788
Weighted average number of shares used to calculate net income per share diluted (loss) earnings and headline (loss)
earnings per share diluted (loss) earnings ('000) .................................................................. 56,819 56,842
Headline (loss) earnings per share: ...................................................................................
Basic, in USD ......................................................................................................... (1.86) 1.42
Diluted, in USD ....................................................................................................... (1.86) 1.42
Calculation of the denominator for headline diluted (loss) earnings per share
Q3 '19 Q3 '18 F2019 F2018
Basic weighted-average common shares outstanding and unvested
restricted shares expected to vest under GAAP ............................. 56,828 56,716 56,795 56,788
Effect of dilutive securities under GAAP ................................. - 61 24 54
Denominator for headline diluted (loss) earnings per share .. 56,828 56,777 56,819 56,842
Weighted average number of shares used to calculate headline (loss) 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 (loss) earnings per share diluted
because we do not use the two-class method to calculate headline (loss) earnings per share diluted.
Johannesburg
May 10, 2019
Sponsor:
Rand Merchant Bank, a division of FirstRand Bank Limited
Date: 10/05/2019 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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