Net 1 UEPS Technologies, Inc. Reports Third Quarter 2013 Results

Net 1 UEPS Technologies, Inc. Reports Third Quarter 2013 Results 
- Bulk enrollment substantially completed; 19 million registrations
and 8.5 million cards issued as of March 31, 2013; 
- Revenue of $111 million, increased 32% in constant currency; and 
- Fundamental EPS of $0.05 including $21 million of direct
implementation and smart card costs. 
JOHANNESBURG, SOUTH AFRICA -- (Marketwired) -- 05/09/13 -- Net 1 UEPS
Technologies, Inc. (NASDAQ:UEPS)(JSE:NT1) today announced results for
the third quarter fiscal 2013. 


 
Summary Financial Metrics                                                   
                                                                            
                                            Three months ended March 31,    
                                        ------------------------------------
                                                           % change % change
                                             2013     2012   in USD   in ZAR
                                        ------------------------------------
(All figures in USD '000s except per                                        
 share data)                                                                
                                                                            
Revenue                                   111,141   90,664      23%      32%
                                                                            
GAAP net (loss) income                    (4,681)    7,766       nm       nm
                                                                            
Fundamental net income(1)                   2,362   12,450    (81%)    (80%)
                                                                            
GAAP loss earnings per share ($)           (0.10)     0.17       nm       nm
                                                                            
Fundamental earnings per share ($)(1)        0.05     0.28    (82%)    (80%)
                                                                            
Fully-diluted shares outstanding                                            
 ('000's)                                  45,609   45,375       1%         
                                                                            
Average period USD/ZAR exchange rate         8.47     7.85       8%         
                                                                            
                                             Nine months ended March 31,    
                                        ------------------------------------
                                                           % change % change
                                             2013     2012   in USD   in ZAR
                                        ------------------------------------
(All figures in USD '000s except per                                        
 share data)                                                                
                                                                            
Revenue                                   334,265  282,648      18%      28%
                                                                            
GAAP net income                             4,692   52,628    (91%)    (90%)
                                                                            
Fundamental net income(1)                  21,897   51,769    (58%)    (54%)
                                                                            
GAAP earnings per share ($)                  0.10     1.17    (91%)    (90%)
                                                                            
Fundamental earnings per share ($)(1)        0.48     1.15    (58%)    (54%)
                                                                            
Fully-diluted shares outstanding                                            
 ('000's)                                  45,588   45,140       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 (loss) income to fundamental net income and earnings per share. 

 
Factors impacting comparability of our Q3 2013 and Q3 2012 results 


 
--  Unfavorable impact from the strengthening of the US dollar: The US
    dollar appreciated by 8% against the ZAR during Q3 2013 which negatively
    impacted our reported results; 
--  SASSA implementation costs: We substantially completed the
    implementation of our South African Social Security Agency ("SASSA")
    contract during Q3 2013 and incurred additional implementation and staff
    costs; 
--  DOJ and SEC investigation-related expenses: We incurred U.S. Department
    of Justice ("DOJ") and Securities and Exchange Commission ("SEC")
    investigation-related expenses of $4.2 million; and 
--  Bad debt provision for amounts due under expired Iraqi contracts: We
    have provided $2.3 million related to the expired NUETS Iraqi customer
    contracts. 

 
Comments and Outlook 
"We are very pleased with the commitment demonstrated by the Net1
team to complete bulk enrollment for our SASSA implementation on
schedule despite having to register nearly 40% more beneficiaries
than originally planned," said Dr. Serge Belamant, Chairman and Chief
Executive Officer of Net1. "By April 30, 2013, we had registered over
20 million beneficiaries and issued more than 9.1 million cards. We
are also delighted that a full bench of the Supreme Court of Appeal
unanimously ruled in favor of Net1 and SASSA. We can now focus
exclusively on providing best-in-class service to SASSA and the
citizens of South Africa. Meanwhile, we continue to cooperate with
the DOJ and SEC on their investigations, but as a result of these
investigations, we continue to experience some adverse impact from
the damage caused to our reputation, including our ability to execute
certain aspects of our strategic plan," 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 have been materially
but proportionally higher than anticipated," said Herman Kotze, Chief
Financial Officer of Net1. "In the fourth quarter of fiscal 2013, we
expect fundamental earnings per share of at least $0.20, which
includes approximately $7 - $9 million of further implementation and
smart card costs, and also assumes a constant currency base of ZAR
7.72/$1 and a share count of approximately 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 substantially completed bulk enrollment by March 31, 2013,
in accordance with the implementation plan agreed with SASSA. Under
our agreement with SASSA, we have to enroll both the grant recipients
as well as their dependents. While the number of grant recipients on
a national basis has consistently been quantified by SASSA at
approximately 9.4 million individuals, the number of beneficiaries
was revised higher by SASSA 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 in the
second quarter of fiscal 2013 from 2,500 to approximately 5,500 and
retained the higher employee base through all of the third quarter of
fiscal 2013. Our temporary employee headcount has since declined to
approximately 3,000 at April 30, 2013. During the third quarter of
fiscal 2013, we enrolled a further 5.8 million grant recipients and
an additional 6.7 million beneficiaries, for a total of 12.5 million
citizens. 
During the third quarter of fiscal 2013, we incurred direct
implementation expenses of approximately $16.1 million (ZAR 140.5
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. We
also expensed $4.5 million (ZAR 39.3 million) related to the cost of
the UEPS/EMV smart cards issued during the quarter, which is not
included in the $16.1 million (ZAR 140.5 million) of direct
implementation expenses described above. 
We also incurred approximately $1.4 million in capital expenditures
related to the implementation during the third quarter of fiscal
2013. Since inception of the implementation we have incurred
cumulative capital expenditures of $26.6 million. We do not expect
any further significant capital expenditures related to this
implementation and expect our cumulative capital expenditure to
remain below our prior estimate of $30 million. 
During March 2013, the Minister of Social Development and SASSA
announced that the deadline for the enrollment of grant recipients
would be extended to April 30, 2013. We therefore continued with the
enrollment process for the month of April 2013 and expect no further
extensions to be granted by the Minister and SASSA. Those
beneficiaries who have not presented themselves for enrollment at the
end of April 2013 will receive grant cancellation notices. This may
result in the final total number of enrolled grant recipients and
cardholders being less than the numbers provided in the original
database. 
Our total cash outlay through March 31, 2013 has been $96 million for
direct implementation expenses, smart card costs and capital
expenditures. We would have been 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 beneficiaries and
therefore employ our temporary staff for longer, should result in our
total cash outlay for the implementation being between $100 and $105
million. 
Update on Government Investigations, SASSA Tender Award Litigation
and Suit Against AllPay 
Government investigations 
We are continuing to cooperate with the investigations being
conducted by the DOJ and SEC that we have previously disclosed. We
have produced documents and information to the DOJ and the SEC
relating to their investigations and expect to continue to produce
documents over the coming months. We also expect that the DOJ and the
SEC will conduct interviews of some of our personnel as part of their
investigations. See also Part II, Item 1A-"Risk Factors." 
In addition, on February 14, 2013, we filed an application pursuant
to Section 34 of the South African Prevention of Corrupt Activities
Act in South Africa with the South African Police Service. Section 34
deals with the reporting of suspected fraud, theft, extortion and
forgery. Matters reported under Section 34 are usually referred for
investigation to the South African Directorate for Priority Crime
Investigation, known as the Hawks. We filed the Section 34
application to prompt the Hawks to conduct an investigation into who
may have made corruption allegations that appeared in the South
African media after we were awarded the SASSA tender in January 2012.
The Hawks have confirmed to us that our Section 34 application has
been accepted for investigation. We have provided certain electronic
information to the Hawks at their request and we will cooperate with
the Hawks in their investigation. 
SASSA tender award litigation 
On March 27, 2013, a full bench of the South African Supreme Court of
Appeal dismissed the appeal by AllPay Consolidated Investment
Holdings (Pty) Ltd ("AllPay"), against the earlier ruling by the
North Gauteng High Court that the award to us of the tender by SASSA
would not be set aside. The Supreme Court also upheld our and SASSA's
appeal against the High Court's orders that the process conducted in
awarding the contract was illegal and invalid and that we and SASSA
pay AllPay's costs occasioned by the court proceedings. The Supreme
Court also ordered AllPay to pay our and SASSA's costs occasioned by
the court proceedings, including the cost of three counsel. The
judges presiding at the Supreme Court hearing unanimously ruled that
there were no unlawful irregularities in the tender process followed
by SASSA. Accordingly, our SASSA contract to distribute social
welfare grants to ten million South Africans every month, for a
period of five years, remains in full force and effect. On April 18,
2013, AllPay applied for leave to appeal to the South African
Constitutional Court, the highest court in the country, against the
judgment of the Supreme Court. We and SASSA have opposed AllPay's
application. AllPay's previous approach to the Constitutional Court,
before the Supreme Court hearing and ruling, was rejected at that
time. We cannot predict if AllPay's leave to appeal will be granted
or if it is granted, when or how the Constitutional Court would rule
on the matter. 
Suit against AllPay 
In December 2012 we sued AllPay. In our lawsuit we are alleging that
AllPay wrongfully and unlawfully and with the intention of injuring
our reputation, infringing our goodwill and reducing our share price,
competed unlawfully with us. We are seeking damages in the aggregate
amount of ZAR 478 million (approximately $55 million based on the
ZAR/US dollar exchange rate on December 11, 2012) plus interest and
costs. The damages claimed may increase as we quantify the continued
impact of AllPay's actions. A trial date will be applied for after
the exchange of the required pleadings and finalization of any
interlocutory issues which may arise. It is unlikely that the matter
will go to trial before June 30, 2013, the end of our current
financial year. 
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 $59 million in Q3 2013, up 27% compared with Q3
2012 in USD and up 37% 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 (7%) and 19%, respectively, and declined primarily due to SASSA
implementation costs. Excluding amortization of acquisition-related
intangibles, Q3 2013 segment operating income margin was (5%),
compared to 23% during Q3 2012. 
International transaction-based activities 
KSNET continues to contribute the majority of our revenues and
operating income in this operating segment. Segment revenue was $33.1
million in Q3 2013, up 17% compared with Q3 2012 in USD and 27% on a
constant currency basis and was modestly impacted by ISC in Iraq
notifying NUETS that it would not renew its contracts upon their
expiration. Operating margin for the segment is lower than most of
our South African transaction-based businesses and was negatively
impacted by the expiration of the Iraqi contracts with ISC and the
related bad debt provision required as well as on-going competition
in the Korean marketplace, but was partially offset by increased
revenue contributions from KSNET. Excluding the amortization of
intangibles, Q3 2013 operating income margin was 6% compared to 12%
during Q3 2012. 
Smart card accounts 
Segment revenue was $8.6 million in Q3 2013, up 15% compared with Q3
2012 in USD and 23% on a constant currency basis. Q3 2013 segment
operating income margin was 29%, compared to 45% during Q3 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 $1.6
million in Q3 2013, down 28% compared with Q3 2012 in USD and 22%
lower on a constant currency basis, principally due to a decrease in
lending activities. Q3 2013 segment operating income margin was 69%
compared with 55% during Q3 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. Smart Life did not contribute to
operating income in the third quarter of fiscal 2013 and is currently
unable to issue new insurance policies as a result of the suspension
of its license. 
Hardware, software and related technology sales 
Segment revenue was $8.7 million in Q3 2013, up 40% compared with Q3
2012 in USD and 51% on a constant currency basis. In constant
currency, the increase in revenue resulted primarily from an increase
in royalty fees and ad hoc hardware sales, offset by a lower
contribution from most other major contributors to hardware and
software sales. Excluding amortization of all intangibles, segment
operating income margin was 20% compared to (21%) during Q3 2012. 
Corporate/eliminations 
The increase in our corporate expenses resulted primarily from legal
fees we incurred in connection with the DOJ and SEC investigations,
stock-based compensation and other corporate head office-related
expenses. 
Cash flow and liquidity 
At March 31, 2013, we had cash and cash equivalents of $43 million,
up from $39 million at June 30, 2012. The increase in our cash
balances from June 30, 2012, was primarily from cash generated from
operations, offset by 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 Q3 2013, net cash provided by operating activities was $12.2
million compared with $22.0 million in Q3 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 Q3 2013 and 2012 were $5.1
million and $13.9 million, respectively, and have decreased primarily
due to lower capital expenditures related to our SASSA contract and
the purchase of fewer payment processing terminals in Korea in Q3
2013. 
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 (loss) 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 loss 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
(loss) income which has been determined based on GAAP. Accordingly,
this may differ to the headline (loss) earnings per share calculation
of other companies listed on the JSE as these companies may report
their financial results under a different financial reporting
framework, including but not limited to, International Financial
Reporting Standards. 
HEPS basic and diluted is calculated as GAAP net (loss) income
adjusted for the loss (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 (loss) income used to calculate (loss) earnings per share
basic and diluted and HEPS basic and diluted. 
Conference Call 
We will host a conference call to review Q3 2013 results on May 10,
2013, at 8:00 Eastern Time. To participate in the call, dial
1-866-652-5200 (U.S. only), 1-855-669-9657 (Canada only),
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 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 June 2, 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.
Net1's UEPS/EMV solution is also completely interoperable with global
EMV standards that seamlessly permit 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 operates market-leading payment processors in South Africa,
Republic of Korea, and Ghana. 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    Nine months ended  
                                 --------------------- ---------------------
                                        March 31,             March 31,     
                                  --------------------  --------------------
                                       2013       2012       2013       2012
                                  ---------  ---------  ---------  ---------
                                 (In thousands, except (In thousands, except
                                    per share data)       per share data)   
                                                                            
REVENUE                          $  111,141 $   90,664 $  334,265 $  282,648
                                                                            
EXPENSE                                                                     
                                                                            
 Cost of goods sold, IT                                                     
  processing, servicing and                                                 
  support                            51,461     32,493    143,789     99,605
                                                                            
 Selling, general and                                                       
  administration                     53,846     36,368    149,854     92,297
                                                                            
 Depreciation and amortization       10,560      9,325     31,051     27,194
                                                                            
                                  ---------  ---------  ---------  ---------
OPERATING (LOSS) INCOME             (4,726)     12,478      9,571     63,552
                                                                            
INTEREST INCOME                       2,515      2,164      8,195      5,981
                                                                            
INTEREST EXPENSE                      2,023      2,244      6,117      7,215
                                  ---------  ---------  ---------  ---------
                                                                            
(LOSS) INCOME BEFORE INCOME TAX                                             
 EXPENSE                            (4,234)     12,398     11,649     62,318
                                                                            
INCOME TAX EXPENSE                      472      4,611      7,172      9,785
                                  ---------  ---------  ---------  ---------
                                                                            
NET (LOSS) INCOME BEFORE EARNINGS                                           
 (LOSS) FROM EQUITY-ACCOUNTED                                               
 INVESTMENTS                        (4,706)      7,787      4,477     52,533
                                                                            
EARNINGS (LOSS) FROM EQUITY-                                                
 ACCOUNTED INVESTMENTS                   22        (4)        204        100
                                  ---------  ---------  ---------  ---------
                                                                            
NET (LOSS) INCOME                   (4,684)      7,783      4,681     52,633
                                                                            
(ADD) LESS NET (LOSS) INCOME                                                
 ATTRIBUTABLE TO NON-CONTROLLING                                            
 INTEREST                               (3)         17       (11)          5
                                                                            
                                  ---------  ---------  ---------  ---------
NET (LOSS) INCOME ATTRIBUTABLE TO                                           
 NET1                            $  (4,681) $    7,766 $    4,692 $   52,628
                                  ---------  ---------  ---------  ---------
                                  ---------  ---------  ---------  ---------
                                                                            
Net (loss) income per share, in                                             
 United States dollars                                                      
 Basic (loss) earnings                                                      
  attributable to Net1                                                      
  shareholders                   $   (0.10) $     0.17 $     0.10 $     1.17
 Diluted (loss) earnings                                                    
  attributable to Net1                                                      
  shareholders                   $   (0.10) $     0.17 $     0.10 $     1.17
                                                                            
                        NET 1 UEPS TECHNOLOGIES, INC.                       
                    Condensed Consolidated Balance Sheets                   
                                                        Unaudited        (A)
                                                        March 31,   June 30,
                                                             2013       2012
                                                       ---------- ----------
                                                       ---------- ----------
                                                       (In thousands, except
                                                            share data)     
                                   ASSETS                                   
CURRENT ASSETS                                                              
 Cash and cash equivalents                             $   42,616 $   39,123
 Pre-funded social welfare grants receivable                6,954      9,684
 Accounts receivable, net of allowances of - March:                         
  $3,272; June: $788                                      101,609    101,918
 Finance loans receivable                                   8,773      8,141
 Deferred expenditure on smart cards                        3,915      4,587
 Inventory                                                  8,415      6,192
 Deferred income taxes                                      6,927      5,591
                                                        ---------  ---------
  Total current assets before settlement assets           179,209    175,236
   Settlement assets                                      538,318    409,166
                                                        ---------  ---------
    Total current assets                                  717,527    584,402
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED                           
 DEPRECIATION OF - March: $85,318; June: $74,242           50,682     52,616
EQUITY-ACCOUNTED INVESTMENTS                                1,112      1,508
GOODWILL                                                  182,066    182,737
INTANGIBLE ASSETS, net                                     83,193     93,930
OTHER LONG-TERM ASSETS, including reinsurance assets       38,426     40,700
                                                        ---------  ---------
 TOTAL ASSETS                                           1,073,006    955,893
                                                        ---------  ---------
                                                        ---------  ---------
                                                           40,570           
                                 LIABILITIES                                
CURRENT LIABILITIES                                                         
 Accounts payable                                          18,681     13,172
 Other payables                                            33,324     40,167
 Current portion of long-term borrowings                   14,502     14,019
 Income taxes payable                                       5,879      6,019
                                                        ---------  ---------
  Total current liabilities before settlement                               
   obligations                                             72,386     73,377
   Settlement obligations                                 538,318    409,166
                                                        ---------  ---------
    Total current liabilities                             610,704    482,543
DEFERRED INCOME TAXES                                      20,033     20,988
LONG-TERM BORROWINGS                                       75,255     79,760
OTHER LONG-TERM LIABILITIES, including insurance policy                     
 liabilities                                               23,331     25,791
                                                        ---------  ---------
 TOTAL LIABILITIES                                        729,323    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 -                          
   March: 45,742,707; 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:                           
   March: -; June: -                                            -          -
 ADDITIONAL PAID-IN-CAPITAL                               160,094    155,350
 TREASURY SHARES, AT COST: March: 13,455,090; June:                         
  13,455,090                                            (175,823)  (175,823)
 ACCUMULATED OTHER COMPREHENSIVE LOSS                    (88,275)   (75,722)
 RETAINED EARNINGS                                        444,333    439,641
                                                        ---------  ---------
  TOTAL NET1 EQUITY                                       340,388    343,505
  NON-CONTROLLING INTEREST                                  3,295      3,306
                                                        ---------  ---------
   TOTAL EQUITY                                           343,683    346,811
                                                        ---------  ---------
                                                                            
                                                        ---------  ---------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $1,073,006 $  955,893
                                                        ---------  ---------
                                                        ---------  ---------
                                                                            
(A) - Derived from audited financial statements                             
                                                                            
                        NET 1 UEPS TECHNOLOGIES, INC.                       
          Unaudited Condensed Consolidated Statements of Cash Flows         
                                                                            
                                Three months ended      Nine months ended   
                             -----------------------------------------------
                                     March 31,               March 31,      
                              ----------------------- ----------------------
                                    2013        2012        2013        2012
                              ----------  ----------- ----------  ----------
                                  (In thousands)          (In thousands)    
                                                                            
Cash flows from operating                                                   
 activities                                                                 
Net (loss) income            $   (4,684) $     7,783 $     4,681 $    52,633
Depreciation and amortization     10,560       9,325      31,051      27,194
Earnings (Loss) from equity-                                                
 accounted investments              (22)           4       (204)       (100)
Fair value adjustments             (299)     (1,211)         408     (1,983)
Interest payable                   1,054         694       3,363       4,469
Loss (Profit) on disposal of                                                
 plant and equipment                   3        (23)        (83)        (57)
Net loss on sale of 10% of                                                  
 Smart Life                            -           -           -          81
Profit on liquidation of                                                    
 SmartSwitch Nigeria                   -           -           -     (3,994)
Realized loss on sale of                                                    
 Smart Life investments                -           -           -          25
Stock-based compensation                                                    
 charge                            1,092         843       3,325       1,882
Facility fee amortized                71         316         235         515
(Increase) Decrease in                                                      
 accounts receivable, pre-                                                  
 funded social welfare grants                                               
 receivable and finance loans                                               
 receivable                      (4,818)         474     (3,987)    (15,321)
Decrease (Increase) in                                                      
 deferred expenditure on                                                    
 smart cards                       3,800        (56)          99        (70)
Decrease (Increase) in                                                      
 inventory                         1,149       (862)     (2,359)       (261)
Increase (Decrease) in                                                      
 accounts payable and other                                                 
 payables                          4,533         583     (1,755)     (1,765)
Increase (Decrease) in taxes                                                
 payable                             948       5,626         354     (5,336)
Decrease in deferred taxes       (1,201)     (1,532)     (4,133)    (14,928)
                              ----------  ----------- ----------  ----------
 Net cash provided by                                                       
  operating activities            12,186      21,964      30,995      42,984
                              ----------  ----------- ----------  ----------
                                                                            
Cash flows from investing                                                   
 activities                                                                 
Capital expenditures             (5,053)    (13,879)    (17,103)    (23,465)
Proceeds from disposal of                                                   
 property, plant and                                                        
 equipment                            31         117         387         385
Acquisitions, net of cash                                                   
 acquired                              -           -     (2,143)           -
Acquisition of prepaid                                                      
 business, net of cash                                                      
 acquired                              -           -           -     (4,481)
Acquisition of Smart Life,                                                  
 net of cash acquired                  -           -           -     (1,673)
Acquisition of available for                                                
 sale securities                       -       (948)           -       (948)
Settlement from former                                                      
 shareholders of KSNET                 -           -           -       4,945
Repayment of loan by equity-                                                
 accounted investment                  -          30           3          93
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                        (156,363)      95,165   (168,419)     128,961
                              ----------  ----------- ----------  ----------
 Net cash (used in) provided                                                
  by investing activities      (161,385)      80,485   (186,730)     103,818
                              ----------  ----------- ----------  ----------
                                                                            
Cash flows from financing                                                   
 activities                                                                 
Repayment of long-term                                                      
 borrowings                            -     (4,842)     (7,307)    (12,027)
Proceeds from issue of common                                               
 stock                                 -           -         240           -
Proceeds on sale of 10% of                                                  
 Smart Life                            -           -           -         107
Acquisition of treasury stock          -           -           -     (1,129)
Net change in settlement                                                    
 obligations                     156,363    (95,165)     168,419   (128,961)
                              ----------  ----------- ----------  ----------
 Net cash provided by (used                                                 
  in) financing activities       156,363   (100,007)     161,352   (142,010)
                              ----------  ----------- ----------  ----------
                                                                            
Effect of exchange rate                                                     
 changes on cash                 (2,664)       4,944     (2,124)    (11,805)
                              ----------  ----------- ----------  ----------
                                                                            
Net increase (decrease) in                                                  
 cash and cash equivalents         4,500       7,386       3,493     (7,013)
                                                                            
Cash and cash equivalents -                                                 
 beginning of period              38,116      80,864      39,123      95,263
                              ----------  ----------- ----------  ----------
                                                                            
Cash and cash equivalents -                                                 
 end of period               $    42,616 $    88,250 $    42,616 $    88,250
                              ----------  ----------- ----------  ----------
                              ----------  ----------- ----------  ----------
                                                                            
Net 1 UEPS Technologies, Inc.                                               
                                                                            
Attachment A                                                                
                                                                            
Operating segment revenue, operating income and operating margin:           
                                                                            
Three months ended March 31, 2013 and 2012 and December 31, 2012            
                                                                            
                                                                 Change -   
                                                                 constant   
                                                   Change -       exchange  
                                                    actual        rate(1)   
                                                ----------------------------
                                                 Q3 '13 Q3 '13 Q3 '13 Q3 '13
Key segmental data,                                  vs     vs     vs     vs
 in $ '000,             Q3 '13   Q3 '12   Q2 '13  Q3'12 Q2 '13  Q3'12 Q2 '13
                     -------------------------------------------------------
 Revenue:                                                                   
  SA transaction-                                                           
   based activities   $ 59,009 $ 46,423 $ 60,764    27%   (3%)    37%   (6%)
  International                                                             
   transaction-based                                                        
   activities           33,119   28,188   33,113    17%     0%    27%   (3%)
  Smart card accounts    8,657    7,558    8,219    15%     5%    23%     2%
  Financial services     1,651    2,289    1,448  (28%)    14%  (22%)    10%
  Hardware, software                                                        
   and related                                                              
   technology sales      8,705    6,206    7,898    40%    10%    51%     7%
                     --------- -------- --------                            
   Total consolidated                                                       
    revenue           $111,141 $ 90,664 $111,442    23%   (0%)    32%   (3%)
                     --------- -------- --------                            
                                                                            
 Consolidated                                                               
  operating (loss)                                                          
  income:                                                                   
  SA transaction-                                                           
   based activities   $(4,197) $  8,694 $  1,933     nm     nm     nm     nm
                     --------- -------- ------------------------------------
   Operating (loss)                                                         
    income excluding                                                        
    amortization       (3,127)   10,452    3,398     nm     nm     nm     nm
   Amortization of                                                          
    intangible assets  (1,070)  (1,758)  (1,465)  (39%)  (27%)  (34%)  (29%)
                     --------- -------- ------------------------------------
  International                                                             
   transaction-based                                                        
   activities          (1,362)      195      202     nm     nm     nm     nm
                     --------- -------- ------------------------------------
   Operating income                                                         
    excluding                                                               
    amortization         1,866    3,387    3,515  (45%)  (47%)  (41%)  (49%)
   Amortization of                                                          
    intangible assets  (3,228)  (3,192)  (3,313)     1%   (3%)     9%   (6%)
                     --------- -------- ------------------------------------
  Smart card accounts    2,467    3,435    2,342  (28%)     5%  (23%)     2%
  Financial services     1,147    1,248    1,048   (8%)     9%   (1%)     6%
  Hardware, software                                                        
   and related                                                              
   technology sales      1,699  (1,301)      795     nm   114%     nm   107%
                     --------- -------- ------------------------------------
   Operating income                                                         
    (loss) excluding                                                        
    amortization         1,785  (1,209)      878     nm   103%     nm    97%
   Amortization of                                                          
    intangible assets     (86)     (92)     (83)   (7%)     4%     1%     0%
                     --------- -------- ------------------------------------
  Corporate/                                                                
   Eliminations        (4,480)      207  (1,348)     nm   232%     nm   222%
                     --------- -------- --------                            
   Total operating                                                          
    (loss) income     $(4,726) $ 12,478 $  4,972     nm     nm     nm     nm
                     --------- -------- --------                            
                                                                            
 Operating income                                                           
  margin (%)                                                                
  SA transaction-                                                           
   based activities       (7%)      19%       3%                            
  International                                                             
   transaction-based                                                        
   activities             (4%)       1%       1%                            
  International                                                             
   transaction-based                                                        
   activities                                                               
   excluding                                                                
   amortization             6%      12%      11%                            
  Smart card accounts      29%      45%      28%                            
  Financial services       69%      55%      72%                            
  Hardware, software                                                        
   and related                                                              
   technology sales        20%    (21%)      10%                            
  Overall operating                                                         
   margin                 (4%)      14%       4%                            
                                                                            
(1) - This information shows what the change in these items would have been 
 if the USD/ ZAR exchange rate that prevailed during the third quarter of   
 fiscal 2013 also prevailed during the third quarter of fiscal 2012 and the 
 second quarter of fiscal 2013.                                             
                                                                            
Nine months ended March 31, 2013 and 2012                                   
                                                                            
                                                                      Change
                                                                   -constant
                                                           Change - exchange
                                                             actual  rate(1)
                                                          ------------------
                                                              F2013    F2013
Key segmental data, in '000, except                              vs       vs
 margins                                 F2013      F2012     F2013    F2013
                                   ----------- ---------- ------------------
 Revenue:                                                                   
  SA transaction-based activities   $  181,137 $  142,773       27%      37%
  International transaction-based                                           
   activities                           97,881     87,278       12%      21%
  Smart card accounts                   25,240     23,074        9%      18%
  Financial services                     4,483      6,344     (29%)    (24%)
  Hardware, software and related                                            
   technology sales                     25,524     23,179       10%      19%
                                   ----------- ----------                   
   Total consolidated revenue       $  334,265 $  282,648       18%      28%
                                   ----------- ----------                   
                                                                            
 Consolidated operating income                                              
  (loss):                                                                   
  SA transaction-based activities   $    4,136 $   44,643     (91%)    (90%)
                                   ----------- ---------- ------------------
   Operating income excluding                                               
    amortization                         8,139     49,448     (84%)    (82%)
   Amortization of intangible                                               
    assets                             (4,003)    (4,805)     (17%)    (10%)
                                   ----------- ---------- ------------------
  International transaction-based                                           
   activities                          (1,331)      1,120        nm       nm
                                   ----------- ---------- ------------------
   Operating income excluding                                               
    amortization                         8,366     10,750     (22%)    (16%)
   Amortization of intangible                                               
    assets                             (9,697)    (9,630)        1%       9%
                                   ----------- ---------- ------------------
  Smart card accounts                    7,194     10,487     (31%)    (26%)
  Financial services                     3,292      3,685     (11%)     (3%)
  Hardware, software and related                                            
   technology sales                      4,478      1,545      190%     213%
                                   ----------- ---------- ------------------
   Operating income excluding                                               
    amortization                         4,732      1,819      160%     181%
   Amortization of intangible                                               
    assets                               (254)      (274)      (7%)       0%
                                   ----------- ---------- ------------------
  Corporate/ Eliminations              (8,198)      2,072        nm       nm
                                   ----------- ----------                   
   Total operating income           $    9,571 $   63,552     (85%)    (84%)
                                   ----------- ----------                   
                                                                            
 Operating income margin (%)                                                
  SA transaction-based activities           2%        31%                   
  International transaction-based                                           
   activities                             (1%)         1%                   
  International transaction-based                                           
   activities excluding                                                     
   amortization                             9%        12%                   
  Smart card accounts                      29%        45%                   
  Financial services                       73%        58%                   
  Hardware, software and related                                            
   technology sales                        18%         7%                   
  Overall operating margin                  3%        22%                   
                                                                            
(1)- This information shows what the change in these items would have been  
 if the USD/ ZAR exchange rate that prevailed during year to date fiscal    
 2013 also prevailed during year to date fiscal 2012.                       
 
Net 1 UEPS Technologies, Inc.                                               
                                                                            
Attachment B                                                                
                                                                            
Reconciliation of GAAP net (loss) income and (loss) earnings per share,     
 basic, to fundamental net income and earnings per share, basic:            
                                                                            
Three months ended March 31, 2013 and 2012                                  
                                                                            
                   Net (loss)      (L)EPS,       Net (loss)       (L)EPS,   
                     income         basic          income          basic    
                    (USD'000)       (USD)         (ZAR'000)        (ZAR)    
                 ---------------------------- ------------------------------
                    2013   2012   2013   2012     2013    2012   2013   2012
                 ---------------------------- ------------------------------
                                                                            
GAAP             (4,681)  7,766 (0.10)   0.17 (39,632)  60,979 (0.87)   1.35
                                                                            
 Intangible asset                                                           
  amortization,                                                             
  net              3,295  3,751                 27,898  29,463              
 Stock-based                                                                
  compensation                                                              
  charge           1,092    843                  9,245   6,619              
 Facility fees                                                              
  for KSNET debt      71     90                    601     707              
 DOJ and SEC                                                                
  investigations-                                                           
  related                                                                   
  expenses         2,557      -                 21,648       -              
 Acquisition-                                                               
  related costs       28      -                    237       -              
                 --------------               ----------------              
  Fundamental      2,362 12,450   0.05   0.28   19,997  97,768   0.44   2.16
                 --------------               ----------------              
                 --------------               ----------------              
                                                                            
Nine months ended March 31, 2013 and 2012                                   
                                                                            
                                     EPS,                           EPS,    
                    Net income       basic        Net income        basic   
                     (USD'000)       (USD)         (ZAR'000)        (ZAR)   
                 ---------------------------- ------------------------------
                    2013     2012  2013  2012     2013      2012  2013  2012
                 ---------------------------- ------------------------------
                                                                            
GAAP               4,692   52,628  0.10  1.17   39,684   411,787  0.87  9.13
                                                                            
 Intangible asset                                                           
  amortization,                                                             
  net             10,453   10,957               88,403    85,733            
 Stock-based                                                                
  compensation                                                              
  charge           3,325    1,883               28,122    14,734            
 Facility fees                                                              
  for KSNET debt     235      301                1,988     2,355            
 DOJ and SEC                                                                
  investigations-                                                           
  related                                                                   
  expenses         3,117        -               26,363         -            
 Acquisition-                                                               
  related costs       75        -                  634         -            
 Change in tax                                                              
  law                  - (18,315)                    - (150,373)            
 Create FTC                                                                 
  valuation                                                                 
  allowance            -    8,232                    -    67,588            
 Profit on                                                                  
  liquidation of                                                            
  subsidiary           -  (3,994)                    -  (31,251)            
 Loss on sale of                                                            
  10% of Smart                                                              
  Life                 -       77                    -       602            
                 ----------------             ------------------            
  Fundamental     21,897   51,769  0.48  1.15  185,194   401,175  4.07  8.90
                 ----------------             ------------------            
                 ----------------             ------------------            
                                                                            
Net 1 UEPS Technologies, Inc.                                               
                                                                            
Attachment C                                                                
                                                                            
Reconciliation of net (loss) income used to calculate (loss) earnings per   
 share basic and diluted and headline (loss) earnings per share basic and   
 diluted:                                                                   
                                                                            
Three months ended March 31, 2013 and 2012                                  
                                                                            
                                                               2013     2012
                                                           -------- --------
                                                                            
Net (loss) income (USD'000)                                 (4,681)    7,766
Adjustments:                                                                
  Loss (Profit) on sale of property, plant and equipment          3     (23)
  Tax effects on above                                          (1)        6
                                                                            
                                                           -------- --------
Net (loss) income used to calculate headline earnings                       
 (USD'000)                                                  (4,679)    7,749
                                                           -------- --------
                                                           -------- --------
                                                                            
Weighted average number of shares used to calculate net                     
 income per share basic earnings and headline earnings per                  
 share basic earnings ('000)                                 45,561   45,268
                                                                            
Weighted average number of shares used to calculate net                     
 income per share diluted earnings and headline earnings                    
 per share diluted earnings ('000)                           45,609   45,375
                                                                            
Headline (loss) earnings per share:                                         
  Basic, in USD                                              (0.10)     0.17
  Diluted, in USD                                            (0.10)     0.17
                                                                            
Nine months ended March 31, 2013 and 2012                                   
                                                                            
                                                               2013     2012
                                                           -------- --------
                                                                            
Net income (USD'000)                                          4,692   52,628
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              (83)     (57)
  Tax effects on above                                           23       16
                                                                            
                                                           -------- --------
Net income used to calculate headline earnings (USD'000)      4,632   48,670
                                                           -------- --------
                                                           -------- --------
                                                                            
Weighted average number of shares used to calculate net                     
 income per share basic earnings and headline earnings per                  
 share basic earnings ('000)                                 45,540   45,083
                                                                            
Weighted average number of shares used to calculate net                     
 income per share diluted earnings and headline earnings                    
 per share diluted earnings ('000)                           45,588   45,140
                                                                            
Headline earnings per share:                                                
  Basic, in USD                                                0.10     1.08
  Diluted, in USD                                              0.10     1.08

 
Contacts:
Net 1 UEPS Technologies, Inc.
Dhruv Chopra
Vice President of Investor Relations
+1-212-626-6675
dchopra@net1.com
www.net1.com
 
 
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