JOHANNESBURG, Nov. 5 /PRNewswire-FirstCall/ -- Net 1 UEPS
Technologies, Inc. ("Net1" or the "Company") (NASDAQ:UEPS)(JSE:NT1)
today announced results for the three months ended September 30,
2009. Revenue during 1Q 2010 was $65.5 million, a year over year
decline of 4% in US dollars ("USD") and 3% in constant currency.
Earnings per share under US generally accepted accounting
principles ("GAAP") in 1Q 2010 was $0.37 versus $0.45 a year ago, a
decline of 18% in USD and 18% in constant currency. Fundamental
earnings per share for 1Q 2010 was $0.45 compared to $0.39 in the
1Q 2009, representing an increase of 15% in USD and 15% in constant
currency. Summary Financial Metrics Three months ended September
30, -------------------------------- % change % change 2009 2008(2)
in USD in ZAR ------ -------- ------ ------- (All figures in USD
'000s except per share data) Revenue 65,514 67,935 (4)% (3)% GAAP
net income 17,941 26,244 (32)% (32)% Fundamental net income (1)
21,804 22,696 (4)% (4)% GAAP earnings per share ($) 37 45 (18)%
(18)% Fundamental earnings per share ($)(1) 45 39 15% 15% Fully
diluted shares outstanding ('000's) 48,918 58,362 (16)% Average
period USD/ ZAR exchange rate 7.82 7.80 -% (1) Fundamental net
income and earnings per share is GAAP net income and earnings per
share excluding the amortization of acquisition-related intangible
assets, net of deferred taxes, and stock-based compensation
charges. In addition, the calculation of fundamental net income and
earnings per share for 1Q 2009 also excludes the effects of the
change in the Company's fully distributed tax rate from 35.45% to
34.55%, JSE listing costs, a bank facility fee and a foreign
exchange gain, net of tax, related to a short-term investment. (2)
Basic and fundamental earnings per shares for 1Q 2009, have been
retrospectively adjusted, as required by FSP EITF 03-6-1 (Topic
260), to include participating securities in the weighted average
number of outstanding shares of common stock. The following factors
had significant impact on the comparability of our 2010 first
quarter results to last year: -- Inflation-adjusted fixed fees on
pension distribution: 1Q 2010 results was favorably impacted by the
inflation-adjusted fixed fee effective from April 2009 for the
distribution of a minimum number of social welfare grants; --
Increased transaction volumes at EasyPay: 1Q 2010 results were
favorably impacted by increased transaction volumes at EasyPay
resulting from growth in value added services; -- Tax comparison:
1Q 2009 results were favorably impacted by a reduction in the
Company's fully-distributed tax rate, which became effective in 1Q
2009. -- Intangible asset amortization related to acquisitions: 1Q
2010 and 1Q 2009, respectively, includes $2.9 million and $0.9
million intangible asset amortization related to acquisitions; --
Non-recurring items: In 1Q 2009, hardware and software revenue
included one-time contributions of $6.2 million from Ghana and
Nedbank, while GAAP EPS was positively influenced by a $4.0 million
foreign exchange gain, all of which had no impact in 1Q 2010.
Comments and Outlook "Our results, particularly within core
transaction-based activities, demonstrate the strength of our
business model and the power of our technology, allowing us to take
advantage of opportunities created by economic challenges
globally," said Dr. Serge Belamant, Chairman and Chief Executive
Officer of Net1. "While we did face difficult year-over-year
comparisons in our hardware, software and related technology sales
segment, we continue to grow both revenue and profitability in
transaction-based activities. We remain an integral distributor of
welfare grants for the South African government, and we continue to
make progress on business development activities that should allow
us to export our technology to more countries around the globe. We
remain committed to delivering sustainable growth for all of our
stake holders," he concluded. "We reiterate our guidance of at
least 20% constant currency fundamental earnings per share growth
for fiscal year 2010," said Herman Kotze, Chief Financial Officer
of Net1. "Our growth during 1Q 2010 was driven by our core pension
and welfare business, further penetration of our merchant acquiring
platform and increased contribution of value-added services at
EasyPay as well as contributions from our activities in Iraq," he
concluded. Results of operations Net1's frequently asked questions
and operating metrics will be posted on the Company's website
(http://www.net1.com/). Transaction-based activities
Transaction-based activities revenue was $45 million, up 11% from
1Q 2009 in USD and 12% higher on a constant currency basis. Revenue
and operating income increased as a result of the standard pricing
formula agreed with SASSA, which resulted in a higher average
revenue per grant, increased transactions processed through EasyPay
and the opening of the October 2009 payfile in the last three days
of September 2009, compared to the last two days of September 2008.
Operating margin increased to 59% from 54% during 1Q 2010 primarily
as a result of the early opening of the October 2009 pay file,
higher average revenue per grant paid due to the standard pricing
formula for all provinces and improved margins at EasyPay.
Excluding amortization of intangibles for EasyPay and RMT, segment
operating margin was 61% in 1Q 2010. Smart card accounts Smart card
account revenue of $8.1 million declined 6% year-over-year both in
USD and on a constant currency basis. Operating margin for the
segment remained consistent at 45%. Financial services Financial
services revenue of $0.8 million, was down 56% from 1Q 2009 in both
USD and constant currency, principally due to the divestiture of
the Company's traditional microlending business in 3Q 2009.
Operating margin for the segment however, improved significantly to
67% from 18% in 1Q 2009 as a result of the sale of this low-margin
business, and higher profitability in our underlying UEPS-based
lending activities. Hardware, software and related technology sales
Revenue of $11.7 million decreased 32% year-over-year both in USD
and in constant currency. The decrease was due primarily to
cyclical pressure on certain commodity hardware products we sell,
non-recurring revenues from Ghana and Nedbank during 1Q 2009 and
lower revenues from BGS. During 1Q 2009, Ghana and Nedbank had
one-time contributions of $6.2 million to segment revenue.
Operating margin for the segment was (15)% in 1Q 2010 compared to
24% in the quarter last year, due to non-recurring Ghana and Iraq
sales in the prior year and high intangible asset amortization
related to the BGS acquisition. Excluding amortization of all
intangibles, segment operating margin was 7%. Cash flow and
liquidity At September 30, 2009, the Company had cash and
equivalents of $139 million, down from $221 million at June 30,
2009. For 1Q 2010, the Company generated operating cash flow of
$37.0 million compared to cash used in operating activities of
$33.0 million in 1Q 2009. Capital expenditures for 1Q 2010 were
$0.6 million. Repurchase of Brait Shares In July 2009, the Company
repurchased all Company shares held by Brait S.A. and its
investment affiliates for an aggregate repurchase price, including
transaction costs, of $125 million. The buyback of Brait's
9,221,526 shares represented 16.9% of the Company's then
outstanding shares. 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 Under GAAP, the Company
is required to fair value all intangible assets on the date of the
acquisition and amortize these intangible assets over their
expected useful lives. In addition, under GAAP, the Company is
required to measure the fair value of options and other stock-based
awards, and recognize a stock-based compensation charge over the
requisite service period. The Company's GAAP net income and
earnings per share for the three months September 30, 2009 and
2008, include amortization of intangibles and stock-based
compensation, as well as, in 2008, JSE listing costs, a bank
facility fee and a foreign exchange gain, net of tax, related to a
short-term investment. Finally, the effect of the change in the
fully distributed tax rate from 35.45% to 34.55% in July 2008 was
included in net income and earnings per share for the three months
ended September 30, 2008. The Company excludes all of the
above-mentioned amounts when calculating fundamental net income and
earnings per share, because management believes that these
adjustments enhance its own evaluation, as well as an investor's
understanding, of the Company's 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 loss (profit) on sale of property, plant and
equipment, net of related tax effects. 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 Net1 will host a conference call to review first quarter
results on November 6, 2009, at 8:00 a.m. Eastern Time. To
participate in the call, dial 1-800-860-2442 (US only),
1-866-605-3852 (Canada only), 0-800-917-7042 (UK only) or
0-800-200-648 (South Africa only) five 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,
http://www.net1.com/. Please click on the webcast link at least 10
minutes prior to the call. A webcast of the call will be available
for replay on the Net1 website through November 27, 2009. About
Net1 (http://www.net1.com/) Net1 provides its universal electronic
payment system, or UEPS, as an alternative payment system for the
unbanked and under-banked populations of developing economies. Our
market-leading system enables the estimated four billion people who
generally have limited or no access to a bank account, to enter
affordably into electronic transactions with each other, government
agencies, employers, merchants and other financial service
providers. Our universal electronic payment system, or UEPS, uses
smart cards that operate in real-time but offline, unlike
traditional payment systems offered by major banking institutions
that require immediate access through a communications network to a
centralized computer. This offline capability means that users of
the Net1 system can enter into transactions at any time with other
card holders even in the most remote areas so long as a portable
offline smart card reader is available. In addition to payments and
purchases, UEPS can be used for banking, healthcare management,
international money transfers, voting and identification. The
Company also focuses on the development and provision of secure
transaction technology, solutions and services. The Company's core
competencies around secure online transaction processing,
cryptography and integrated circuit card (chip/smart card)
technologies are principally applied to electronic commerce
transactions in the telecommunications, banking, retail, energy and
utilities market sectors. Additionally, through our majority-owned
subsidiary, BGS Smartcard System AG ("BGS") based in Austria, the
Company implements, develops and integrates smart card-based
offline and online financial transaction systems in cooperation
with banks, enterprises and government authorities in Russia and
the other members of the Commonwealth of Independent States. 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 the
Company's actual results, levels of activity, performance or
achievements to differ materially from those expressed in such
forward-looking statements are included in the Company's filings
with the Securities and Exchange Commission. The Company undertakes
no obligation to revise any of these statements to reflect future
circumstances or the occurrence of unanticipated events. NET 1 UEPS
TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of
Operations Three months ended ------------------ September 30,
------------- 2009 2008 ---- ---- (In thousands, except per share
data) REVENUE $65,514 $67,935 EXPENSE Cost of goods sold, IT
processing, servicing and support 16,827 19,236 Selling, general
and administration 17,740 17,998 Depreciation and amortization
4,579 3,423 ----- ----- OPERATING INCOME 26,368 27,278 UNREALIZED
FOREIGN EXCHANGE GAIN RELATED TO SHORT-TERM INVESTMENT - 6,076
INTEREST INCOME, net 2,371 3,162 ----- ----- INCOME BEFORE INCOME
TAXES 28,739 36,516 INCOME TAX EXPENSE 11,031 9,902 ------ -----
NET INCOME FROM CONTINUING OPERATIONS BEFORE LOSS FROM
EQUITY-ACCOUNTED INVESTMENTS 17,708 26,614 LOSS FROM
EQUITY-ACCOUNTED INVESTMENTS (111) (310) ---- ---- NET INCOME
17,597 26,304 (ADD) LESS: NET (LOSS) INCOME ATTRIBUTABLE TO
NON-CONTROLLING INTEREST (344) 60 ---- --- NET INCOME ATTRIBUTABLE
TO NET1 $17,941 $26,244 ------- ------- Net income per share, in
cents Basic earnings attributable to Net1 shareholders 36.8 45.2
Diluted earnings attributable to Net1 shareholders 36.7 45.0 NET 1
UEPS TECHNOLOGIES, INC. Condensed Consolidated Balance Sheets
Unaudited (A) September 30, June 30, 2009 2009 ---- ---- (In
thousands, except share data) ASSETS CURRENT ASSETS Cash and cash
equivalents $139,312 $220,786 Pre-funded social welfare grants
receivable 3,624 4,930 Accounts receivable, net of allowances of -
September: $355; June: $395 43,766 42,475 Finance loans receivable,
net of allowances of - September: $243; June: $226 2,588 2,563
Deferred expenditure on smart cards 40 8 Inventory 6,617 7,250
Deferred income taxes 13,597 12,282 ------ ------ Total current
assets 209,544 290,294 OTHER LONG-TERM ASSETS, including available
for sale securities 7,567 7,147 PROPERTY, PLANT AND EQUIPMENT, NET
OF ACCUMULATED DEPRECIATION OF - September: $30,637; June: $28,169
7,342 7,376 EQUITY-ACCOUNTED INVESTMENTS 2,471 2,583 GOODWILL
121,935 116,197 INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION
OF - September: $36,350; June: $31,150 75,447 75,890 ------ ------
TOTAL ASSETS 424,306 499,487 ------- ------- LIABILITIES CURRENT
LIABILITIES Accounts payable 4,230 5,481 Other payables 68,563
61,454 Income taxes payable 17,799 10,874 ------ ------ Total
current liabilities 90,592 77,809 DEFERRED INCOME TAXES 45,543
41,737 OTHER LONG-TERM LIABILITIES, including noncontrolling
interest loans 4,125 4,185 COMMITMENTS AND CONTINGENCIES - -
------- ------- TOTAL LIABILITIES 140,260 123,731 ------- -------
EQUITY NET1 EQUITY: COMMON STOCK Authorized: 200,000,000 with
$0.001 par value; Issued and outstanding shares, net of treasury -
September: 45,378,397; June: 54,506,487 59 59 ADDITIONAL
PAID-IN-CAPITAL 129,056 126,914 TREASURY SHARES, AT COST:
September: 13,149,042; June: 3,927,516 (173,671) (48,637)
ACCUMULATED OTHER COMPREHENSIVE LOSS (44,985) (58,472) RETAINED
EARNINGS 371,294 353,353 ------- ------- TOTAL NET1 EQUITY 281,753
373,217 NON-CONTROLLING INTEREST 2,293 2,539 ----- ----- TOTAL
EQUITY 284,046 375,756 ------- ------- TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $424,306 $499,487 -------- -------- (A) -
Derived from audited financial statements NET 1 UEPS TECHNOLOGIES,
INC. Unaudited Condensed Consolidated Statements of Cash Flows
Three months ended ------------------ September 30, -------------
2009 2008 ---- ---- (In thousands) Cash flows from operating
activities Net income $17,597 $26,304 Depreciation and amortization
4,579 3,423 Loss from equity-accounted investments 111 310 Fair
value adjustments (142) (6,048) Interest payable 78 639 (Profit)
Loss on disposal of property, plant and equipment (1) 1 Stock-based
compensation charge 1,422 1,205 Facility fee amortized - 748
Decrease (Increase) in accounts receivable, pre-funded social
welfare grants receivable and finance loans receivable 5,529
(46,141) Increase in deferred expenditure on smart cards (30) (23)
Decrease (Increase) in inventory 1,015 (217) Increase (Decrease) in
accounts payable and other payables 25 (14,415) Increase in taxes
payable 6,211 3,409 Increase (Decrease) in deferred taxes 575
(2,170) --- ------ Net cash provided by (used in) operating
activities 36,969 (32,975) ------ -------- Cash flows from
investing activities Capital expenditures (641) (2,844) Proceeds
from disposal of property, plant and equipment 49 1 Acquisition of
BGS, net of cash acquired - (95,328) Acquisition of shares in
equity-accounted investments - (550) --- ---- Net cash used in
investing activities (592) (98,721) ---- -------- Cash flows from
financing activities Proceeds from issue of share capital, net of
share issue expenses 720 155 Treasury stock acquired (126,304) -
Proceeds from short-term loan facility - 110,000 Payment of
facility fee - (1,100) Repayment of noncontrolling interest loan -
2 Proceeds from bank overdrafts - (1) Repayment of loans (137) -
---- --- Net cash provided by financing activities (125,721)
109,056 --------- ------- Effect of exchange rate changes on cash
7,870 (3,911) ----- ------ Net decrease in cash and cash
equivalents (81,474) (26,551) Cash and cash equivalents - beginning
of period 220,786 272,475 ------- ------- Cash and cash equivalents
- end of period $139,312 $245,924 -------- -------- Net 1 UEPS
Technologies, Inc. Attachment A Operating segment revenue,
operating income and operating margin: Three months ended September
30, 2009 and 2008 Q1 '10 Q1 '09 Change ------ ------ ------ ' In
Constant Key segmental data, in $'000, USD USD In USD Currency(1)
except margins --- --- ------ ----------- Revenue:
Transaction-based activities 44,978 40,344 11% 12% Smart card
accounts 8,074 8,570 (6)% (6)% Financial services 792 1,784 (56)%
(56)% Hardware, software and related technology sales 11,670 17,237
(32)% (32)% ------ ------ Total consolidated revenue 65,514 67,935
(4)% (3)% ------ ------ Consolidated operating income (loss):
Transaction-based activities 26,668 21,638 23% 23% Smart card
accounts 3,670 3,895 (6)% (6)% Financial services 531 327 62% 63%
Hardware, software and related technology sales (1,713) 4,134
(141)% (141)% Corporate/ Eliminations (2,788) (2,716) 3% 3% ------
------ Total operating income 26,368 27,278 (3)% (3)% ------ ------
Operating income margin (%) Transaction-based activities 59% 54%
Smart card accounts 45% 45% Financial services 67% 18% Hardware,
software and related technology sales (15)% 24% Overall operating
margin 40% 40% (1) - This information shows what the change in
these items would have been if the USD/ ZAR exchange rate that
prevailed during the first quarter of fiscal 2010 also prevailed
during the first quarter of fiscal 2009. Net 1 UEPS Technologies,
Inc. Attachment B Reconciliation of GAAP net income to fundamental
net income: Three months ended September 30, 2009 and 2008 Net
Income EPS, basic (USD'000) (USD cents) --------- ----------- 2009
2008 2009 2008 ---- ---- ---- ---- GAAP 17,941 26,244 37 45
Amortization of intangible assets(1) 2,441 1,490 ----- -----
Customer relationships 3,237 1,203 Software and unpatented
Technology - 851 Trademarks 87 87 Deferred tax benefit (883) (651)
---- ---- Stock-based charge 1,422 1,205 JSE listing costs - 441
Facility fee - 748 Foreign exchange gain related to a short-term
investment, net of tax of $2,100 - (3,976) Change in tax rate (2) -
(3,456) Fundamental 21,804 22,696 45 39 ------ ------ Net income
EPS, basic (ZAR'000) (ZAR cents) ---------- ----------- 2009 2008
2009 2008 ---- ---- ---- ---- GAAP 140,214 204,822 287 353
Amortization of intangible assets(1) 19,073 11,631 ------ ------
Customer relationships 25,299 9,389 Software and unpatented
Technology - 6,642 Trademarks 679 679 Deferred tax benefit (6,905)
(5,079) ------ ------ Stock-based charge 11,113 9,404 JSE listing
costs - 3,442 Facility fee - 5,838 Foreign exchange gain related to
a short-term investment, net of tax of $2,100 - (31,940) Change in
tax rate (2) - (26,524) Fundamental 170,400 176,673 349 304 -------
------- (1) Amortization of Prism, EasyPay, RMT and BGS
intangibles, net of deferred tax benefit. (2) Represents the effect
of the change in the fully distributed tax rate from 35.45% to
34.55% in fiscal 2009. 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 September 30, 2009 and 2008 2009 2008
---- ---- Net income (USD'000) 17,941 26,244 Adjustments: (Profit)
Loss on sale of property, plant and equipment (USD'000) (1) 1 Tax
effects on above (USD'000) - - Net income used to calculate
headline earnings (USD'000) 17,940 26,245 ------ ------ Weighted
average number of shares used to calculate net income per share
basic earnings and headline earnings per share basic earnings
('000) 48,815 58,031 Weighted average number of shares used to
calculate net income per share diluted earnings and headline
earnings per share diluted earnings ('000) 48,918 58,362 Headline
earnings per share: Basic earnings - common stock and linked units,
in US cents 37 45 Diluted earnings - common stock and linked units,
in US cents 37 45 DATASOURCE: Net 1 UEPS Technologies, Inc.
CONTACT: Dhruv Chopra, Vice President of Investor Relations, Net 1
UEPS Technologies, Inc., +1-212-626-6675, Web Site:
http://www.net1.com/
Copyright