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Short-Form Announcement: Net 1 UEPS Technologies, Inc. Reports First Quarter 2020 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
LEI: 529900J4IZMWV4RDEB07
ISIN: US64107N2062
(“Net1” or “the Company”)
Short-Form Announcement: Net 1 UEPS Technologies, Inc. Reports First Quarter 2020 Results
Q1 2020 Highlights:
• Revenue of $80.8 million, GAAP EPS of $(0.08) and Fundamental EPS of $(0.02);
• Operating loss of $2.7 million and adjusted EBITDA of $2.8 million;
• South African operations remained stable and KSNET operating and EBITDA margin improved further versus Q4 2019;
• Exercised option to acquire an additional 35% of Bank Frick, which accelerates our ability to provide a vertically integrated
fintech solution in Europe.
“During the first quarter we made meaningful progress towards the monetization of some of our assets, accomplished several
objectives towards commercial launch of various new products internationally and positioned our South African operations for
growth as liquidity becomes available.” said Herman Kotzé, CEO. “In the near term we will continue to push forward on our
multiple corporate actions to improve our liquidity, in turn allowing us to reduce liabilities, reinvest in our growth businesses, and
return capital to shareholders.”
“Though our Q1 2020 results benefited from certain ad-hoc technology and telecom product sales, most of our key South African
businesses remained stable or posted modest growth compared to Q4 2019, while KSNET showed tangible improvements in its
profitability as a result of the transformational actions that we have implemented. Until we have clearer visibility on the quantum
and timing of various liquidity events, we believe for fiscal 2020 it is prudent for us to reiterate our guidance of adjusted EBITDA of
at least $16 million, using a constant currency base of ZAR 14.27/$1, driven by growth in South Korea and South Africa, and
reduced losses from our IPG business,” said Alex Smith, CFO.
Summary Financial Metrics
% change in % change in
USD ZAR
Q1 ’20 Q1 ’20 Q1 ’20 Q1 ’20
vs vs vs vs
Q1 2020 Q1 2019 Q4 2019 Q1 ’19 Q4 ’19 Q1 ’19 Q4 ’19
(All figures in USD ‘000s except per share data)
Revenue(1) 80,756 125,884 51,472 (36%) 57% (36%) 62%
GAAP operating (loss) income (2,734) 896 (49,646) nm (94%) (403%) (94%)
Adjusted (negative) EBITDA(2) 2,837 13,240 (749) (79%) nm (79%) nm
GAAP (loss) earnings per share ($) (0.08) (0.09) (3.23) (11%) (98%) (254%) (98%)
Continuing (0.08) (0.12) (3.23) (33%) (98%) (96%) (98%)
Discontinued - 0.03 - nm nm nm nm
Fundamental (loss) earnings per share ($)(2) (0.02) 0.01 (3.05) nm (99%) (255%) (99%)
Fully-diluted shares outstanding (‘000’s) 56,568 56,773 56,804 (0%) (0%) nm nm
Average period USD/ ZAR exchange rate 14.75 14.86 14.29 (1%) 3% nm nm
(1) Revenue for Q4 2019, includes revenue that has been reversed of $19.7 million (ZAR 277.6 million) as a result of the Supreme Court ruling
discussed in Note 13 to our audited consolidated financial statements on Form 10-K for the year ended June 30, 2019.
(2) Adjusted (negative) EBITDA and fundamental (loss) earnings per share are non-GAAP measures and are described below under “Use of Non-
GAAP Measures”. See Attachment B in our full announcement 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 Q1 2020 and Q1 2019 results
• Decline in revenue: Our revenues declined 36% in ZAR primarily due to the deconsolidation of DNI, the expiration of our
SASSA contract, the 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 higher ad hoc terminal and prepaid airtime sales;
• Ongoing operating losses: We continue to experience operating losses primarily in South Africa as a result of lower
revenues, coupled with a high-fixed cost infrastructure, but achieved our targeted break-even EBITDA for the quarter;
• Lower net interest expense: Net interest expense decreased due to the settlement of our long-term debt in the second half of
fiscal 2019, but partially offset by lower average cash balances and higher short-term borrowing to fund ATMs;
• Adverse foreign exchange movements: The U.S. dollar appreciated 6% against the KRW during fiscal 2020, which
adversely impacted our reported results.
Results of Operations by Segment and Liquidity
South African transaction processing
Segment revenue was $19.4 million in Q1 2020, down 49% on a constant currency basis compared with Q1 2019 but up from $18.9
million in Q4 2019. The decrease in segment revenue and operating income was primarily due to the termination of our SASSA
contract 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. Our South African transaction processing operating segment activities have been adversely
impacted by the loss of EPE customers as a result of SASSA’s auto-migration of accounts to SAPO. Our operating (loss) margin for
Q1 2020 and 2019 was (17.4%) and (9.3%), respectively.
International transaction processing
Segment revenue was $34.0 million in Q1 2020, down 14% on a constant currency basis compared with Q1 2019 and down from
$36.4 million in Q4 2019. Segment revenue was lower during the first quarter of fiscal 2020, primarily due to an ongoing
contraction in IPG transactions processed, specifically meaningfully lower crypto-exchange and China processing activity, modestly
lower KSNET revenue as a result of lower transaction values processed and the impact of the weaker KRW/ USD exchange rate on
reported KSNET revenue. Operating income during Q1 2020 has improved compared with Q1 2019 due to a reduction in expenses
incurred by KSNET and IPG. Operating income margin for Q1 2020 and 2019 was 11.1% and 7.0%, respectively, due to improving
profitability at KSNET and reduction of costs at IPG.
Financial inclusion and applied technologies
Segment revenue was $30.1 million in Q1 2020, down 44% on a constant currency basis compared with Q1 2019 but up from $17.6
million in Q4 2019. Segment revenue decreased primarily due to the deconsolidation of DNI, lower lending revenue as a result of
our lending book and insurance revenue as a result of fewer customers, and a decrease in inter-segment revenues, partially offset by
higher ad hoc technology and telecom product sales. Operating income was significantly lower than Q1 2019,
primarily due to the deconsolidation of DNI and lower revenue generation and higher expenses incurred to maintain and expand our
financial service infrastructure, partially offset by the ad hoc sales referred to previously. Operating income margin for the Financial
inclusion and applied technologies segment was 5.0% and 21.2% during Q1 2020 and 2019, respectively.
Corporate/eliminations
Our corporate expenses decreased primarily due to lower amortization expense as a result of the deconsolidation of DNI, partially
offset by higher non-employee director expenses, transaction-related expenditures and external service provider fees.
Cash flow and liquidity
At September 30, 2019, our cash and cash equivalents were $42.0 million and comprised of KRW-denominated balances of KRW
31.7 billion ($26.5 million), ZAR-denominated balances of ZAR 145.8 million ($9.6 million), U.S. dollar-denominated balances of
$2.0 million, and other currency deposits, primarily Botswana pula, of $3.0 million, all amounts translated at exchange rates
applicable as of September 30, 2019. The decrease in our unrestricted cash balances from June 30, 2019, was primarily due to
weaker trading activities, capital expenditures, an additional investment in V2, which was partially offset by utilization of our long-
term borrowings and repayment of a loan outstanding by DNI.
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 Q1 2020 compared to Q1 2019, as well as the purchase of $12.3 million
of Cell C prepaid airtime that is subject to sale restrictions utilizing our borrowings (refer below under financial activities and to
Note 3 to our condensed consolidated financial statements). Capital expenditures for Q1 2020 and 2019 were $2.6 million and $3.1
million, respectively, and Q1 2020 capital expenditures relate primarily to the acquisition of additional ATMs in South Africa.
Use of Non-GAAP Measures
U.S. 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 in our full announcement. The presentation of
EBITDA, adjusted EBITDA, fundamental net (loss) income and fundamental (loss) earnings per share and headline (loss) earnings
per share are non-GAAP measures.
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.
The table below presents our H(L)EPS for Q1 2020 and Q4 2019
2020 2019
Net loss used to calculate headline earnings (USD’000) ................................ (4,503) (5,290)
Headline loss per share: ...............................................................
Basic, in USD ....................................................................... (0.08) (0.09)
Diluted, in USD ..................................................................... (0.08) (0.09)
Short-form announcement
This short-form announcement is the responsibility of the Net1’s Board of Directors (“Board”) and the contents have been approved
by the Board on November 7, 2019. This short-form announcement released on SENS is a summary of the full announcement which
has been published at https://senspdf.jse.co.za/documents/2019/JSE/ISSE/NT1/Q1Res20.pdf and on Net1’s website at
www.net1.com. This short-form announcement does not contain complete or full announcement details. Any investment decision by
investors and/or shareholders should be based on consideration of the full announcement. The short-form announcement has not
been audited or reviewed by Net1’s external auditors. The full announcement is available upon request through enquiries directed to
either Net1’s Group Vice President, Investor Relations at dchopra@net1.com or Net1’s media relations contact at
bridget.vonholdt@bm-africa.com.
Conference Call
We will host a conference call to review these results on November 8, 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 December 1, 2019.
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 may 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
Johannesburg
November 8, 2019
Sponsor:
Rand Merchant Bank, a division of FirstRand Bank Limited
Date: 08/11/2019 07:05:00
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