JOHANNESBURG, SOUTH AFRICA --(Marketwired - August 25, 2016) - Net 1 UEPS Technologies, Inc. (
- Q4 2016 Revenue of $151.3 million, an increase of 15% in constant currency;
- Q4 2016 FEPS of $0.51, which includes an adverse impact of $2.0 million, or $0.042 per share, attributable to taxes;
- Closed IFC transaction with the issue of 10 million shares for $107.7 million on May 11, 2016.
| Summary Financial Metrics | |||||||||
| Three months ended June 30, | |||||||||
| 2016 | 2015 | % change in USD | % change in ZAR | ||||||
| (All figures in USD '000s except per share data) | |||||||||
| Revenue | 151,259 | 164,286 | (8% | ) | 15% | ||||
| GAAP net income | 24,356 | 23,914 | 2% | 27% | |||||
| Fundamental net income (1) | 26,299 | 27,233 | (3% | ) | 20% | ||||
| GAAP earnings per share ($) | 0.48 | 0.51 | (7% | ) | 16% | ||||
| Fundamental earnings per share ($) (1) | 0.51 | 0.58 | (12% | ) | 10% | ||||
| Fully-diluted shares outstanding ('000's) | 51,224 | 46,944 | 10% | ||||||
| Average period USD/ ZAR exchange rate | 15.02 | 12.04 | 25% | ||||||
| Year ended June 30, | |||||||||
| 2016 | 2015 | % change in USD | % change in ZAR | ||||||
| (All figures in USD '000s except per share data) | |||||||||
| Revenue | 590,749 | 625,979 | (6% | ) | 19% | ||||
| GAAP net income | 82,454 | 94,735 | (13% | ) | 10% | ||||
| Fundamental net income (1) | 92,113 | 108,205 | (15% | ) | 7% | ||||
| GAAP earnings per share ($) | 1.72 | 2.03 | (15% | ) | 7% | ||||
| Fundamental earnings per share ($) (1) | 1.92 | 2.32 | (17% | ) | 5% | ||||
| Fully-diluted shares outstanding ('000's) | 48,105 | 46,913 | 3% | 3% | |||||
| Average period USD/ ZAR exchange rate | 14.38 | 11.43 | 26% | ||||||
| (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 Q4 2016 and Q4 2015 results
- Unfavorable impact from the strengthening of the U.S. dollar against primary functional currencies: The U.S. dollar appreciated by 26% against the ZAR and 9% against the KRW during Q4 2016, which negatively impacted our reported results;
- Higher financial services revenue and transaction fees: We experienced growth in lending revenues due to an increase in the number of loans extended, and an increase in transaction fees;
- Ongoing contributions from EPE and Smart Life and expansion of branch network: Our EPE and Smart Life offerings contributed to an increase in revenue in ZAR, as well as an associated increase in establishment costs for our branch network;
- Increase in ad hoc terminal and card sales: Our reported results were positively impacted by higher ad hoc terminal and card sales during Q4, 2016;
- Gain on change in accounting for Finbond: We recognized a gain of $1.6 million, net of tax, related to the change to the equity method of accounting from available-for-sale method for Finbond ;
- Tax impact of dividends from South African subsidiary: Our income tax expense includes approximately $2.0 million related to the tax impact, including withholding taxes, resulting from further distributions from our South African subsidiary during fiscal 2016, which helped reduce the impact of a weakened ZAR on our reported cash balances. The conversion of a significant portion of our ZAR cash reserves to USD also had a negative impact on our interest income due to the material difference between ZAR and USD deposit rates; and
- Issue of 10 million shares of our common stock: Our earnings per share and fundamental earnings per share for Q4 2016 were adversely impacted by the issuance of 10 million shares of our common stock to IFC Investors, partially offset by modestly higher interest income due to the cash consideration received for the share issue.
"As a disruptive force providing technology-based solutions to facilitate financial inclusion, we have built a business model that is defensible, differentiated, sustainable and socially responsible, and that once again has delivered top and bottom line constant currency growth despite on-going political and regulatory interference in South Africa, and macroeconomic events globally," said Serge Belamant, Chairman and CEO of Net1. "Being disruptive is not for the fainthearted, but we believe that unless norms, cartels and traditional thinking are challenged, progress will be obstructed at the cost of those who need it most. In fiscal 2017, we will continue to grow our South African businesses, but will also directly market and sell our UEPS/EMV solutions, and their related financial products, in other developing economies with the help of our partners like the IFC, further aided by focused acquisitions. We have spent the past few months on the restructuring and building of our management teams, and are now ready and able to scale our operations internationally," he concluded.
"During fiscal 2017, we expect to implement our strategic plan by investing between $15 and $20 million on building out our direct international sales force, management teams and infrastructure, establishing a presence in new countries and further developing our products across Europe and many emerging countries in Africa, Asia and Latin America. These investments will be a drag on our reported results but the resultant top line benefits should start to accrue in the second half of fiscal 2017, and more meaningfully in fiscal 2018 and beyond," said Herman Kotze, Chief Financial Officer of Net1. "In South Africa, we expect our CPS business to remain flat, while our financial inclusion businesses should continue to grow in excess of 15%. As a result of these factors, and taking into consideration the approximately 10 million shares issued to the IFC in May 2016, for fiscal 2017, we anticipate our fundamental earnings per share to be at least $1.65. Our guidance assumes that our existing contract with SASSA remains in effect for the full year on the existing terms and conditions, an updated constant currency base of ZAR 14.38/$1, a share count of 54.1 million shares, and a tax rate between 33%-35%," he concluded.
Purchase of shares under 10b5-1 plan and unscheduled Korean debt repayment
As of August 24, 2016, we had repurchased approximately 1.2 million shares of our common stock under our $50 million 10b5-1 plan that we adopted on June 29, 2016 and that expires at the end of August 2016.
On July 29, 2016, we prepaid KRW 30 billion (approximately $26.0 million, translated at exchange rates applicable as of June 30, 2016) of our Korean debt facility. We had outstanding long-term debt of KRW 30.0 billion following this unscheduled payment, and a replenished revolver facility of KRW 10 billion which expires in 2018.
Results of Operations by Segment and Liquidity
Our operating metrics will be updated and posted on our website ( www.net1.com ).
South African transaction processing
Segment revenue was $53.6 million in Q4 2016, down 10% compared with Q4 2015 in USD, but 12% higher on a constant currency basis. In ZAR, the increase in segment revenue and operating income was primarily due to higher EPE transaction revenue as a result of increased usage of our ATMs, more low-margin transaction fees generated from card holders using the South African National Payment System, increased inter-segment transaction processing activities, and a modest increase in the number of social welfare grants distributed. Our operating income margin for Q4 2016 and 2015 was 24% and 19%, respectively, and was higher primarily due to higher EPE revenue as a result of increased ATM transactions, an increase in inter-segment transaction processing activities, an increase in the number of beneficiaries paid in Q4 2016 and a modest increase in the margin of transaction fees generated from cardholders using the South African National Payment System, partially offset by annual salary increases granted to our South African employees.
International transaction processing
Segment revenue was $47.2 million in Q4 2016, up 11% compared with Q4 2015 in USD, and up 38% on a constant currency basis. Revenue increased in constant currency primarily due to higher transaction volume at KSNET during Q4 2016 and the contribution from Transact24 and Masterpayment from April 2016. Operating income during Q4 2016 was higher primarily due to higher processing activity at KSNET, partially offset by an increase in depreciation expenses at KSNET and ongoing ZAZOO start-up costs. Operating income margin for Q4 2016 and 2015 was constant at 17%.
Financial inclusion and applied technologies
Segment revenue was $62.1 million in Q4 2016, down 15% compared with Q4 2015 in USD and up 6% on a constant currency basis. In ZAR, Financial inclusion and applied technologies revenue and operating income increased primarily due to more ad hoc terminal and card sales, more insurance policies sold and higher lending service fees, partially offset by lower sales of prepaid airtime and other value-added services . Operating income for Q4 2016 was also adversely impacted by establishment costs for Smart Life and expansion of our branch network as well as an increase in inter-segment charges. Operating income margin for the Financial inclusion and applied technologies segment was 22% and 27%, respectively, during Q4 2016 and 2015, and has decreased primarily due to establishment costs for Smart Life, expansion of our branch network and an increase in inter-segment charges.
Corporate/eliminations
Our corporate expenses have decreased largely due to the impact of the stronger USD on goods and services procured in other currencies, primarily the ZAR, lower amortization costs and the gain resulting from the change in accounting for Finbond, partially offset by modest increases in USD denominated goods and services purchased from third parties and directors' fees.
Cash flow and liquidity
At June 30, 2016, we had cash and cash equivalents of $223.6 million, up from $117.6 million at June 30, 2015. The increase in our cash balances from June 30, 2015, was primarily due to the cash received from issue of our common stock to the IFC Investors and the expansion of all of our core businesses, partially offset by the strengthening of the U.S. dollar against our primary functional currencies, repurchase of shares of our common stock, provisional tax payments, acquisitions and capital expenditures.
Excluding the impact of interest received, interest paid under our Korean debt and taxes, the increase in cash from operating activities resulted from improved trading activity during fiscal 2016. Capital expenditures for Q4 2016 and 2015 were $7.1 million and $11.6 million, respectively, and have decreased primarily due to the acquisition of fewer payment processing terminals in South Korea. During Q4 2016, we paid $25.9 million for 100% of the issued and outstanding shares of Masterpayment. We received approximately $107.7 million from the issuance of approximately 10 million shares of our common stock to the IFC Investors. Finally, we paid $2.7 million related to the repurchase of our common stock under our buy-back authorization and made a scheduled Korean long-term debt repayment of $8.7 million
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 and US government investigations-related and US lawsuit expenses as well as, in fiscal 2016, a fair value gain resulting from the acquisition of Transact24, a gain resulting from the change in accounting for Finbond and costs related to the IFC transaction and to acquisitions consummated or ultimately not pursued, and in fiscal 2015, a refund (net of taxes) related to Korean industry-wide litigation that has now been finalized. 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, and in fiscal 2016, a fair value gain resulting from the acquisition of Transact24 and a gain resulting from the change in accounting for Finbond. 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 Q4 2016 results on August 26, 2016, at 8:00 Eastern Time. To participate in the call, dial 1-855-481-5362 (US and Canada), 0808-162-4061 (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 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 18, 2016.
About Net1 ( www.net1.com )
Net1 is a leading provider of alternative payment systems that leverage its Universal Electronic Payment System ("UEPS") or utilize its proprietary mobile technologies. The Company operates market-leading payment processors in South Africa and the Republic of Korea. Through Transact24, Net1 offers debit, credit and prepaid processing and issuing services for Visa, MasterCard and ChinaUnionPay in China and other territories across Asia-Pacific, Europe and Africa, and the United States. Through Masterpayment, Net1 provides payment processing and enables working capital financing in Europe.
UEPS permits the Company to facilitate biometrically secure, real-time electronic transaction processing to unbanked and under-banked populations of developing economies around the world in an online or offline environment. Net1's UEPS/EMV solution is interoperable with global EMV standards that seamlessly enable access to all the UEPS functionality in a traditional EMV environment. In addition to payments, UEPS can be used for banking, healthcare management, payroll, remittances, voting and identification.
Net1's mobile technologies include its proprietary mobile payments solution - MVC, which offers secure mobile-based payments, as well as mobile banking and prepaid value-added services in developed and emerging countries. The Company intends to deploy its varied mobile solutions through its ZAZOO business unit, which is an aggregation of innovative technology companies and is based in the United Kingdom.
Net1 has a primary listing on the NASDAQ and a secondary listing on the Johannesburg Stock Exchange.
Forward-Looking Statements
This announcement contains forward-looking statements that involve known and unknown risks and uncertainties. A discussion of various factors that cause our actual results, levels of activity, performance or achievements to differ materially from those expressed in such forward-looking statements are included in our filings with the Securities and Exchange Commission. We undertake no obligation to revise any of these statements to reflect future events.
| NET 1 UEPS TECHNOLOGIES, INC. | |||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||
| Unaudited | (A) | ||||||||||||
| Three months ended | Year ended | ||||||||||||
| June 30, | June 30, | ||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||
| (In thousands, except per share data) | (In thousands, except per share data) | ||||||||||||
| REVENUE | $ | 151,259 | $ | 164,286 | $ | 590,749 | $ | 625,979 | |||||
| EXPENSE | |||||||||||||
| Cost of goods sold, IT processing, servicing and support | 70,785 | 80,582 | 290,101 | 297,856 | |||||||||
| Selling, general and administration | 37,879 | 40,797 | 145,886 | 158,919 | |||||||||
| Depreciation and amortization | 10,412 | 10,294 | 40,394 | 40,685 | |||||||||
| OPERATING INCOME | 32,183 | 32,613 | 114,368 | 128,519 | |||||||||
| INTEREST INCOME | 4,008 | 4,467 | 15,292 | 16,355 | |||||||||
| INTEREST EXPENSE | 543 | 1,096 | 3,423 | 4,456 | |||||||||
| INCOME BEFORE INCOME TAX EXPENSE | 35,648 | 35,984 | 126,237 | 140,418 | |||||||||
| INCOME TAX EXPENSE | 10,774 | 11,980 | 42,080 | 44,136 | |||||||||
| NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS | 24,874 | 24,004 | 84,157 | 96,282 | |||||||||
| EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS | 61 | 219 | 639 | 452 | |||||||||
| NET INCOME | 24,935 | 24,223 | 84,796 | 96,734 | |||||||||
| LESS NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST | 579 | 309 | 2,342 | 1,999 | |||||||||
| NET INCOME ATTRIBUTABLE TO NET1 | $ | 24,356 | $ | 23,914 | $ | 82,454 | $ | 94,735 | |||||
| Net income per share, in United States dollars | |||||||||||||
| Basic earnings attributable to Net1 shareholders | $ | 0.48 | $ | 0.51 | $ | 1.72 | $ | 2.03 | |||||
| Diluted earnings attributable to Net1 shareholders | $ | 0.48 | $ | 0.51 | $ | 1.71 | $ | 2.02 | |||||
| (A) - Derived from audited financial statements | |||||||||||||
| NET 1 UEPS TECHNOLOGIES, INC. | |||||||||||
| Unaudited Condensed Consolidated Balance Sheets | |||||||||||
| (A) | (A) | ||||||||||
| June 30, | June 30, | ||||||||||
| 2016 | 2015 | ||||||||||
| (In thousands, except share data) | |||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS | |||||||||||
| Cash and cash equivalents | $ | 223,644 | $ | 117,583 | |||||||
| Pre-funded social welfare grants receivable | 1,580 | 2,306 | |||||||||
| Accounts receivable, net of allowances of – 2016: $1,669; 2015: $1,956 (B) | 107,805 | 121,335 | |||||||||
| Finance loans receivable, net of allowances of – 2016: $4,494; 2015: $4,227 | 37,009 | 40,373 | |||||||||
| Inventory | 10,004 | 12,979 | |||||||||
| Deferred income taxes | 6,956 | 7,298 | |||||||||
| Total current assets before settlement assets | 386,998 | 301,874 | |||||||||
| Settlement assets (C) | 536,725 | 692,442 | |||||||||
| Total current assets | 923,723 | 994,316 | |||||||||
| PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – 2016: $99,969; 2015: $94,014 | 54,977 | 52,320 | |||||||||
| EQUITY-ACCOUNTED INVESTMENTS | 25,645 | 14,329 | |||||||||
| GOODWILL | 179,478 | 166,437 | |||||||||
| INTANGIBLE ASSETS, net of accumulated amortization of – 2016: $91,208; 2015: $84,668 | 48,556 | 47,124 | |||||||||
| OTHER LONG-TERM ASSETS, including reinsurance assets (B) | 31,121 | 42,430 | |||||||||
| TOTAL ASSETS | 1,263,500 | 1,316,956 | |||||||||
| LIABILITIES | |||||||||||
| CURRENT LIABILITIES | |||||||||||
| Accounts payable | 14,097 | 21,453 | |||||||||
| Other payables | 37,479 | 45,595 | |||||||||
| Current portion of long-term borrowings | 8,675 | 8,863 | |||||||||
| Income taxes payable | 5,235 | 6,287 | |||||||||
| Total current liabilities before settlement obligations | 65,486 | 82,198 | |||||||||
| Settlement obligations (C) | 536,725 | 692,442 | |||||||||
| Total current liabilities | 602,211 | 774,640 | |||||||||
| DEFERRED INCOME TAXES | 12,559 | 10,564 | |||||||||
| LONG-TERM BORROWINGS | 43,134 | 50,762 | |||||||||
| OTHER LONG-TERM LIABILITIES, including insurance policy liabilities | 2,376 | 2,205 | |||||||||
| TOTAL LIABILITIES | 660,280 | 838,171 | |||||||||
| COMMITMENTS AND CONTINGENCIES | |||||||||||
| EQUITY | |||||||||||
| COMMON STOCK | |||||||||||
| Authorized: 200,000,000 with $0.001 par value; | |||||||||||
| Issued and outstanding shares, net of treasury - 2016: 55,271,954; 2015: 46,679,565 | 74 | 64 | |||||||||
| PREFERRED STOCK | |||||||||||
| Authorized shares: 50,000,000 with $0.001 par value; | |||||||||||
| Issued and outstanding shares, net of treasury: 2016: -; 2015: - | - | - | |||||||||
| ADDITIONAL PAID-IN-CAPITAL | 223,978 | 213,896 | |||||||||
| TREASURY SHARES, AT COST: 2016: 20,483,932; 2015: 18,057,228 | (241,627) | (214,520 | ) | ||||||||
| ACCUMULATED OTHER COMPREHENSIVE LOSS | (189,700) | (139,181 | ) | ||||||||
| RETAINED EARNINGS | 700,322 | 617,868 | |||||||||
| TOTAL NET1 EQUITY | 493,047 | 478,127 | |||||||||
| REDEEMABLE COMMON STOCK | 107,672 | - | |||||||||
| NON-CONTROLLING INTEREST | 2,501 | 658 | |||||||||
| TOTAL EQUITY | 603,220 | 478,785 | |||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,263,500 | $ | 1,316,956 | |||||||
| (A) - Derived from audited financial statements | |||||||||||
| (B) - We have restated amounts in our unaudited condensed consolidated balance sheet as at June 30, 2015. We have decreased accounts receivable, net of allowances and increased other long-term assets by approximately $27.4 million. This restatement has no impact on our previously reported consolidated statement of operations, consolidated statements of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows. | |||||||||||
| (C) As described in Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K, we have restated our settlement assets and obligations balances. The restatement resulted in an increase in settlement assets and obligations as of June 30, 2015, of $30.5 million. | |||||||||||
| NET 1 UEPS TECHNOLOGIES, INC. | ||||||||||||||||
| Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
| Unaudited | (A) | |||||||||||||||
| Three months ended | Year ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||
| Cash flows from operating activities | ||||||||||||||||
| Net Income | $ | 24,935 | $ | 24,223 | $ | 84,796 | $ | 96,734 | ||||||||
| Depreciation and amortization | 10,412 | 10,294 | 40,394 | 40,685 | ||||||||||||
| Earnings from equity-accounted investments | (61 | ) | (219 | ) | (639 | ) | (452 | ) | ||||||||
| Fair value adjustment | (94 | ) | 518 | 519 | 248 | |||||||||||
| Interest payable | 132 | 7 | 1,829 | 1,283 | ||||||||||||
| Facility fee amortized | 35 | 38 | 138 | 208 | ||||||||||||
| Gain on release from accumulated other comprehensive income | (2,176 | ) | - | (2,176 | ) | - | ||||||||||
| Gain on fair value of Transact24 | - | - | (1,909 | ) | - | |||||||||||
| Profit on disposal of property, plant and equipment | (173 | ) | (1 | ) | (286 | ) | (296 | ) | ||||||||
| Stock compensation charge, net of forfeitures | 953 | 513 | 3,598 | 3,195 | ||||||||||||
| Decrease (Increase) in accounts and finance loans receivable, and pre-funded grants receivable | 11,810 | (4,135 | ) | (3,401 | ) | 1,399 | ||||||||||
| Decrease (Increase) in inventory | 1,496 | (1,075 | ) | 1,001 | (3,846 | ) | ||||||||||
| (Decrease) Increase in accounts payable and other payables | (9,403 | ) | 6,804 | (7,840 | ) | (850 | ) | |||||||||
| (Decrease) Increase in taxes payable | (2,681 | ) | (3,507 | ) | 763 | 606 | ||||||||||
| (Decrease) Increase in deferred taxes | 21 | (1,631 | ) | (235 | ) | (3,656 | ) | |||||||||
| Net cash provided by operating activities | 35,206 | 31,829 | 116,552 | 135,258 | ||||||||||||
| Cash flows from investing activities | ||||||||||||||||
| Capital expenditures | (7,099 | ) | (11,614 | ) | (35,797 | ) | (36,436 | ) | ||||||||
| Proceeds from disposal of property, plant and equipment | 596 | 80 | 1,349 | 857 | ||||||||||||
| Acquisitions, net of cash acquired | (14,101 | ) | - | (15,767 | ) | - | ||||||||||
| Acquisition of available for sale securities | - | - | (8,900 | ) | - | |||||||||||
| Acquisition of equity of equity-accounted investment | - | (13,200 | ) | - | (13,200 | ) | ||||||||||
| Proceeds from sale of business | - | - | - | 1,895 | ||||||||||||
| Other investing activities, net | - | - | (5 | ) | (29 | ) | ||||||||||
| Net change in settlement assets (B) | (161,343 | ) | (24,314 | ) | 53,364 | (33,870 | ) | |||||||||
| Net cash used in investing activities | (181,947 | ) | (49,048 | ) | (5,756 | ) | (80,783 | ) | ||||||||
| Cash flows from financing activities | ||||||||||||||||
| Proceeds from issue of common stock | 107,682 | 265 | 111,444 | 2,045 | ||||||||||||
| Acquisition of treasury stock | (2,725 | ) | - | (26,637 | ) | (9,151 | ) | |||||||||
| Acquisition of interests in non-controlling interests | (11,189 | ) | - | (11,189 | ) | - | ||||||||||
| Repayment of long-term borrowings | (8,716 | ) | - | (8,716 | ) | (14,128 | ) | |||||||||
| Long-term borrowings obtained | - | 789 | 2,107 | 3,765 | ||||||||||||
| Sale of equity to non-controlling interest | - | - | 1,407 | |||||||||||||
| Dividends paid to non-controlling interest | - | - | - | (1,024 | ) | |||||||||||
| Net change in settlement obligations (B) | 161,343 | 24,314 | (53,364 | ) | 33,870 | |||||||||||
| Net cash provided by financing activities | 246,395 | 25,368 | 13,645 | 16,784 | ||||||||||||
| Effect of exchange rate changes on cash | 721 | (1,568 | ) | (18,380 | ) | (12,348 | ) | |||||||||
| Net increase in cash and cash equivalents | 100,375 | 6,581 | 106,061 | 58,911 | ||||||||||||
| Cash and cash equivalents – beginning of period | 123,269 | 111,002 | 117,583 | 58,672 | ||||||||||||
| Cash and cash equivalents – end of period | $ | 223,644 | $ | 117,583 | $ | 223,644 | $ | 117,583 | ||||||||
| (A) - Derived from audited financial statements | ||||||||||||||||
| (B) - As described in Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K, we have restated our settlement assets and obligations balances. The restatement resulted in an increase in cash flows from investing activities and an increase in cash flows from financing activities of $21.3 million during F2015, and an increase in cash flows from investing activities and an increase in cash flows from financing activities of $1.5 million during Q4, 2015. | ||||||||||||||||
Net 1 UEPS Technologies, Inc.
Attachment A
Operating segment revenue, operating income and operating margin:
| Three months ended June 30, 2016 and 2015 and March 31, 2016 | ||||||||||||||||
| Change - actual | Change - constant exchange rate (1) | |||||||||||||||
| Key segmental data, in $ '000, | Q4 '16 | Q4 '15 | Q3 '16 | Q4 '16 vs Q4'15 | Q4 '16 vs Q3 '16 | Q4 '16 vs Q4'15 | Q4 '16 vs Q3 '16 | |||||||||
| Revenue: | ||||||||||||||||
| South African transaction processing | $53,577 | $59,774 | $50,594 | (10%) | 6% | 12% | 1% | |||||||||
| International transaction processing | 47,154 | 42,573 | 40,588 | 11% | 16% | 38% | 10% | |||||||||
| Financial inclusion and applied technologies | 62,071 | 73,042 | 54,286 | (15%) | 14% | 6% | 9% | |||||||||
| Subtotal: Operating segments | 162,802 | 175,389 | 145,468 | (7%) | 12% | 16% | 6% | |||||||||
| Intersegment eliminations | (11,543) | (11,103) | (10,732) | 4% | 8% | 30% | 2% | |||||||||
| Consolidated revenue | $151,259 | $164,286 | $134,736 | (8%) | 12% | 15% | 7% | |||||||||
| Operating income (loss): | ||||||||||||||||
| South African transaction processing | $12,662 | $11,268 | $13,133 | 12% | (4%) | 40% | (8%) | |||||||||
| International transaction processing | 7,793 | 7,134 | 4,813 | 9% | 62% | 36% | 54% | |||||||||
| Financial inclusion and applied technologies | 13,457 | 19,385 | 11,469 | (31%) | 17% | (13%) | 11% | |||||||||
| Subtotal: Operating segments | 33,912 | 37,787 | 29,415 | (10%) | 15% | 12% | 9% | |||||||||
| Corporate/Eliminations | (1,729) | (5,174) | (3,224) | (67%) | (46%) | (58%) | (49%) | |||||||||
| Consolidated operating income | $32,183 | $32,613 | $26,191 | (1%) | 23% | 23% | 17% | |||||||||
| Operating income margin (%) | ||||||||||||||||
| South African transaction processing | 24% | 19% | 26% | |||||||||||||
| International transaction processing | 17% | 17% | 12% | |||||||||||||
| Financial inclusion and applied technologies | 22% | 27% | 21% | |||||||||||||
| Consolidated operating margin | 21% | 20% | 19% | |||||||||||||
| (1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the Q4 2016 also prevailed during Q4 2015 and Q3 2016. | ||||||||||||||||
| Year ended June 30, 2016 and 2015 | ||||||||||
| Change - actual | Change - constant exchange rate (1) | |||||||||
| Key segmental data, in '000, except margins | F2016 | F2015 | F2016 vs F2015 | F2016 vs F2015 | ||||||
| Revenue: | ||||||||||
| South African transaction processing | $212,574 | 236,452 | (10%) | 13% | ||||||
| International transaction processing | 169,807 | 164,554 | 3% | 30% | ||||||
| Financial inclusion and applied technologies | 249,403 | 272,600 | (9%) | 15% | ||||||
| Subtotal: Operating segments | 631,784 | 673,606 | (6%) | 18% | ||||||
| Intersegment eliminations | (41,035) | (47,627) | (14%) | 8% | ||||||
| Consolidated revenue | $590,749 | 625,979 | (6%) | 19% | ||||||
| Operating income: | ||||||||||
| South African transaction processing | $51,386 | 51,008 | 1% | 27% | ||||||
| International transaction processing | 23,389 | 26,805 | (13%) | 10% | ||||||
| Financial inclusion and applied technologies | 54,999 | 72,725 | (24%) | (5%) | ||||||
| Subtotal: Operating segments | 129,774 | 150,538 | (14%) | 9% | ||||||
| Corporate/Eliminations | (15,406) | (22,019) | (30%) | (12%) | ||||||
| Consolidated operating income | $114,368 | 128,519 | (11%) | 12% | ||||||
| Operating income margin (%) | ||||||||||
| South African transaction processing | 24% | 22% | ||||||||
| International transaction processing | 14% | 16% | ||||||||
| Financial inclusion and applied technologies | 22% | 27% | ||||||||
| Overall operating margin | 19% | 21% | ||||||||
| (1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during fiscal 2016 also prevailed during fiscal 2015. | ||||||||||
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 June 30, 2016 and 2015 | ||||||||||||||||||
| Net income (USD'000) | EPS, basic (USD) | Net income (ZAR'000) | EPS, basic (ZAR) | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||
| GAAP | 24,356 | 23,914 | 0.48 | 0.51 | 365,778 | 288,035 | 7.16 | 6.18 | ||||||||||
| Intangible asset amortization, net | 2,213 | 2,751 | 33,229 | 33,131 | ||||||||||||||
| Accounting change for Finbond | (1,732) | - | (26,011) | - | ||||||||||||||
| Stock-based compensation charge | 954 | 513 | 14,327 | 6,179 | ||||||||||||||
| Transaction costs | 473 | - | 7,104 | - | ||||||||||||||
| Facility fees for KSNET debt | 35 | 38 | 526 | 458 | ||||||||||||||
| US government investigations-related and US lawsuit expenses | - | 17 | - | 205 | ||||||||||||||
| Fundamental | 26,299 | 27,233 | 0.51 | 0.58 | 394,953 | 328,008 | 7.73 | 7.04 | ||||||||||
| Year ended June 30, 2016 and 2015 | ||||||||||||||||||
| Net income (USD'000) | EPS, basic (USD) | Net income (ZAR'000) | EPS, basic (ZAR) | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||
| GAAP | 82,454 | 94,735 | 1.72 | 2.03 | 1,186,035 | 1,082,584 | 24.78 | 23.17 | ||||||||||
| Intangible asset amortization, net | 8,413 | 11,263 | 120,989 | 128,708 | ||||||||||||||
| Stock-based compensation charge | 3,598 | 3,195 | 51,754 | 36,511 | ||||||||||||||
| Gain resulting from acquisition of Transact24 | (1,909) | - | (27,459) | - | ||||||||||||||
| Accounting change for Finbond | (1,732) | - | (24,913) | - | ||||||||||||||
| Transaction costs | 1,018 | - | 14,643 | - | ||||||||||||||
| US government investigations-related and US lawsuit expenses | 133 | 158 | 1,913 | 1,806 | ||||||||||||||
| Facility fees for KSNET debt | 138 | 208 | 1,985 | 2,377 | ||||||||||||||
| Refund related to litigation finalized in Korea, net | - | (1,354) | - | (15,473) | ||||||||||||||
| Fundamental | 92,113 | 108,205 | 1.92 | 2.32 | 1,324,947 | 1,236,513 | 27.68 | 26.46 | ||||||||||
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 June 30, 2016 and 2015 | |||||
| 2016 | 2015 | ||||
| Net income (USD'000) | 24,356 | 23,914 | |||
| Adjustments: | |||||
| Accounting change for Finbond | (1,732) | - | |||
| Profit on sale of property, plant and equipment | (173) | (64) | |||
| Tax effects on above | 48 | 18 | |||
| Net income used to calculate headline earnings (USD'000) | 22,499 | 23,868 | |||
| Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000) | 51,118 | 46,620 | |||
| Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000) | 51,224 | 46,944 | |||
| Headline earnings per share: | |||||
| Basic, in USD | 0.44 | 0.51 | |||
| Diluted, in USD | 0.44 | 0.51 | |||
| Year ended June 30, 2016 and 2015 | |||||
| 2016 | 2015 | ||||
| Net income (USD'000) | 82,454 | 94,735 | |||
| Adjustments: | |||||
| Gain resulting from acquisition of Transact24 | (1,909) | - | |||
| Accounting change for Finbond | (2,176) | - | |||
| Profit on sale of property, plant and equipment | (286) | (296) | |||
| Tax effects on above | 524 | 83 | |||
| Net income used to calculate headline earnings (USD'000) | 78,607 | 94,522 | |||
| Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000) | 47,863 | 46,733 | |||
| Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000) | 48,105 | 46,913 | |||
| Headline earnings per share: | |||||
| Basic, in USD | 1.64 | 2.02 | |||
| Diluted, in USD | 1.63 | 2.01 | |||
| Calculation of the denominator for headline diluted earnings per share | ||||||||||
| Q4 '16 | Q4 '15 | F2016 | F2015 | |||||||
| Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP | 51,118 | 46,620 | 47,863 | 46,733 | ||||||
| Effect of dilutive securities under GAAP | 106 | 324 | 242 | 180 | ||||||
| Denominator for headline diluted earnings per share | 51,224 | 46,944 | 48,105 | 46,913 | ||||||
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.
Investor Relations Contact: Dhruv Chopra Head of Investor Relations Phone: +1 917-767-6722 Email: dchopra@net1.com
