NET 1 UEPS TECHNOLOGIES INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - May 8, 2014

Attached files

file filename
8-K - FORM 8-K - NET 1 UEPS TECHNOLOGIES INCform8k.htm

Exhibit 99.1

Net 1 UEPS Technologies, Inc. Reports Third Quarter 2014 Results

  • Revenue and Fundamental EPS of $138 million and $0.47, a constant currency increase of 60% and 1,070% respectively;
  • BEE transactions implemented after quarter-end, and 4.4 million shares issued to BEE partners.

    JOHANNESBURG, May 8, 2014 – Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today released results for the third quarter of fiscal 2014.

    Summary Financial Metrics

        Three months ended March 31,  
                    % change     % change  
        2014     2013     in USD     in ZAR  
    (All figures in USD ‘000s except per share data)                        
    Revenue   138,126     111,141     24%     60%  
    GAAP net income (loss)   17,182     (4,681 )   nm     nm  
    Fundamental net income (1)   21,688     2,362     818%     1,079%  
    GAAP earnings (loss) per share ($)   0.38     (0.10 )   nm     nm  
    Fundamental earnings per share ($) (1)   0.47     0.05     840%     1,070%  
    Fully-diluted shares outstanding (‘000’s)   45,954     45,597     1%        
    Average period USD/ ZAR exchange rate   10.87     8.47     28%        

        Nine months ended March 31,  
                    % change     % change  
        2014     2013     in USD     in ZAR  
    (All figures in USD ‘000s except per share data)                        
    Revenue   398,903     334,265     19%     46%  
    GAAP net income   41,527     4,692     785%     986%  
    Fundamental net income (1)   57,009     21,897     160%     220%  
    GAAP earnings per share ($)   0.91     0.10     781%     981%  
    Fundamental earnings per share ($) (1)   1.25     0.48     160%     218%  
    Fully-diluted shares outstanding (‘000’s)   45,997     45,593     1%        
    Average period USD/ ZAR exchange rate   10.38     8.46     23%        

    (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 (loss) to fundamental net income and earnings (loss) per share.

    Factors impacting comparability of our Q3 2014 and Q3 2013 results

    • Unfavorable impact from the strengthening of the US dollar against the ZAR: The US dollar appreciated by 28% against the ZAR during Q3 2014, which negatively impacted our reported results;
    • SASSA implementation complete: Our SASSA contract implementation is complete. We incurred implementation- related expenditure, including smart card costs, of approximately $20.6 million during Q3 2013;
    • Increased contribution by KSNET: Our results were positively impacted by growth in our Korean operations;
    • Growth in financial services: The year-over-year expansion of our financial services offering during Q3 2014, resulted in higher revenue and operating income from UEPS-based lending;
    • Ad hoc hardware sales in fiscal 2014: We sold more terminals and cards during Q3 2014 as a result of ad hoc orders received from our customers;
    • Higher revenue resulting from an increase in low-margin prepaid airtime and electricity sales: Our revenue has increased as a result of the growth of our prepaid airtime offering during Q3 2014, which has lower margins compared with our other South African businesses;
    • Lower US government investigation-related and US lawsuit expenses: We incurred lower US government investigation-related expenses during Q3 2014 compared to during 2013, which was partially offset by an increase in US lawsuit-related expenses; and
    • Fiscal 2013 bad debt provision: In fiscal 2013 we provided $2.3 million related to the expired NUETS Iraqi customer contracts.

      Comments and Outlook

      “I am delighted with the quality of our third quarter performance,” said Dr. Serge Belamant, Chairman and CEO of Net1. “Despite the many distractions faced by the Company during the last two years, our staff members have maintained focus and, once again, demonstrated our ability to deliver sterling results under adverse circumstances. I commend all of those Net1 employees who remain loyal and committed to ensure we deliver the highest level of service and continue to expand our business activities in physical and virtual payment technologies, both locally and internationally.”

      “We believe that the publication of any new SASSA tender may take some time and we are ready to propose an enhanced version of our current UEPS/EMV solution, which would continue to provide SASSA with the business functionality which they described in detail during the legal processes. We are proud that our technology has already saved the public purse in excess of ZAR 3 billion ($286 million) per annum, with the removal of more than a million invalid grants. In the mean time, we will continue to optimize our cost structures and focus on the marketing of our complementary and supplementary products in order to diversify our business and enhance our profitability,” he concluded.

      “We expect the momentum from the execution of our strategy to continue driving top and bottom line growth,” said Herman Kotzé, Chief Financial Officer of Net1. “For fiscal 2014, we now expect fundamental earnings per share of at least $1.90, assuming a constant currency base of ZAR 8.71/$1. The share count assumption in our guidance includes the 4.4 million shares that were issued as part of our BEE transaction on April 16, 2014,” he concluded.

      South African Constitutional Court remedy related to SASSA tender

      On April 17, 2014, the South African Constitutional Court ruled on the appropriate remedy following its declaration on November 29, 2013, that the tender process followed by the South African Social Security Agency, or SASSA, in awarding a contract to us was constitutionally invalid. The declaration of invalidity of our contract was upheld, but suspended until a new tender is awarded, or for the remainder of the existing contract period if no tender is awarded. SASSA is required to initiate a new tender process within 30 days of the Court's ruling and any award must be for a period of five years. If a new tender is not awarded, the declaration of invalidity of our current contract will be further suspended until the completion of the five-year period for which the contract was originally awarded.

      Implementation of December 2013 BEE transaction

      On April 16, 2014 we implemented our Relationship Agreements with our BEE partners, concluded during December 2013, and we have accordingly issued 4,400,000 shares to the BEE partners.

      Under the Relationship Agreements, we issued 4,100,000 shares of our common stock to Business Venture Investments 1567 Proprietary Limited (RF) and 300,000 shares to Born Free Investments 272 Proprietary Limited at a price of ZAR 60.00 per share. In order to facilitate the transactions, one of our wholly owned subsidiaries lent the funds to the BEE partners to effect the purchase of the BEE shares.

      Results of Operations by Segment and Liquidity

      Our operating metrics will be updated and posted on our website (www.net1.com).

            South African transaction-based activities

      Segment revenue was $64.9 million in Q3 2014, up 10% compared with Q3 2013 in USD and up 41% on a constant currency basis. In ZAR, increase in segment revenue was primarily due to more low-margin transaction fees generated from beneficiaries using the South African National Payment System, incremental prepaid airtime sales driven by the rollout of our prepaid airtime product, and reflects the elimination of inter-company transactions. Segment operating income margin was 17% and (7 )%, respectively, and increased primarily due to the absence of SASSA implementation costs in Q3 2014. Excluding amortization of acquisition-related intangibles, Q3 2014 segment operating income margin was 19% compared with (5) % in Q3 2013.

       

           International transaction-based activities

      KSNET contributes the majority of our revenues and operating income in this segment. Segment revenue was $34.9 million in Q3 2014, up 6% compared with Q3 2013 in USD and 36% on a constant currency basis. Revenue increased primarily due to KSNET’s revenue growth during Q3 2014 and was partially offset by the expiration and non-renewal of NUETS’ contract with its Iraqi customer in Q3 2013. Operating income during Q3 2014 was higher due to increase in revenue contribution from KSNET and due to the NUETS Iraqi customer bad debt provision in fiscal 2013, but partially offset by ongoing losses related to our XeoHealth launch in the United States and at Net1 Virtual Card, as well as ongoing competition in the Korean marketplace. Excluding the amortization of intangibles, Q3 2014 operating income margin was 13% compared to 6% during Q3 2013.

           Smart card accounts

      Segment revenue was $10.6 million in Q3 2014, up 23% compared with Q3 2013 in USD and 57% on a constant currency basis driven exclusively by the increase in the number of smart card accounts. Segment operating income margin from providing smart card accounts for each of Q3 2014 and 2013 was 29% and 28%, respectively.

           Financial services

      UEPS-based lending contributes the majority of the revenue and operating income in this segment. Segment revenue was $11.1 million in Q3 2014, up 572% compared with Q3 2013 in USD and 763% higher on a constant currency basis, principally due to the increase in the number of loans granted as we rolled out our product nationally. The year-over-year increase in operating income was partially offset by the higher UEPS-based lending operating cost base in fiscal 2014 and the re-allocation of UEPS-based lending corporate and administration overhead expenses to this segment. Smart Life did not contribute to operating income in Q3 2014 as it is currently unable to issue new insurance policies as a result of the suspension of its license by the Financial Services Board in fiscal 2013.

           Hardware, software and related technology sales

      Segment revenue was $16.6 million in Q3 2014, up 90% compared with Q3 2013 in USD and 144% on a constant currency basis. The increase in revenue and operating income resulted from higher ad hoc terminal and smart card sales. Excluding amortization of all intangibles, segment operating income margin was 24% compared to 20% during Q3 2013.

           Corporate/eliminations

      The decrease in our corporate expenses resulted primarily from lower legal fees incurred in connection with the US government investigations compared to Q3 2013, partially offset by higher other corporate head office-related expenses.

           Cash flow and liquidity

      At March 31, 2013, we had cash and cash equivalents of $30.9 million, down from $53.7 million at June 30, 2013. The decrease in our cash balances from June 30, 2013, was primarily due to the expansion of our UEPS-based lending business, working capital changes, the repayment of a portion of our Korean debt and acquisition of all of the remaining shares of KSNET that we did not already own.

      Excluding the impact of interest received, interest paid under our Korean debt and taxes, the decrease in cash from operating activities resulted from the expansion of our UEPS-based lending book, offset by cash inflows from improved trading activity and the substantial elimination of implementation costs related to our SASSA contract in fiscal 2014. Capital expenditures for Q3 2014 and 2013 were $4.8 million and $5.1 million, respectively, and have increased primarily due to the acquisition of more payment processing terminals in Korea.

      Use of Non-GAAP Measures

      US securities laws require that when we publish any non-GAAP measures, we disclose the reason for using the non-GAAP measure and provide reconciliation to the directly comparable GAAP measure. The presentation of fundamental net income and fundamental earnings per share and headline earnings per share are non-GAAP measures.

           Fundamental net income and fundamental earnings per share

      Fundamental net income and earnings per share is GAAP net income (loss) and earnings (loss) 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 2013, acquisition-related costs. 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 (loss) and earnings (loss) per share.

           Headline earnings (loss) 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 (loss) which has been determined based on GAAP. Accordingly, this may differ to the headline earnings (loss) 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 (loss) adjusted for the profit on sale of property, plant and equipment, net of related tax effects. Attachment C presents the reconciliation between our net income (loss) used to calculate earnings (loss) per share basic and diluted and HEPS basic and diluted and the calculation of the denominator for headline diluted earnings (loss) per share.

      Conference Call

      We will host a conference call to review Q3 2014 results on May 9, 2014, 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 June 1, 2014.

      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.

      Investor Relations Contact:
      Dhruv Chopra
      Head of Investor Relations
      Phone: +1 917-767-6722
      Email: dchopra@net1.com


      NET 1 UEPS TECHNOLOGIES, INC.
      Unaudited Condensed Consolidated Statements of Operations

          Three months ended     Nine months ended  
          March 31,     March 31,  
          2014     2013     2014     2013  
          (In thousands, except per share data)     (In thousands, except per share data)  
      REVENUE $  138,126   $  111,141   $  398,903   $  334,265  
      EXPENSE                        
      Cost of goods sold, IT processing, servicing and support   63,149     51,461     187,591     143,789  
      Selling, general and administration   40,586     53,846     121,916     149,854  
      Depreciation and amortization   10,442     10,560     30,245     31,051  
      OPERATING INCOME (LOSS)   23,949     (4,726 )   59,151     9,571  
      INTEREST INCOME   3,438     2,515     9,993     8,195  
      INTEREST EXPENSE   1,734     2,023     5,712     6,117  
      INCOME (LOSS) BEFORE INCOME TAX EXPENSE   25,653     (4,234 )   63,432     11,649  
      INCOME TAX EXPENSE   8,535     472     22,119     7,172  
      NET INCOME (LOSS) BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   17,118     (4,706 )   41,313     4,477  
      EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   52     22     202     204  
      NET INCOME (LOSS)   17,170     (4,684 )   41,515     4,681  
      ADD NET LOSS ATTRIBUTABLE TO NON- CONTROLLING INTEREST   (12 )   (3 )   (12 )   (11 )
      NET INCOME (LOSS) ATTRIBUTABLE TO NET1 $  17,182   $  (4,681 ) $  41,527   $  4,692  
      Net income (loss) per share, in United States dollars                
               Basic earnings (loss) attributable to Net1 shareholders $ 0.38   $ (0.10 ) $ 0.91   $ 0.10  
               Diluted earnings (loss) attributable to Net1 shareholders $ 0.37   $ (0.10 ) $ 0.90   $ 0.10  


      NET 1 UEPS TECHNOLOGIES, INC.
      Unaudited Condensed Consolidated Balance Sheets

          Unaudited     (A)  
          March 31,     June 30,  
          2014     2013  
          (In thousands, except share data)  
      ASSETS    
      CURRENT ASSETS            
           Cash and cash equivalents $  30,875   $  53,665  
           Pre-funded social welfare grants receivable   4,728     2,934  
           Accounts receivable, net of allowances of – March: $1,592; June: $4,701   132,356     102,614  
           Finance loans receivable, net of allowances of – March: $1,815; June: $-   42,379     8,350  
           Inventory   10,491     12,222  
           Deferred income taxes   5,350     4,938  
                   Total current assets before settlement assets   226,179     184,723  
                           Settlement assets   744,782     752,476  
                                   Total current assets   970,961     937,199  
      PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – March: $92,314; June: $84,808   46,150     48,301  
      EQUITY-ACCOUNTED INVESTMENTS   1,347     1,183  
      GOODWILL   179,832     175,806  
      INTANGIBLE ASSETS, net   69,265     77,257  
      OTHER LONG-TERM ASSETS, including reinsurance assets   34,338     36,576  
           TOTAL ASSETS   1,301,893     1,276,322  
      LIABILITIES    
      CURRENT LIABILITIES            
           Bank overdraft   -     -  
           Accounts payable   14,592     26,567  
           Other payables   35,682     33,808  
           Current portion of long-term borrowings   14,005     14,209  
           Income taxes payable   11,749     2,275  
                   Total current liabilities before settlement obligations   76,028     76,859  
                           Settlement obligations   744,782     752,476  
                                   Total current liabilities   820,810     829,335  
      DEFERRED INCOME TAXES   17,343     18,727  
      LONG-TERM BORROWINGS   58,061     66,632  
      OTHER LONG-TERM LIABILITIES, including insurance policy liabilities   20,117     21,659  
           TOTAL LIABILITIES   916,331     936,353  
      COMMITMENTS AND CONTINGENCIES            
      EQUITY    
           COMMON STOCK            
                       Authorized: 200,000,000 with $0.001 par value;
                       Issued and outstanding shares, net of treasury - March: 45,783,342; June:
                       45,592,550       		 

      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   165,076     160,670  
           TREASURY SHARES, AT COST: March: 13,455,090; June: 13,455,090   (175,823 )   (175,823 )
           ACCUMULATED OTHER COMPREHENSIVE LOSS   (97,910 )   (100,858 )
           RETAINED EARNINGS   494,145     452,618  
                   TOTAL NET1 EQUITY   385,547     336,666  
                   NON-CONTROLLING INTEREST   15     3,303  
                           TOTAL EQUITY   385,562     339,969  
                                   TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $  1,301,893   $  1,276,322  

      (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,  
          2014     2013     2014     2013  
          (In thousands)     (In thousands)  
      Cash flows from operating activities                        
      Net income (loss) $  17,170   $  (4,684 ) $  41,515   $  4,681  
      Depreciation and amortization   10,442     10,560     30,245     31,051  
      Earnings from equity-accounted investments   (52 )   (22 )   (202 )   (204 )
      Fair value adjustments   110     (299 )   49     408  
      Interest payable   30     1,054     1,696     3,363  
      (Profit) loss on disposal of property, plant and equipment   (26 )   3     (42 )   (83 )
      Stock-based compensation charge   922     1,092     2,820     3,325  
      Facility fee amortized   79     71     657     235  
      Increase in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable   (6,443 )   (4,818 )   (67,521 )   (3,987 )
      Decrease (Increase) in inventory   2,821     4,949     979     (2,260 )
      Increase (Decrease) in accounts payable and other payables   2,656     4,533     (10,895 )   (1,755 )
      Increase in taxes payable   8,069     948     9,431     354  
      Decrease in deferred taxes   (1,141 )   (1,201 )   (3,019 )   (4,133 )
           Net cash provided by operating activities   34,637     12,186     5,713     30,995  
      Cash flows from investing activities                        
      Capital expenditures   (4,848 )   (5,053 )   (17,309 )   (17,103 )
      Proceeds from disposal of property, plant and equipment   123     31     2,124     387  
      Acquisitions, net of cash acquired   -     -     -     (2,143 )
      (Investment in equity in) Repayment of loan by equity-accounted investment   (25 )   -     (25 )   3  
      Proceeds from maturity of investments related to insurance business   -     -     -     545  
      Other investing activities, ne3t   571     -     (570 )   -  
      Net change in settlement assets   (277,912 )   (156,363 )   (21,409 )   (168,419 )
           Net cash used in investing activities   (282,091 )   (161,385 )   (36,049 )   (186,730 )
      Cash flows from financing activities                        
      Long-term borrowings obtained   1,028     -     72,633     -  
      Repayment of long-term borrowings   -     -     (87,008 )   (7,307 )
      Payment of facility fee   -     -     (872 )   -  
      Proceeds from bank overdraft   -     -     24,580     -  
      Repayment of bank overdraft   (23,335 )   -     (23,335 )   -  
      Acquisition of interests in KSNET   -     -     (1,968 )   -  
      Proceeds from issue of common stock   88     -     88     240  
      Net change in settlement obligations   277,912     156,363     21,409     168,419  
           Net cash provided by financing activities   255,693     156,363     5,527     161,352  
      Effect of exchange rate changes on cash   274     (2,664 )   2,019     (2,124 )
      Net increase (decrease) in cash and cash equivalents   8,513     4,500     (22,790 )   3,493  
      Cash and cash equivalents – beginning of period   22,362     38,116     53,665     39,123  
      Cash and cash equivalents – end of period $  30,875   $  42,616   $  30,875   $  42,616  

      Net 1 UEPS Technologies, Inc.

      Attachment A

      Operating segment revenue, operating income and operating margin:

      Three months ended March 31, 2014 and 2013 and December 31, 2013

                                        Change – constant  
                            Change - actual     exchange rate(1)
                            Q3 ‘14     Q3 ‘14     Q3 ‘14     Q3 ‘14  
                            vs     vs     vs     vs  
      Key segmental data, in $ ’000,   Q3 ‘14     Q3 ‘13     Q2 ‘14     Q3‘13     Q2 ‘14     Q3‘13     Q2 ‘14  
         Revenue:                                          
             SA transaction-based activities $ 64,864   $ 59,009   $ 72,237     10%     (10% )   41%     (4% )
             International transaction-based activities   34,994     33,119     37,288     6%     (6% )   36%     0%  
             Smart card accounts   10,612     8,657     11,237     23%     (6% )   57%     1%  
             Financial services   11,099     1,651     6,199     572%     79%     763%     92%  
             Hardware, software and related technology sales   16,557     8,705     10,322     90%     60%     144%     72%  
                   Total consolidated revenue $ 138,126   $ 111,141   $ 137,283     24%     1%     60%     8%  
                                                 
         Consolidated operating income (loss):                                          
             SA transaction-based activities $ 11,145     ($4,197 ) $ 13,398     nm     (17% )   nm     (11% )
                   Operating income (loss) excluding amortization   12,308     (3,127 )   13,916     nm     (12% )   nm     (5% )
                   Amortization of intangible assets   (1,163 )   (1,070 )   (518 )   9%     125%     40%     140%  
               International transaction-based activities   1,322     (1,362 )   1,365     nm     (3% )   nm     4%  
                   Operating income excluding amortization   4,680     1,866     4,883     151%     (4% )   222%     3%  
                   Amortization of intangible assets   (3,358 )   (3,228 )   (3,518 )   4%     (5% )   34%     2%  
             Smart card accounts   3,025     2,467     3,203     23%     (6% )   57%     1%  
             Financial services   5,119     1,147     1,727     346%     196%     473%     217%  
             Hardware, software and related technology sales   4,000     1,699     1,592     135%     151%     202%     169%  
                   Operating income (loss) excluding amortization   4,066     1,785     1,663     128%     144%     193%     162%  
                   Amortization of intangible assets   (66 )   (86 )   (71 )   (23% )   (7% )   (1% )   (0% )
               Corporate/ Eliminations   (662 )   (4,480 )   (2,483 )   (85% )   (73% )   (81% )   (71% )
                   Total operating income (loss) $ 23,949     ($4,726 ) $ 18,802     nm     27%     nm     36%  
                                                 
         Operating income margin (%)                                          
             SA transaction-based activities   17%     (7% )   19%                          
            International transaction-based activities   4%     (4% )   4%                  
            International transaction-based activities excluding
                amortization      		   13%     6%     13%                  
             Smart card accounts   29%     28%     29%                          
             Financial services   46%     69%     28%                          
             Hardware, software and related technology sales   24%     20%     15%                  
             Overall operating margin   17%     (4% )   14%                          

      (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 2014 also prevailed during the third quarter of fiscal 2013 and the second quarter of fiscal 2014.

      Nine months ended March 31, 2014 and 2013

                            Change –  
                            constant  
                      Change -     exchange  
                      actual     rate(1)
                      F2014     F2014  
                      vs     vs  
      Key segmental data, in ’000, except margins   F2014     F2013     F2013     F2013  
         Revenue:                        
             SA transaction-based activities $ 200,133   $ 181,137     10%     36%  
             International transaction-based activities   109,099     97,881     11%     37%  
             Smart card accounts   33,178     25,240     31%     61%  
             Financial services   19,725     4,483     340%     440%  
             Hardware, software and related technology sales   36,768     25,524     44%     77%  
                   Total consolidated revenue $ 398,903   $ 334,265     19%     46%  
                               
         Consolidated operating income (loss):                        
             SA transaction-based activities $ 37,825   $ 4,136     815%     1,022%  
                   Operating income excluding amortization   40,057     8,139     392%     504%  
                   Amortization of intangible assets   (2,232 )   (4,003 )   (44% )   (32% )
             International transaction-based activities   4,738     (1,331 )   nm     nm  
                   Operating income excluding amortization   14,751     8,366     76%     116%  
                   Amortization of intangible assets   (10,013 )   (9,697 )   3%     27%  
             Smart card accounts   9,456     7,194     31%     61%  
             Financial services   6,902     3,292     110%     157%  
             Hardware, software and related technology sales   8,540     4,478     91%     134%  
                   Operating income excluding amortization   8,748     4,732     85%     127%  
                   Amortization of intangible assets   (208 )   (254 )   (18% )   1%  
             Corporate/ Eliminations   (8,310 )   (8,198 )   1%     24%  
                   Total operating income $ 59,151   $ 9,571     518%     658%  
                               
         Operating income margin (%)                        
             SA transaction-based activities   19%     2%              
             International transaction-based activities   4%     (1% )            
             International transaction-based activities excluding amortization   14%     9%          
             Smart card accounts   29%     29%              
             Financial services   35%     73%              
             Hardware, software and related technology sales   23%     18%              
             Overall operating margin   15%     3%              

      (1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the year to date fiscal 2014 also prevailed during the year to date fiscal 2013.

      Net 1 UEPS Technologies, Inc.

      Attachment B

      Reconciliation of GAAP net income (loss) and earnings (loss) per share, basic, to fundamental net income and earnings per share, basic:

      Three months ended March 31, 2014 and 2013

                      E(L)PS,                 E(L)PS,  
          Net income     basic     Net income     basic  
          (USD’000)   (USD)     (ZAR’000)   (ZAR)  
          2014     2013     2014     2013     2014     2013     2014     2013  
                                                       
      GAAP   17,182     (4,681 )   0.38     (0.10)     186,842     (39,632 )   4.08     (0.87 )
                                                       
           Intangible asset amortization, net .   3,443     3,295                 37,431     27,898              
           Stock-based compensation charge   922     1,092                 10,026     9,245              
           Facility fees for KSNET debt   79     71                 859     601              
           US government investigations- related and
               US lawsuit expenses       		  62     2,557               674     21,648          
           Acquisition-related costs   -     28                 -     237              
      Fundamental   21,688     2,362     0.47     0.05     235,832     19,997     5.15     0.44  

      Nine months ended March 31, 2014 and 2013

                                              EPS,  
          Net income     EPS, basic     Net income     basic  
          (USD’000)   (USD)     (ZAR’000)   (ZAR)  
          2014     2013     2014     2013     2014     2013     2014     2013  
                                                       
      GAAP   41,527     4,692     0.91     0.10     431,054     39,684     9.42     0.87  
                                                       
           Intangible asset amortization, net .   9,385     10,453                 97,414     88,403              
           Stock-based compensation charge   2,914     3,325                 30,248     28,122              
           Facility fees for KSNET debt   657     235                 6,820     1,988                 
           US government investigations- related and
                US lawsuit expenses       		  2,526     3,117             26,220     26,363          
           Acquisition-related costs   -     75                 -     634              
      Fundamental   57,009     21,897     1.25     0.48     591,756     185,194     12.94     4.07  

      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 March 31, 2014 and 2013

          2014     2013  
                   
      Net income (loss) (USD’000)   17,182     (4,681 )
      Adjustments:            
           Profit on sale of property, plant and equipment   (26 )   3  
           Tax effects on above   7     (1 )
                   
      Net income (loss) used to calculate headline earnings (USD’000)   17,163     (4,679 )
      Weighted average number of shares used to calculate net income (loss) per share basic earnings and headline earnings (loss) per share basic earnings (‘000)   45,776     45,545  
      Weighted average number of shares used to calculate net income (loss) per share diluted earnings and headline earnings (loss) per share diluted earnings (‘000)   45,954     45,597  
      Headline earnings (loss) per share:            
           Basic, in USD   0.37     (0.10 )
           Diluted, in USD   0.37     (0.10 )

      Nine months ended March 31, 2014 and 2013

          2014     2013  
                   
      Net income (USD’000)   41,527     4,692  
      Adjustments:            
           Profit on sale of property, plant and equipment   (42 )   (83 )
           Tax effects on above   12     23  
                   
      Net income used to calculate headline earnings (USD’000)   41,497     4,632  
      Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings (‘000)   45,742     45,530  
      Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings (‘000)   45,997     45,593  
      Headline earnings per share:            
           Basic, in USD   0.90     0.10  
           Diluted, in USD   0.90     0.10  

      Calculation of the denominator for headline diluted earnings per share

          Q3 ‘14     Q3 ‘13     F2014     F2013  
                               
      Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP   45,776     45,545     45,742     45,530  
           Effect of dilutive securities under GAAP   178     52     255     63  
               Denominator for headline diluted earnings per share   45,954     45,597     45,997     45,593  

      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.

Stock widget

Investing forum

NET 1 UEPS TECHNOLOGIES INC Reports