Net 1 UEPS Technologies Inc. (NASDAQ:UEPS)(JSE:NT1) today announced
results for the second quarter fiscal 2013.
Summary Financial Metrics
Three months ended December 31,
------------------------------------------------
% change in % change in
2012 2011 USD ZAR
------------------------------------------------
(All figures in USD '000s
except per share data)
Revenue 111,442 92,058 21% 29%
GAAP net income 2,629 25,094 (90%) (89%)
Fundamental net income (1) 8,051 17,677 (54%) (51%)
GAAP earnings per share ($) 0.06 0.56 (90%) (89%)
Fundamental earnings per
share ($) (1) 0.18 0.39 (100%) (52%)
Fully-diluted shares
outstanding ('000's) 45,567 44,967 1%
Average period USD/ ZAR
exchange rate 8.74 8.18 7%
Six months ended December 31,
------------------------------------------------
% change in % change in
2012 2011 USD ZAR
------------------------------------------------
(All figures in USD '000s
except per share data)
Revenue 223,124 191,984 16% 26%
GAAP net income 9,373 44,862 (79%) (77%)
Fundamental net income (1) 19,559 39,309 (50%) (45%)
GAAP earnings per share ($) 0.21 1.00 (79%) (78%)
Fundamental earnings per
share ($) (1) 0.43 0.87 (100%) (46%)
Fully-diluted shares
outstanding ('000's) 45,578 45,026 1%
Average period USD/ ZAR
exchange rate 8.46 7.82 8%
(1) Fundamental net income and earnings per share are non-GAAP
measures and are described below under "Use of Non-GAAP
Measures-Fundamental net income and fundamental earnings per
share." See Attachment B for a reconciliation of GAAP net income to
fundamental net income and earnings per share.
Factors impacting comparability of our Q2 2013 and Q2 2012
results
-- Unfavorable impact from the strengthening of the US dollar: The US
dollar appreciated by 7% against the ZAR during Q2 2013 which negatively
impacted our reported results;
-- SASSA implementation costs: We continued implementing our SASSA contract
during Q2 2013 and incurred additional implementation and staff costs;
and
-- Fiscal 2012 impacted by change in South African tax law: As a result of
the change in South African tax law that replaced STC with a dividends
withholding tax, Q2 2012 tax expense included a net taxation benefit of
$11.8 million, as we recorded a $20.0 million deferred tax benefit which
was offset by an $8.2 million foreign tax credit valuation allowance.
Comments and Outlook
"We enrolled 12 million citizens by the end of January as part
of our SASSA implementation and remain on track to complete bulk
enrollment by the end of March 2013," said Dr. Serge Belamant,
Chairman and Chief Executive Officer of Net1. "We continue to
cooperate with the DOJ and SEC on their investigations, but as a
result of these investigations, we are experiencing some adverse
impact from the damage caused to our reputation, including our
ability to execute certain aspects of our strategic plan. The
Supreme Court will hear the appeal of the August 2012 High Court
judgment on February 15. We believe we have a strong case and look
forward to presenting our arguments to the Supreme Court," he
concluded.
"The successful implementation for SASSA is a one-off event and
integral for the smooth transition and operation of South Africa's
social welfare program. Given the critical importance of this roll
out, and the higher number of beneficiaries required to be enrolled
in the same time frame, our implementation costs are materially but
proportionally higher than anticipated," said Herman Kotze, Chief
Financial Officer of Net1. "As a result, in fiscal 2013, we expect
fundamental earnings per share to be at least $0.95 assuming a
constant currency base of ZAR 7.72/$1 and using our fiscal 2012
share count of 45 million shares," he concluded.
Progress of second phase of our SASSA contract
implementation
We commenced the second phase of the enrollment process in early
July 2012 and plan to be substantially complete by March 2013, in
accordance with the enrollment plan agreed with SASSA. Under our
agreement with SASSA, we have to enroll both the grant recipients
(those individuals who receive the actual payment and are issued
with our UEPS/EMV smart card), as well as the grant beneficiaries
(those individuals who have qualified for the social grant, but are
not necessarily the recipient of the grant). While the number of
grant recipients on a national basis has consistently been
quantified by SASSA at 9.4 million individuals, the number of
beneficiaries is continually being revised by SASSA on an ongoing
basis from an initial estimate of approximately 15.5 million, to
the current estimate of approximately 21.6 million. In order to
complete the second phase of the implementation on time, and given
the significantly higher number of beneficiaries, we increased the
number of temporary employees that we hired for the entire second
quarter of fiscal 2013from 2,500 to approximately 5,500. The total
number of temporary employees is significantly more than the 2,500
we previously expected at the beginning of fiscal 2013 as the
actual number of individuals (grant recipients plus grant
beneficiaries) that SASSA has asked us to enroll has increased
substantially. During Q2 2013, we enrolled a further 2.7 million
grant recipients and an additional 3.8 million beneficiaries.
During Q2 2013 we incurred direct implementation expenses of
approximately $18.0 million (ZAR 157.1 million) including staff,
travel, temporary infrastructure hire, fixed premises hire for
enrollment and stationery costs. We are unable to quantify the
value of time spent by our executives and pension and welfare
operations managers and staff that service the five provinces in
which we operated under the previous contract and that have
assisted in the implementation of the national contract. Our
implementation expenditure during Q2 2013 was materially higher
than we had previously anticipated due to the significant number of
grant recipients and beneficiaries that we enrolled during the
quarter, especially in the rural and deep rural areas. In order to
meet our enrollment obligations in accordance with the timetable
agreed with SASSA we incurred higher than anticipated temporary
infrastructure hire, travel and staff expenditures. We expect this
level of expenditure to reduce slightly during the third quarter of
fiscal 2013, as our efforts are now focused primarily on urban
areas. We also expensed $3.0 million (ZAR 26.6 million) related to
the cost of the UEPS/EMV smart cards issued during the quarter,
which is not included in the $18.0 million (ZAR 157.1 million)
above.
We also incurred approximately $0.7 million in capital
expenditures related to the implementation during Q2 2013. Since
inception of the implementation we have incurred cumulative capital
expenditures of $25.2 million. We anticipate cumulative capital
expenditures related to the ramp of our national contract to be in
the $30 million range. We have lowered our expected capital
expenditure range related to the implementation of our SASSA
contract given the decision to expense the cost of smart cards
rather than capitalize those costs.
When we signed our Service Level Agreement with SASSA in
February 2012, we anticipated total cash outlays of approximately
$68 to $95 million from February 2012 through March 2013, including
direct implementation costs of $5-10 million per quarter, as well
as capital expenditures of $45-50 million, in order to build our
infrastructure, register 15.6 million beneficiaries and roll out
our biometrically secure UEPS/EMV technology nationally. With one
more quarter of bulk enrollment remaining, our total cash outlay to
date has been $74 million for direct implementation expenses, smart
card costs and capital expenditures. We therefore would be in-line
with the mid-point of our initial total cash outlay range assuming
the volume of enrollments had not changed. Having to register the
incremental 6 million people and therefore employ our temporary
staff for longer, should result in our total cash outlay being
between $100 and $105 million by March 2013. We also expect that by
the end of the bulk enrollment period, roughly 10-15% of
beneficiaries would not have come for re-registration and therefore
we would have to rely on SASSA's efforts to encourage those
beneficiaries to re-register, which would require us to maintain at
least some if not all of our enrollment infrastructure for a couple
of months in Q4 2013. Given our enrollment experience to date
however, we are unsure of what proportion of un-registered people
would ultimately come for re-registration as some of the remainder
may be duplicate recipients or recipients that do not exist
altogether.
Results of Operations by Segment and Liquidity
Our frequently asked questions and operating metrics will be
updated and posted on our website (www.net1.com).
South African transaction-based activities
Segment revenue was $60.8 million in Q2 2013, up 31% compared
with Q2 2012 in USD and up 40% on a constant currency basis. In
ZAR, the increases in segment revenue were primarily due to higher
revenues earned under our new SASSA contract. Segment operating
income margin was 3% and 34%, respectively, and declined primarily
due to SASSA implementation costs. Excluding amortization of
acquisition-related intangibles, Q2 2013 segment operating income
margin was 6%, compared to 38% during Q2 2012.
International transaction-based activities
KSNET continues to contribute the majority of our revenues in
this operating segment. Segment revenue was $33.1 million in Q2
2013, up 15% compared with Q2 2012 in USD and 23% on a constant
currency basis. Operating margin for the segment is lower than most
of our South African transaction-based businesses and was
negatively impacted by continued competition in the Korean
marketplace but was partially offset by increased revenue
contributions from KSNET, NUETS' initiative in Iraq and SmartSwitch
Botswana and favorable currency movement between the Korean won and
the US dollar. Excluding the amortization of intangibles but
including the start-up costs referenced above, Q2 2013 operating
income margin was 11% compared to 12% during Q2 2012.
Smart card accounts
Segment revenue was $8.2 million in Q2 2013, up 13% compared
with Q2 2012 in USD and 21% on a constant currency basis. Q2 2013
segment operating income margin was 29%, compared to 45% during Q2
2012. We have reduced our pricing for smart card accounts after
taking into consideration the lower price and higher volumes of the
new SASSA contract.
Financial services
UEPS-based lending contributes the majority of the revenue and
operating income in this operating segment. Segment revenue was
$1.4 million in Q2 2013, down 26% compared with Q2 2012 in USD and
20% lower on a constant currency basis, principally due to a
decrease in lending activities. Q2 2013 segment operating income
margin was 72% compared with 53% during Q2 2012 primarily as a
result of an improved margin in our UEPS-based lending book
resulting from a better loss experience, offset by start-up
expenditures related to Smart Life and other financial services
offerings.
Hardware, software and related technology sales
Segment revenue was $7.9 million in Q2 2013, up 4% compared with
Q2 2012 in USD and 12% on a constant currency basis. In constant
currency, the increase in revenue and operating income resulted
primarily from an increase in royalty fees, offset by a lower
contribution from all other contributors to hardware and software
sales. Excluding amortization of all intangibles, segment operating
income margin was 10% compared to 12% during Q2 2012.
Cash flow and liquidity
At December 31, 2012, we had cash and cash equivalents of $38
million, down from $39 million at June 30, 2012. The decrease in
our cash balances from June 30, 2012, was primarily from
implementation costs and capital expenditures incurred to implement
our SASSA contract, a scheduled repayment of our Korean debt and
the acquisition of Pbel and SmartSwitch Botswana. For Q2 2013, net
cash utilized by operating activities was $6.9 million compared
with $6.2 million in Q2 2012.
Excluding the impact of interest received, interest paid under
our Korean debt and taxes paid, the decrease in cash provided by
operating activities resulted from significant implementation costs
related to our SASSA contract, partially offset by cash generated
from operations. Capital expenditures for Q2 2013 and 2012 were
$5.6 million and $5.1 million, respectively, and have increased
primarily due to acquisition of payment vehicles and other
equipment for our new SASSA contract and payment processing
terminals in Korea.
Use of Non-GAAP Measures
US securities laws require that when we publish any non-GAAP
measures, we disclose the reason for using the non-GAAP measure and
provide reconciliation to the directly comparable GAAP measure. The
presentation of fundamental net income and fundamental earnings per
share and headline earnings per share are non-GAAP measures.
Fundamental net income and fundamental earnings per share
Fundamental net income and earnings per share is GAAP net income
and earnings per share adjusted for (1) the amortization of
acquisition-related intangible assets (net of deferred taxes), (2)
stock-based compensation charges and (3) unusual non-recurring
items, including the amortization of KSNET debt facility fees, as
well as (a) in fiscal 2013, DOJ and SEC investigations-related
expenses and acquisition-related costs; and (b) in fiscal 2012, the
effects of a change in South African tax law and the creation of a
valuation allowance related to foreign tax credits, the profit on
liquidation of SmartSwitch Nigeria and loss on sale of 10% of Smart
Life. Management believes that the fundamental net income and
earnings per share metric enhances its own evaluation, as well as
an investor's understanding, of our financial performance.
Attachment B presents the reconciliation between GAAP and
fundamental net income and earnings per share.
Headline earnings per share ("HEPS")
The inclusion of HEPS in this press release is a requirement of
our listing on the JSE. HEPS basic and diluted is calculated using
net income which has been determined based on GAAP. Accordingly,
this may differ to the headline earnings per share calculation of
other companies listed on the JSE as these companies may report
their financial results under a different financial reporting
framework, including but not limited to, International Financial
Reporting Standards.
HEPS basic and diluted is calculated as GAAP net income adjusted
for the profit on sale of property, plant and equipment, net of
related tax effects, the loss attributable to the sale of 10% of
Smart Life and the profit on liquidation of SmartSwitch Nigeria.
Attachment C presents the reconciliation between our net income
used to calculate earnings per share basic and diluted and HEPS
basic and diluted.
Conference Call
We will host a conference call to review Q2 2013 results on
February 8, 2013, at 8:00 Eastern Time. To participate in the call,
dial 1-800-860-2442 (U.S. only), 1-866-605-3852 (Canada only),
0-800-917-7042 (U.K. only) or 0-800-200-648 (South Africa only) ten
minutes prior to the start of the call. Callers should request
"Net1 call" upon dial-in. The call will also be webcast on our
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 our website through March 1, 2013.
About Net1 (www.net1.com)
Net1 is a leading provider of alternative payment systems that
leverage its Universal Electronic Payment System, or UEPS, to
facilitate biometrically secure real-time electronic transaction
processing to unbanked and under-banked populations of developing
economies around the world in an online or offline environment. In
addition to payments, UEPS can be used for banking, healthcare
management, payroll, remittances, voting and identification.
Net1 operates market-leading payment processors in South Africa,
Republic of Korea, Ghana and Iraq. In addition, Net1's proprietary
Mobile Virtual Card technology offers secure mobile payments and
banking services in developed and emerging countries while its
MediKredit and XeoHealth subsidiaries provide its proprietary 5010
and ICD-10 compliant real-time claims adjudication system.
Net1 has a primary listing on the Nasdaq and a secondary listing
on the JSE Limited.
Forward-Looking Statements
This announcement contains forward-looking statements that
involve known and unknown risks and uncertainties. A discussion of
various factors that cause our actual results, levels of activity,
performance or achievements to differ materially from those
expressed in such forward-looking statements are included in our
filings with the Securities and Exchange Commission. We undertake
no obligation to revise any of these statements to reflect future
events.
NET 1 UEPS TECHNOLOGIES INC.
Unaudited Condensed Consolidated Statements of Operations
Three months ended Six months ended
-----------------------------------------------------
December 31, December 31,
------------------------- ------------------------
2012 2011 2012 2011
------------ ----------- ----------- -----------
(In thousands, except per (In thousands, except per
share data) share data)
REVENUE $ 111,442 $ 92,058 $ 223,124 $ 191,984
EXPENSE
Cost of goods sold,
IT processing,
servicing and
support 47,227 34,168 92,328 67,112
Selling, general
and administration 48,756 28,872 96,008 55,929
Depreciation and
amortization 10,487 8,790 20,491 17,869
------------ ----------- ----------- -----------
OPERATING INCOME 4,972 20,228 14,297 51,074
INTEREST INCOME 2,589 1,820 5,680 3,817
INTEREST EXPENSE 2,023 2,355 4,094 4,971
------------ ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES 5,538 19,693 15,883 49,920
INCOME TAX EXPENSE 2,971 (5,378) 6,700 5,174
------------ ----------- ----------- -----------
NET INCOME BEFORE
EARNINGS FROM
EQUITY-ACCOUNTED
INVESTMENTS 2,567 25,071 9,183 44,746
EARNINGS FROM
EQUITY-ACCOUNTED
INVESTMENTS 54 19 182 104
------------ ----------- ----------- -----------
NET INCOME 2,621 25,090 9,365 44,850
LESS (ADD) NET
INCOME (LOSS)
ATTRIBUTABLE TO
NON-CONTROLLING
INTEREST (8) (4) (8) (12)
------------ ----------- ----------- -----------
NET INCOME $
ATTRIBUTABLE TO
NET1 2,629 $ 25,094 $ 9,373 $ 44,862
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Net income per
share, in United
States dollars
Basic earnings
attributable to
Net1 shareholders $0.06 $0.56 $0.21 $1.00
Diluted earnings
attributable to
Net1 shareholders $0.06 $0.56 $0.21 $1.00
NET 1 UEPS TECHNOLOGIES INC.
Condensed Consolidated Balance Sheets
Unaudited (A)
December 31, June 30,
2012 2012
------------------------------------
------------------------------------
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 38,116 $ 39,123
Pre-funded social welfare grants
receivable 8,024 9,684
Accounts receivable, net of
allowances of - December: $1,027;
June: $788 105,104 101,918
Finance loans receivable 6,979 8,141
Deferred expenditure on smart cards 8,306 4,587
Inventory 9,869 6,192
Deferred income taxes 5,976 5,591
--------------- ---------------
Total current assets before
settlement assets 182,374 175,236
Settlement assets 414,621 409,166
--------------- ---------------
Total current assets 596,995 584,402
PROPERTY, PLANT AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION OF -
December: $85,023; June: $74,242 55,746 52,616
EQUITY-ACCOUNTED INVESTMENTS 1,192 1,508
GOODWILL 193,133 182,737
INTANGIBLE ASSETS, net 92,287 93,930
OTHER LONG-TERM ASSETS, including
reinsurance assets 41,010 40,700
--------------- ---------------
TOTAL ASSETS 980,363 955,893
--------------- ---------------
--------------- ---------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable 12,881 13,172
Other payables 36,960 40,167
Current portion of long-term
borrowings 15,221 14,019
Income taxes payable 5,317 6,019
--------------- ---------------
Total current liabilities before
settlement obligations 70,379 73,377
Settlement obligations 414,621 409,166
--------------- ---------------
Total current liabilities 485,000 482,543
DEFERRED INCOME TAXES 20,999 20,988
LONG-TERM BORROWINGS 78,989 79,760
OTHER LONG-TERM LIABILITIES, including
insurance policy liabilities 25,107 25,791
--------------- ---------------
TOTAL LIABILITIES 610,095 609,082
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
EQUITY
NET1 EQUITY:
COMMON STOCK
Authorized: 200,000,000 with $0.001
par value;
Issued and outstanding shares, net
of treasury - December: 45,600,471;
June: 45,548,902 59 59
PREFERRED STOCK
Authorized shares: 50,000,000 with
$0.001 par value;
Issued and outstanding shares, net
of treasury: December: -; June: - - -
ADDITIONAL PAID-IN-CAPITAL 159,002 155,350
TREASURY SHARES, AT COST: December:
13,455,090; June: 13,455,090 (175,823) (175,823)
ACCUMULATED OTHER COMPREHENSIVE LOSS (65,282) (75,722)
RETAINED EARNINGS 449,014 439,641
--------------- ---------------
TOTAL NET1 EQUITY 366,970 343,505
NON-CONTROLLING INTEREST 3,298 3,306
--------------- ---------------
TOTAL EQUITY 370,268 346,811
--------------- ---------------
--------------- ---------------
TOTAL LIABILITIES AND $
SHAREHOLDERS' EQUITY 980,363 $ 955,893
--------------- ---------------
--------------- ---------------
(A) - Derived from audited financial statements
NET 1 UEPS TECHNOLOGIES INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Three months ended Six months ended
----------------------------------------------------
December 31, December 31,
------------------------ ------------------------
2012 2011 2012 2011
----------- ----------- ----------- -----------
(In thousands) (In thousands)
Cash flows from
operating activities
Net income $ 2,621 $ 25,090 $ 9,365 $ 44,850
Depreciation and
amortization 10,487 8,790 20,491 17,869
(Earnings) Loss from
equity-accounted
investments (54) (19) (182) (104)
Fair value adjustments 1,000 (551) 707 (772)
Interest payable 1,117 2,113 2,309 3,775
Profit on disposal of
property, plant and
equipment (86) (26) (86) (34)
Net loss on sale of 10%
of SmartLife - 81 - 81
Profit on liquidation
of SmartSwitch Nigeria - - - (3,994)
Realized loss on sale
of SmartLife
investments - - - 25
Stock-based
compensation charge 1,117 543 2,233 1,039
Facility fee amortized 76 83 164 199
Decrease in accounts
receivable, pre-funded
social welfare grants
receivable and finance
loans receivable (5,061) (19,044) 831 (15,795)
(Increase) Decrease in
deferred expenditure
on smart cards (3,668) (58) (3,701) (14)
Increase in inventory (2,582) 920 (3,508) 601
(Decrease) Increase in
accounts payable and
other payables (4,939) (2,679) (6,288) (2,348)
Increase (Decrease) in
taxes payable (6,032) (7,355) (594) (10,962)
(Decrease) Increase in
deferred taxes (916) (14,088) (2,932) (13,396)
----------- ----------- ----------- -----------
Net cash provided by
operating activities (6,920) (6,200) 18,809 21,020
----------- ----------- ----------- -----------
Cash flows from
investing activities
Capital expenditures (5,597) (5,120) (12,050) (9,586)
Proceeds from disposal
of property, plant and
equipment 251 174 356 268
Acquisition of Pbel,
net of cash acquired (230) 0 (2,143) 0
Acquisition of prepaid
business, net of cash
acquired - (4,481) - (4,481)
Acquisition of Smart
Life, net of cash
acquired - - - (1,673)
Settlement from former
shareholders of KSNET - 4,945 - 4,945
Repayment of loan by
equity-accounted
investment - 30 3 63
Purchase of investments
related to insurance
business - - - (2,320)
Proceeds from maturity
of investments related
to insurance business - - 545 2,321
Net change in
settlement assets (72,835) 30,349 (12,056) 33,796
----------- ----------- ----------- -----------
Net cash provided by
(used in) investing
activities (78,411) 25,897 (25,345) 23,333
----------- ----------- ----------- -----------
Cash flows from
financing activities
Repayment of long-term
borrowings (7,307) (7,185) (7,307) (7,185)
Proceeds from issue of
common stock - 0 240 0
Proceeds on sale of 10%
of SmartLife - 107 - 107
Acquisition of treasury
stock - 0 - (1,129)
Net change in
settlement obligations 72,835 (30,349) 12,056 (33,796)
----------- ----------- ----------- -----------
Net cash used in
financing activities 65,528 (37,427) 4,989 (42,003)
----------- ----------- ----------- -----------
Effect of exchange rate
changes on cash 375 (3,389) 540 (16,749)
----------- ----------- ----------- -----------
Net increase in cash
and cash equivalents (19,428) (21,119) (1,007) (14,399)
Cash and cash
equivalents -
beginning of period 57,544 101,983 39,123 95,263
----------- ----------- ----------- -----------
Cash and cash
equivalents - end of
period $ 38,116 $ 80,864 $ 38,116 $ 80,864
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net 1 UEPS Technologies Inc.
Attachment A
Operating segment revenue, operating income and operating
margin:
Three months ended December 31, 2012 and 2011 and September 30,
2012
Change -
constant
Change - exchange
actual rate(1)
----------------------------
Q2 '13 Q2 '13 Q2 '13 Q2 '13
Key segmental data, vs vs vs vs
in $ '000, Q2 '13 Q2 '12 Q1 '13 Q2'12 Q1 '13 Q2'12 Q1 '13
-------------------------------------------------------
Revenue:
SA transaction-
based activities $60,764 $46,448 $61,364 31% (1%) 40% 5%
International
transaction-based
activities 33,113 28,835 31,649 15% 5% 23% 11%
Smart card
accounts 8,219 7,264 8,364 13% (2%) 21% 4%
Financial services 1,448 1,944 1,384 (26%) 5% (20%) 11%
Hardware, software
and related
technology sales 7,898 7,567 8,921 4% (11%) 12% (6%)
---------------------------
Total
consolidated
revenue $111,442 $92,058 $111,682 21% 0% 29% 6%
---------------------------
Consolidated
operating (loss)
income:
SA transaction-
based activities $1,933 $15,766 $6,400 (88%) (70%) (87%) (68%)
-------------------------------------------------------
Operating income
excluding
amortization 3,398 17,463 7,849 (81%) (57%) (79%) (54%)
Amortization of
intangible assets (1,465) (1,697) (1,449) (14%) 1% (8%) 7%
-------------------------------------------------------
International
transaction-based
activities 202 241 (171) (16%) (218%) (10%) (225%)
-------------------------------------------------------
Operating income
excluding
amortization 3,515 3,369 2,981 4% 18% 12% 25%
Amortization of
intangible assets (3,313) (3,128) (3,152) 6% 5% 13% 11%
-------------------------------------------------------
Smart card
accounts 2,342 3,302 2,385 (29%) (2%) (24%) 4%
Financial services 1,048 1,026 1,097 2% (4%) 9% 1%
Hardware, software
and related
technology sales 795 909 1,984 (13%) (60%) (6%) (58%)
-------------------------------------------------------
Operating income
excluding
amortization 878 997 2,072 (12%) (58%) (6%) (55%)
Amortization of
intangible assets (83) (88) (88) (6%) (6%) 1% (0%)
-------------------------------------------------------
Corporate/
Eliminations (1,348) (1,016) (2,370) 33% (43%) 42% (40%)
---------------------------
Total operating
income $4,972 $20,228 $9,325 (75%) (47%) (74%) (44%)
---------------------------
Operating income
margin (%)
SA transaction-
based activities 3% 34% 10%
International
transaction-based
activities 1% 1% (1%)
International
transaction-based
activities
excluding
amortization 11% 12% 9%
Smart card
accounts 29% 45% 29%
Financial services 72% 53% 79%
Hardware, software
and related
technology sales 10% 12% 22%
Overall operating
margin 4% 22% 8%
(1) - This information shows what the change in these items would have been
if the USD/ ZAR exchange rate that prevailed during the second quarter of
fiscal 2013 also prevailed during the second quarter of fiscal 2012 and
the first quarter of fiscal 2013.
Six months ended December 31, 2012 and 2011
Change -
constant
Change - exchange
actual rate(1)
------------------------
F2013 F2013
Key segmental data, in vs vs
'000, except margins F2013 F2012 F2012 F2012
------------------------------------------------
Revenue:
SA transaction-based
activities $122,128 $96,350 27% 37%
International
transaction-based
activities 64,762 59,090 10% 19%
Smart card accounts 16,583 15,516 7% 16%
Financial services 2,832 4,055 (30%) (24%)
Hardware, software and
related technology sales 16,819 16,973 (1%) 7%
------------------------
Total consolidated
revenue $223,124 $191,984 16% 26%
------------------------
Consolidated operating
income (loss):
SA transaction-based
activities $8,333 $35,949 (77%) (75%)
International
transaction-based
activities 31 925 (97%) (96%)
------------------------------------------------
Operating income
excluding amortization 6,499 7,355 (12%) (4%)
Amortization of
intangible assets (6,468) (6,430) 1% 9%
------------------------------------------------
Smart card accounts 4,727 7,052 (33%) (28%)
Financial services 2,145 2,437 (12%) (5%)
Hardware, software and
related technology sales 2,779 2,846 (2%) 6%
Corporate/ Eliminations (3,718) 1,865 (299%) (316%)
------------------------
Total operating income 14,297 $51,074 (72%) (70%)
------------------------
Operating income margin (%)
SA transaction-based
activities 7% 37%
International
transaction-based
activities 0% 2%
International
transaction-based
activities excluding
amortization 10% 12%
Smart card accounts 29% 45%
Financial services 76% 60%
Hardware, software and
related technology sales 17% 17%
Overall operating margin 6% 27%
(1) - This information shows what the change in these items would have been
if the USD/ ZAR exchange rate that prevailed during the first half of
fiscal 2013 also prevailed during the first half of fiscal 2012.
Net 1 UEPS Technologies Inc.
Attachment B
Reconciliation of GAAP net income and earnings per share, basic,
to fundamental net income and earnings per share, basic:
Three months ended December 31, 2012 and 2011
EPS, EPS,
Net income basic Net income basic
(USD'000) (USD) (ZAR'000) (ZAR)
--------------------------------------------------------
2012 2011 2012 2011 2012 2011 2012 2011
--------------------------------------------------------
GAAP 2,629 25,094 0.06 0.56 22,979 205,148 0.50 4.57
Intangible asset
amortization, net 3,640 3,656 31,817 29,893
Stock-based
compensation
charge 1,117 543 9,763 4,439
Facility fees for
KSNET debt 76 110 664 899
DOJ and SEC
investigations-
related expenses 561 - 4,903 -
Acquisition-
related costs 28 - 245 -
Change in tax law - (20,031) - (163,760)
Create FTC
valuation
allowance - 8,232 - 67,298
Loss on sale of
10% of Smart Life - 73 - 597
------------------ ------------------
Fundamental 8,051 17,677 0.18 0.39 70,371 144,514 1.55 3.22
------------------ ------------------
------------------ ------------------
Six months ended December 31, 2012 and 2011
EPS, EPS,
Net income basic Net income basic
(USD'000) (USD) (ZAR'000) (ZAR)
--------------------------------------------------------
2012 2011 2012 2011 2012 2011 2012 2011
--------------------------------------------------------
GAAP 9,373 44,862 0.21 1.00 79,268 350,808 1.74 7.80
Intangible asset
amortization, net 7,155 7,196 60,518 56,268
Stock-based
compensation
charge 2,233 1,040 18,885 8,132
Facility fees for
KSNET debt 164 211 1,387 1,650
DOJ and SEC
investigations-
related expenses 561 - 4,744 -
Acquisition-
related costs 73 - 617 -
Change in tax law - (18,315) - (150,373)
Create FTC
valuation
allowance - 8,232 - 67,588
Profit on
liquidation of
subsidiary - (3,994) - (31,232)
Loss on sale of
10% of Smart Life - 77 - 602
------------------ ------------------
Fundamental 19,559 39,309 0.43 0.87 165,419 303,443 3.63 6.74
------------------ ------------------
------------------ ------------------
Net 1 UEPS Technologies Inc.
Attachment C
Reconciliation of net income used to calculate earnings per
share basic and diluted and headline earnings per share basic and
diluted:
Three months ended December 31, 2012 and 2011
2012 2011
------------------------
Net income (USD'000) 2,629 25,094
Adjustments:
Loss on sale of 10% of Smart Life - 73
Profit on sale of property, plant and equipment (86) (26)
Tax effects on above 24 7
------------------------
Net income used to calculate headline earnings
(USD'000) 2,567 25,148
------------------------
------------------------
Weighted average number of shares used to
calculate net income per share basic earnings and
headline earnings per share basic earnings ('000) 45,545 44,935
Weighted average number of shares used to
calculate net income per share diluted earnings
and headline earnings per share diluted earnings
('000) 45,567 44,967
Headline earnings per share:
Basic, in USD 0.06 0.56
Diluted, in USD 0.06 0.56
Six months ended December 31, 2012 and 2011
2012 2011
------------------------
Net income (USD'000) 9,373 44,862
Adjustments:
Profit on liquidation of SmartSwitch Nigeria - (3,994)
Loss on sale of 10% of Smart Life - 77
Profit on sale of property, plant and equipment (86) (34)
Tax effects on above 24 10
------------------------
Net income used to calculate headline earnings
(USD'000) 9,311 40,921
------------------------
------------------------
Weighted average number of shares used to
calculate net income per share basic earnings and
headline earnings per share basic earnings ('000) 45,530 44,995
Weighted average number of shares used to
calculate net income per share diluted earnings
and headline earnings per share diluted earnings
('000) 45,578 45,026
Headline earnings per share:
Basic, in USD 0.20 0.91
Diluted, in USD 0.20 0.91
Contacts: Net 1 UEPS Technologies Inc. Dhruv Chopra Vice
President of Investor Relations +1-212-626-6675dchopra@net1.com
www.net1.com
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