Net 1 UEPS Technologies, Inc. Reports Third Quarter 2019 Results

5/9, 10:05 PM (Source: GlobeNewswire)

JOHANNESBURG, South Africa, May 09, 2019 (GLOBE NEWSWIRE) -- Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today released results for the third fiscal quarter ended March 31, 2019.

 Q3 2019 Highlights:

  • Revenue of $86.5 million, GAAP EPS of $(0.96) and Fundamental EPS of $(0.62)
  • Fundamental EPS of ($0.62) includes $25.2 million, or $0.44 per share of non-cash fair value loss adjustments for Cell C, net of tax, and the impairment of the Cedar Cell note;
  • Operating loss of $21.7 million, Adjusted EBITDA improved sequentially to a loss of $(1.1) million;
  • Early-settlement of long-term South African debt on May 3, 2019; net cash of $24 million at March 31, 2019;
  • Monetization of DNI commenced with reduction of ownership from 55% to 30.4% since March 2019; DNI given a call option to acquire the remaining 30.4% at an exercise price of $59.3 million prior to December 31, 2019; and
  • Active EPE accounts remained stable at 1.1 million as of March 31, 2019.

“We are pleased that our core South African operations demonstrated far more stability during the third-quarter, allowing us to focus on our extensive cost-containment exercise, a significant reduction of debt and other obligations, and the first steps towards the realization of value of some of our assets,” said Herman Kotzé, CEO. “The retrenchment of thousands of Net1 family members has been one of the most difficult processes we have ever faced and we completed the necessary actions to remain on track to achieve a monthly EBITDA-neutral position for our South African operations by the end of Q4 2019. The Board and management remain squarely focused on reviewing all options available for the Group, and will provide updates when there are tangible actions to report.”

“In Korea, our advisors are actively engaged with management to execute the near-term action items to drive higher growth and profitability, and in parallel, our Board, with financial advisors, is reviewing the strategic alternatives for this business. Cell C is focused on managing its near-term liquidity constraints, closing its transaction with a new minority investor and improving the performance of the business. Our other equity investments continued to perform in line with expectations during the quarter,” continued Kotzé. “With the deleveraging of the balance sheet that has been achieved since our last report, we remain comfortable with our liquidity position for the next 12 months.”

Subsequent Event
On February 28, 2019, we entered into a transaction which reduced our shareholding in DNI from 55% to 38%. The transaction closed on March 31, 2019. On May 3, 2019, we entered into an agreement which further reduced our shareholding in DNI from 38% to 30.4% through the sale of shares in DNI to FirstRand Bank Limited, acting through its Rand Merchant Bank division, for a transaction consideration of ZAR 215.0 million ($14.9 million, translated at exchange rates applicable as of May 3, 2019). The company utilized the sale proceeds and ZAR 15.0 million ($1.0 million, translated at exchange rates applicable as of May 3, 2019) of its cash reserves to early-settle its outstanding long-term borrowings. On May 3, 2019, we also entered into an agreement, in which we granted a call option to DNI to acquire our retained 30.4% interest in DNI. The option expires on December 31, 2019, and may be exercised at any time during this period. The option strike price for our remaining 30.4% interest is ZAR 859.3 million, or $59.3 million, translated at exchange rates applicable as of May 3, 2019, less any special distributions made by DNI.

Summary Financial Metrics

 Three months ended March 31,
 2019       2018
As
restated
(1)
  % change
in USD
 % change
in ZAR

(All figures in USD ‘000s except per share data)          
Revenue86,484  162,721  (47%) (37%)
GAAP operating (loss) income(21,683) 7,564  nm  nm 
Adjusted (negative) EBITDA(2)(1,082) 34,335  nm  nm 
GAAP (loss) earnings per share ($)(0.96) 0.57  nm  nm 
Continuing(0.88) 0.51  nm  nm 
Discontinued(0.08) 0.06  nm  nm 
Fundamental (loss) earnings per share ($)(2)(0.62) 0.95  nm  nm 
Fully-diluted shares outstanding (‘000’s)56,828  56,777  0%   
Average period USD/ ZAR exchange rate14.17  11.95  19%   
Non-cash adjustments included (before tax impact):39,726  (17,399) nm    
Allowance for doubtful finance loans receivables396  579  (32%)   
Change in fair value of equity securities26,263  (37,843) nm    
Loss on disposal of DNI5,140  -  nm    
Impairment loss5,305  19,865  (73%)   
Impairment of Cedar Cell note2,622  -  nm    



 Nine months ended March 31,
 2019      2018
As
restated
(1)
 % change
in USD

 % change
in ZAR
(All figures in USD ‘000s except per share data)          
Revenue309,518  463,695 (33%) (26%)
GAAP operating (loss) income(63,862) 48,877 nm  nm 
Adjusted (negative) EBITDA(2)(11,872) 102,774 nm  nm 
GAAP (loss) earnings per share ($)(2.18) 1.08 nm  nm 
Continuing(2.16) 1.02 nm  nm 
Discontinued(0.02) 0.06 nm  nm 
Fundamental (loss) earnings per share ($)(2)(1.48) 1.77 nm  (188%)
Fully-diluted shares outstanding (‘000’s)56,819  56,842 (0%)   
Average period USD/ ZAR exchange rate14.27  12.89 11%   
Non-cash adjustments included (before tax impact):97,727  (6,418)nm    
Allowance for doubtful finance loans receivables31,638  11,560 174%   
Change in fair value of equity securities42,099  (37,843)nm    
Loss on disposal of DNI5,140  - nm    
Impairment loss13,496  19,865 (32%)   
Impairment of Cedar Cell note5,354  - nm    

(1) As previously reported and more fully described in Note 1 to the consolidated financial statements contained in the Form 10-K/A filed on December 6, 2018, the Company restated its 2018 consolidated financial statements, to correctly classify and record the change in fair value of its investment in Cell C. The financial information for the three and nine months ended March 31, 2018, has been restated with the effect of increasing GAAP net (loss) income by $29,366, and GAAP (loss) net income by $0.52.

(2) Adjusted negative EBITDA and fundamental (loss) earnings per share are non-GAAP measures and are described below under “Use of Non-GAAP Measures—negative EBITDA and Adjusted negative EBITDA, and —Fundamental net (loss) income and fundamental (loss) earnings per share.” See Attachment B for a reconciliation of GAAP operating (loss) income to negative EBITDA and Adjusted negative EBITDA, and GAAP net (loss) income to fundamental net (loss) income and (loss) earnings per share.

Factors impacting comparability of our Q3 2019 and Q3 2018 results

  • Decline in revenue: Our revenues declined 37% in ZAR primarily due to the expiration of our SASSA contract, significant decline in EPE account numbers driven by SASSA’s auto-migration of accounts to SAPO, and a reduction in EPE-related financial and value-added services and transaction fees due to a smaller customer base, but partially offset by the inclusion of DNI;
  • Increase in operating losses: Lower revenue, coupled with a high-fixed cost infrastructure and write-downs due to limited recoverability of dues from customers, resulted in an operating loss. During the Q3 2019, we commenced with a restructuring of our South African operations to bring our cost structure in-line with our current customer base, and expect to reach break-even on a cash basis by the end of the Q4 2019. We incurred $4.5 million in retrenchment costs during Q3 2019;
  • Non-cash losses, impairments and fair-value adjustments: We incurred a $5.1 million non-cash loss on disposal of DNI, an impairment loss of $5.3 million related to DNI intangibles, a fair value adjustment loss of $26.3 million for Cell C and a $2.6 million impairment of our Cedar Cell note; and
  • Adverse foreign exchange movements: The U.S. dollar appreciated 19% against the ZAR and 6% against the KRW during Q3 2019, which adversely impacted our reported results.

Results of Operations by Segment and Liquidity

South African transaction processing

Segment revenue was $17.4 million in Q3 2019, down 72% on a constant currency basis compared with Q3 2018. The decrease in segment revenue and operating income was primarily due to the substantial decrease in the number of SASSA grant recipients paid under our SASSA contract as the contract ended at the end of Q1 2019. Our revenue and operating income was also adversely impacted by the significant reduction in the number of SASSA grant recipients with SASSA-branded Grindrod cards linked to Grindrod bank accounts as well as a lower number of EPE accounts. These decreases in revenue and operating income were partially offset by higher transaction revenue as a result of increased usage of our ATMs. Operating income for this operating segment for Q3 2019 included retrenchment costs of $3.0 million (ZAR 41.7 million). Our operating (loss) income margin for Q3 2019 and 2018 was (74.6%) and 17.3%, respectively. Excluding restructuring costs, the operating loss margin for Q3 2019 was (57.5%).

International transaction processing

Segment revenue was $34.4 million in Q3 2019, down 12% compared with Q3 2018 in constant currency. Segment revenue was lower during Q3 2019, primarily due to a contraction in IPG transactions processed, specifically meaningfully lower crypto-exchange and China processing activity, and modestly lower KSNET revenue as a result of lower transaction values processed. Operating income during Q3 2018 was adversely impacted by a $19.9 million impairment loss and positively impacted by an ad hoc refund of indirect taxes of $2.5 million in Korea. Excluding the impact of the impairment loss and the ad hoc tax refund, operating income during Q3 2019 was lower compared to fiscal 2018 due to the decrease in IPG revenues and resulting from these lower revenues, and partially offset by an improved contribution from KSNET, primarily as a result of a lower depreciation expense. Operating income (loss) margin for Q3 2019 and 2018 was 5.6% and (32.2%), respectively. Excluding the goodwill impairment and ad hoc tax refund, segment operating income and margin for fiscal 2018 were $2.4 million and 5.2%, respectively.

Financial inclusion and applied technologies

Segment revenue was $36.7 million in Q3 2019, down 27% compared with Q3 2018 in constant currency. Segment revenue decreased primarily due to fewer prepaid airtime and value-added services sales, lower lending and insurance revenue, and a decrease in inter-segment revenues, partially offset by the inclusion of DNI. Operating income was significantly lower than Q3 2018, primarily due to lower revenue generation and higher expenses incurred to maintain and expand our financial service infrastructure, partially offset by the contribution from DNI. Operating income for this operating segment for Q3 2019 included retrenchment costs of $1.6 million (ZAR 22.1 million). Excluding the retrenchment costs, segment operating income and margin for fiscal 2019 were $4.8 million and 13.2% respectively.

Corporate/eliminations

Our corporate expenses increased primarily due to a $5.3 million impairment loss as well as higher acquired intangible asset amortization, non-employee director expenses, transaction-related expenditures and external service provider fees.

Cash flow and liquidity

At March 31, 2019, our cash and cash equivalents were $48.8 million and comprised ZAR-denominated balances of ZAR 263.0 million ($18.2 million), KRW-denominated balances of KRW 17.2 billion ($15.1 million), U.S. dollar-denominated balances of $10.7 million, and other currency deposits, primarily Botswana pula, of $4.7 million, all amounts translated at exchange rates applicable as of March 31, 2019. The decrease in our unrestricted cash balances from June 30, 2018, was primarily due to significantly weaker trading activities, scheduled debt repayments, dividend payments to non-controlling interests and capital expenditures, which was partially offset by the contribution from the inclusion of DNI, and a decrease in our South African lending book.

Excluding the impact of interest received, interest paid under our South Africa debt and taxes, the decrease in cash provided is primarily due to significantly weaker trading activity during fiscal 2019 compared to 2018. Capital expenditures for Q3 2019 and 2018 were $1.6 million and $4.2 million, respectively, and have decreased primarily due to the acquisition of fewer ATMs in South Africa and computer equipment to maintain our processing activities. We made a scheduled South African debt facility payment of $10.5 million (ZAR 151 million).

Operating metrics and supplemental presentation for Q3 2019 Results

Our updated operating metrics have been posted on our website (www.net1.com). A supplemental presentation for Q3 2019 will be posted to the Investor Relations page of our website – ir.net1.com one hour prior to our earnings call on Friday, May 10, 2019.

Conference Call

We will host a conference call to review these results on May 10, 2019, at 8:00 a.m. Eastern Time. To participate in the call, dial 1-508-924-4326 (US and Canada), 0333-300-1418 (U.K. only) or 080-020-0648 (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 May 30, 2019.

Use of Non-GAAP Measures

US securities laws require that when we publish any non-GAAP measures, we disclose the reason for using these non-GAAP measures and provide reconciliations to the directly comparable GAAP measures. The presentation of negative EBITDA, adjusted negative EBITDA, fundamental net (loss) income and fundamental (loss) earnings per share and headline (loss) earnings per share are non-GAAP measures.

EBITDA and adjusted EBITDA

(Loss) Earnings before interest, tax, depreciation and amortization (“EBITDA”) is GAAP operating (loss) income adjusted for depreciation and amortization and, if applicable, impairment losses. Adjusted EBITDA is EBITDA adjusted for costs related to acquisitions and transactions consummated or ultimately not pursued, retrenchment costs incurred, an allowance for doubtful Mastertrading working capital finance loans receivable, a refund of indirect taxes in Korea, and (loss) profits realized on the sale of a business.

Fundamental net (loss) income and fundamental (loss) earnings per share

Fundamental net (loss) income and (loss) earnings per share is GAAP net (loss) income and (loss) earnings per share adjusted for the amortization of acquisition-related intangible assets (net of deferred taxes), the amortization of intangible assets (net of deferred taxes) related to equity-accounted investments, stock-based compensation charges and reversals, the amortization of South African and South Korean debt facility fees and unusual non-recurring items, including the impairment loss, costs related to acquisitions and transactions consummated or ultimately not pursued.

Fundamental net (loss) income and (loss) earnings per share for fiscal 2019 also includes an adjustment for the loss incurred on the disposal of DNI, retrenchment costs incurred, accretion of interest related to the DNI contingent consideration, and for the non-controlling interest portion of the amortization of intangible assets (net of deferred taxes). Fundamental net income and earnings per share for fiscal 2018 also includes adjustments for an allowance for doubtful working capital finance receivables, refund of indirect taxes in Korea, the impact of changes in tax laws in the U.S and a gain realized on the sale of XeoHealth.

We provide earnings guidance only on a non-GAAP basis and do not provide a reconciliation of forward-looking fundamental (loss) earnings per share guidance to the most directly comparable GAAP financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, the amounts of which, based on past experience, could be material.

Management believes that the EBITDA, adjusted EBITDA, fundamental net (loss) income and (loss) 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 operating income and EBITDA and adjusted EBITDA; and GAAP net (loss) income and (loss) earnings per share and fundamental net (loss) income and (loss) earnings per share.

Headline (loss) earnings per share (“H(L)EPS”)

The inclusion of H(L)EPS in this press release is a requirement of our listing on the JSE. H(L)EPS 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.

H(L)EPS basic and diluted is calculated as GAAP net (loss) income adjusted for the impairment loss and (profit) loss on sale of property, plant and equipment. Attachment C presents the reconciliation between our net (loss) income used to calculate (loss) earnings per share basic and diluted and HE(L)PS basic and diluted and the calculation of the denominator for headline diluted (loss) earnings per share.

About Net1

Net1 is a leading provider of transaction processing services, financial inclusion products and services and secure payment technology. Net1 operates market-leading payment processors in South Africa and the Republic of Korea. Net1 offers debit, credit and prepaid processing and issuing services for all major payment networks. In South Africa, Net1 provides innovative low-cost financial inclusion products, including banking, lending and insurance and through DNI is a leading distributor of mobile subscriber starter packs for Cell C, a South African mobile network operator. Net1 leverages its strategic equity investments in Finbond and Bank Frick (both regulated banks), and Cell C to introduce products to new customers and geographies. Net1 has a primary listing on NASDAQ (NasdaqGS: UEPS) and a secondary listing on the Johannesburg Stock Exchange (JSE: NT1). Visit www.net1.com for additional information about Net1.

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
Group Vice President, Investor Relations
Phone: +1 917-767-6722
Email: dchopra@net1.com 

Media Relations Contact:
Bridget von Holdt
Business Director – BCW
Phone: +27-82-610-0650
Email: bridget.vonholdt@bm-africa.com 

 
 
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
 
 Three months ended Nine months ended
  March 31,
  March 31,
  2019       2018
(As restated)
  2019      2018
(As restated)
                 
           
 (In thousands, except per share data) (In thousands, except per share data)
           
REVENUE$ 86,484  $ 162,721 $ 309,518 $ 463,695
EXPENSE          
Cost of goods sold, IT processing, servicing and support  50,179    77,860   173,680   226,506
                 
Selling, general and administration  42,802    48,091   155,676   141,417
                 
Depreciation and amortization  9,881    9,341   30,528   27,030
                 
Impairment loss  5,305    19,865   13,496   19,865
OPERATING (LOSS) INCOME  (21,683)   7,564   (63,862)  48,877
           
CHANGE IN FAIR VALUE OF EQUITY SECURITIES  (26,263)   37,843   (42,099)  37,843
           
LOSS ON DISPOSAL OF DNI  5,140    -   5,140   -
           
INTEREST INCOME, net of impairment  (959)   5,154   586   14,903
           
INTEREST EXPENSE  3,493    2,426   9,030   6,872
           
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE  (57,538)   48,135   (119,545)  94,751
           
INCOME TAX (BENEFIT) EXPENSE  (2,490)   19,418   1,702   39,757
           
NET (LOSS) INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS  (55,048)   28,717   (121,247)  54,994
           
(LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS  (464)   3,960   (338)  7,389
           
NET (LOSS) INCOME  (55,512)   32,677   (121,585)  62,383
Continuing  (50,784)   29,386   (124,275)  57,181
Discontinued  (4,728)   3,291   2,690   5,202
           
(ADD) LESS NET (LOSS) INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST  (728)   302   2,339   903
Continuing  (485)   302   (1,362)  903
Discontinued  (243)   -   3,701   -
           
NET (LOSS) INCOME ATTRIBUTABLE TO NET1$ (54,784) $ 32,375 $ (123,924)$ 61,480
Continuing  (50,299)   29,084   (122,913)  56,278
Discontinued  (4,485)   3,291   (1,011)  5,202
           
Net (loss) income per share, in U.S. dollars          
Basic (loss) earnings attributable to Net1 shareholders $(0.96)  $0.57  $(2.18) $1.08
Continuing $(0.88)  $0.51  $(2.16) $1.02
Discontinued $(0.08)  $0.06  $(0.02) $0.06
Diluted (loss) earnings attributable to Net1 shareholders $(0.96)  $0.57  $(2.18) $1.08
Continuing $(0.88)  $0.51  $(2.16) $1.02
Discontinued $(0.08)  $0.06  $(0.02) $0.06
           
           



NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets
 
 March 31,  June 30,
 2019
 2018(A)
        
 (In thousands, except share data)
ASSETS
CURRENT ASSETS     
Cash and cash equivalents$48,757  $87,075 
Restricted cash 74,181   - 
Pre-funded social welfare grants receivable -   2,965 
Accounts receivable, net and other receivables 80,150   93,448 
Finance loans receivable, net 25,217   61,463 
Inventory 7,861   10,361 
Current assets of discontinued operation -   22,482 
Total current assets before settlement assets 236,166   277,794 
Settlement assets 66,222   149,047 
Total current assets 302,388   426,841 
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – March: $131,212; June: $126,026 19,889   25,737 
EQUITY-ACCOUNTED INVESTMENTS 167,497   87,992 
GOODWILL 156,499   169,079 
INTANGIBLE ASSETS, net of accumulated amortization of – March: $128,724; June: $121,466 15,719   27,129 
DEFERRED INCOME TAXES 2,862   5,751 
OTHER LONG-TERM ASSETS, including reinsurance assets 174,903   235,032 
LONG-TERM ASSETS OF DISCONTINUED OPERATION -   241,729 
TOTAL ASSETS 839,757   1,219,290 
      
LIABILITIES
CURRENT LIABILITIES     
Short-term credit facilities for ATM funding 74,181   - 
Short-term credit facilities 8,865   - 
Accounts payable 14,743   21,106 
Other payables 37,936   41,645 
Current portion of long-term borrowings 15,823   44,079 
Income taxes payable 4,958   5,742 
Current liabilities of discontinued operation -   20,914 
Total current liabilities before settlement obligations 156,506   133,486 
Settlement obligations 66,222   149,047 
Total current liabilities 222,728   282,533 
DEFERRED INCOME TAXES 6,299   17,485 
LONG-TERM BORROWINGS -   5,469 
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities 2,273   30,289 
LONG-TERM LIABILITIES OF DISCONTINUED OPERATION -   37,412 
TOTAL LIABILITIES 231,300   373,188 
COMMITMENTS AND CONTINGENCIES     
REDEEMABLE COMMON STOCK 107,672   107,672 
      
EQUITY
COMMON STOCK     
Authorized: 200,000,000 with $0.001 par value;     
Issued and outstanding shares, net of treasury - March: 56,815,925; June: 56,685,925 80   80 
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 277,950   276,201 
TREASURY SHARES, AT COST: March: 24,891,292; June: 24,891,292 (286,951)  (286,951)
ACCUMULATED OTHER COMPREHENSIVE LOSS (204,338)  (184,436)
RETAINED EARNINGS 713,701   837,625 
TOTAL NET1 EQUITY 500,442   642,519 
NON-CONTROLLING INTEREST 343   95,911 
TOTAL EQUITY 500,785   738,430 
      
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY$839,757  $1,219,290 
      
(A) – Derived from audited financial statements filed on Form 10-K/A on December 6, 2018



NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
            
      
      
   Three months ended  Nine months ended
               
               
   March 31,   March 31,
             
   2019     2018
(as restated)
  2019  
 
  2018
(as restated()
                    
  (In thousands) (In thousands)
             
Cash flows from operating activities          
Net (loss) income$(55,512) $32,677  $(121,585)$62,383 
Depreciation and amortization 9,881   9,341   30,528  27,030 
Impairment loss 5,305   19,865   13,496  19,865 
Allowance for doubtful accounts receivable charged 396   579   31,638  11,560 
Loss (Earnings) from equity-accounted investments 464   (3,960)  338  (7,389)
Interest on Cedar Cell note, net of impairment 2,044   (587)  3,404  (769)
Change in fair value of equity securities 26,263   (37,843)  42,099  (37,843)
Fair value adjustments and foreign currency re-measurements 90   (110)  91  (209)
Interest payable 53   (17)  294  (264)
Facility fee amortized 51   120   206  467 
(Profit) Loss on disposal of property, plant and equipment (147)  (50)  (413) 71 
Loss (Profit) on disposal of business 5,140   -   5,140  (463)
Stock-based compensation charge, net 487   575   1,672  2,010 
Dividends received from equity accounted investments -   1,946   454  4,111 
Decrease (Increase) in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable (14,938)  41,679   6,533  (2,438)
Decrease (Increase) in inventory 1,451   1,072   3,612  (2,776)
Increase (Decrease) in accounts payable and other payables 8,196   2,827   (11,339) 5,775 
Increase in taxes payable 795   9,007   2,142  8,091 
(Decrease) Increase in deferred taxes (4,153)  7,824   (11,223) 8,252 
Net cash (used in) provided by operating activities (14,134)  84,945   (2,913) 97,464 
           
Cash flows from investing activities          
Capital expenditures (1,615)  (4,225)  (7,280) (7,801)
Proceeds from disposal of property, plant and equipment 295   160   781  575 
Disposal of DNI (2,114)  -   (2,114) - 
Investment in equity of equity-accounted investments (489)  (18,597)  (2,989) (132,335)
Acquisition of intangible assets -   -   (1,384) - 
Investment in MobiKwik -   -   (1,056) - 
Proceeds on return of investment -   -   284  - 
Investment in Cell C -   -   -  (151,003)
Loans to equity-accounted investments -   (10,635)  -  (10,635)
Acquisition of held to maturity investment -   -   -  (9,000)
Other investing activities -   300   -  146 
Net change in settlement assets (1,083)  43,222   76,879  280,390 
Net cash (used in) provided by investing activities (5,006)  10,225   63,121  (29,663)
           
Cash flows from financing activities          
Proceeds from bank overdraft 278,288   9,802   584,525  42,372 
Repayment of bank overdraft (257,097)  (42,650)  (502,823) (56,993)
Repayment of long-term borrowings (12,499)  (15,826)  (36,310) (60,967)
Long-term borrowings utilized 3,609   17,726   14,613  113,157 
Dividends paid to non-controlling interest (1,148)  -   (4,085) - 
Payment of guarantee fee -   (202)  (394) (754)
Net change in settlement obligations 1,083   (43,222)  (76,879) (280,390)
Net cash provided by (used in) financing activities 12,236   (74,372)  (21,353) (243,575)
           
Effect of exchange rate changes on cash (3,199)  1,478   (5,971) 4,489 
Net (decrease) increase in cash, cash equivalents and restricted cash (10,103)  22,276   32,884  (171,285)
Cash, cash equivalents and restricted cash – beginning 133,041   64,896   90,054  258,457 
Cash, cash equivalents and restricted cash – end of period (1)$122,938  $87,172  $122,938 $87,172 
           
(1) Cash, cash equivalents and restricted cash as of March 31, 2019, includes restricted cash of approximately $74.2 million related to cash withdrawn from the Company’s various debt facilities to fund ATMs. This cash may only be used to fund ATMs and is considered restricted as to use and therefore is classified as restricted cash.
 
 

Net 1 UEPS Technologies, Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended March 31, 2019 and 2018 and December 31, 2018

       Change - actual Change –
constant
exchange rate
(1)
Key segmental data, in ’000, except marginsQ3 ‘19 Q3 ‘18 Q2 ‘19 Q3 ‘19
vs
Q3‘18
 Q3 ‘19
vs
Q2 ‘19

 Q3 ‘19
vs
Q3‘18

 Q3 ‘19
vs
Q2 ‘19
Revenue:                 
South African transaction processing$17,374  $73,508  $21,970  (76%) (21%) (72%) (22%)
International transaction processing 34,358   46,240   38,124  (26%) (10%) (12%) (11%)
Financial inclusion and applied technologies 36,650   59,574   38,755  (38%) (5%) (27%) (6%)
Continuing 18,808   59,574   19,047  (68%) (1%) (63%) (2%)
Discontinued 17,842   -   19,708  nm  (9%) nm  (10%)
Subtotal: Operating segments 88,382   179,322   98,849  (51%) (11%) (42%) (12%)
Intersegment eliminations (1,898)  (16,601)  (1,699) (89%) 12% (86%) 11%
Consolidated revenue  86,484   162,721   97,150  (47%) (11%) (37%) (12%)
Continuing  68,642   162,721   77,442  (58%) (11%) (50%) (12%)
Discontinued $17,842  $-  $19,708  nm  (9%) nm  (10%)
                  
Operating (loss) income:                 
South African transaction processing($12,954) $12,719  ($11,830) nm  10% nm  8%
International transaction processing 1,909   (14,892)  (4,043) nm  nm  nm  nm 
Financial inclusion and applied technologies 3,227   14,968   (18,538) (78%) nm  (74%) nm 
Continuing (4,911)  14,968   (26,968) (133%) nm  (139%) nm 
Discontinued 8,138   -   8,430  nm  (3%) nm  (4%)
Subtotal: Operating segments (7,818)  12,795   (34,411) nm  (77%) nm  (78%)
Corporate/Eliminations (13,865)  (5,231)  (8,664) 165% 60% 214% 58%
Continuing (6,399)  (5,231)  (6,061) 22% 6% 45% 4%
Discontinued (7,466)  -   (2,603) nm  187% nm  184%
Consolidated operating (loss) income  (21,683)  7,564   (43,075) nm  (50%) nm  (50%)
Continuing  (22,355)  7,564   (48,902) nm  (54%) nm  (55%)
Discontinued $672  $-  $5,827  nm  (88%) nm  (89%)
                  
Operating (loss) income margin (%)                 
South African transaction processing (74.6%)  17.3%  (53.8%)            
International transaction processing 5.6%  (32.2%)  (10.6%)            
Financial inclusion and applied technologies 8.8%  25.1%  (47.8%)            
Continuing (26.1%)  25.1%  (141.6%)            
Discontinued 45.6% nm  42.8%            
Consolidated operating margin (25.1%)  4.6%  (44.3%)            
Continuing (32.6%)  4.6%  (63.1%)            
Discontinued 3.8% nm  29.6%            
                
(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during Q3 2019 also prevailed during Q3 2018 and Q2 2019.
 
 

Nine months ended March 31, 2019 and 2018

      Change -
actual

 Change –
constant
exchange
rate
(1)
Key segmental data, in ’000, except margins F2019 F2018  F2019
vs
F2018
 F2019
vs
F2018
Revenue:          
South African transaction processing$77,093  $204,093   (62%) (58%)
International transaction processing  111,869   136,447   (18%) (9%)
Financial inclusion and applied technologies  128,611   168,018   (23%) (15%)
Continuing  72,274   168,018   (57%) (52%)
Discontinued 56,337   -   nm  nm 
Subtotal: Operating segments 317,573   508,558   (38%) (31%)
Intersegment eliminations  (8,055)  (44,863)  (82%) (80%)
Consolidated revenue  309,518   463,695   (33%) (26%)
Continuing  253,181   463,695   (45%) (40%)
Discontinued $56,337  $-   nm  nm 
           
Operating (loss) income:          
South African transaction processing $(28,297) $38,521   (173%) (181%)
International transaction processing  628   (14,567)  (104%) (105%)
Financial inclusion and applied technologies  (4,009)  41,625   (110%) (111%)
Continuing  (28,409)  41,625   (168%) (176%)
Discontinued 24,400   -   nm  nm 
Subtotal: Operating segments  (31,678)  65,579   (148%) (153%)
Corporate/Eliminations  (32,184)  (16,702)  93% 113%
Continuing  (19,465)  (16,702)  17% 29%
Discontinued  (12,719)  -   nm  nm 
Consolidated operating (loss) income (63,862)  48,877   (231%) (245%)
Continuing  (75,543)  48,877   (255%) (271%)
Discontinued $11,681  $-   nm  nm 
           
Operating (loss) income margin (%)          
South African transaction processing (36.7%)  18.9%       
International transaction processing  0.6%  (10.7%)       
Financial inclusion and applied technologies  (3.1%)  24.8%       
Continuing  (39.3%)  24.8%       
Discontinued 43.3% nm       
Consolidated operating margin (20.6%)  10.5%       
Continuing  (29.8%)  10.5%       
Discontinued  20.7% nm       
           
(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 2019 also prevailed during the year to date fiscal 2018.
 
 

(Loss) Earnings from equity-accounted investments:

The table below presents the relative (loss) earnings from our equity-accounted investments:

 Q3 2019 Q3 2018 %
change

 F2019 F2018 %
change
Bank Frick ($90)  $653  nm   ($1,895)  $975  nm 
Share of net income 52   747  (93%)  616   1,234  (50%)
Amortization of intangible assets, net of deferred tax (142)  (94) 51%  (427)  (259) 65%
Other  -   -  nm   (2,084)  -  nm 
DNI(1) -   3,291  nm   -   5,202  nm 
Share of net income -   3,628  nm   -   6,868  nm 
Amortization of intangible assets, net of deferred tax -   (337) nm   -   (1,666) nm 
Finbond(2) -   -  nm   1,875   1,101  70%
Other (374)  16  nm   (318)  111  nm 
(Loss) earnings from equity-accounted investments ($464)  $3,960  nm   ($338)  $7,389  nm 

(1) DNI was accounted for using the equity method in fiscal 2018 and has been consolidated from June 30, 2018, following the acquisition of a controlling interest in the company. DNI is included in our Financial inclusion and applied technologies operating segment from the acquisition date.
(2) Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first quarter and its annual results during our fourth quarter and we record those results in our results during those quarters.


Net 1 UEPS Technologies, Inc.

Attachment B

Reconciliation of GAAP operating (loss) income to negative EBITDA and adjusted negative EBITDA:

Three and nine months and year ended March 31, 2019 and 2018

 Three months ended
March 31,
 Nine months ended
March 31,
 2019 2018 2019 2018
            
Operating (loss) income - GAAP(21,683) 7,564  (63,862) 48,877 
            
Depreciation and amortization9,881  9,341  30,528  27,030 
Impairment loss5,305  19,865  13,496  19,865 
(Negative) EBITDA(6,497) 36,770  (19,838) 95,772 
Retrenchment costs4,542  -  5,243  - 
Transaction costs873  110  2,723  2,207 
Refund of Korean indirect taxes-  (2,545) -  (2,545)
Non-recurring Mastertrading allowance for doubtful accounts-  -  -  7,803 
(Loss) Profit on disposal of subsidiary-  -  -  (463)
Adjusted (negative) EBITDA(1,082) 34,335  (11,872) 102,774 
            

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

Three months ended March 31, 2019 and 2018

  Net (loss) income
(USD’000)
 (L)EPS,
basic
(USD)
 Net (loss) income
(ZAR’000)
 (L)EPS,
 basic
(ZAR)
 2019
 2018
 2019
 2018 2019 2018
 2019
 2018
                     
GAAP(54,784) 32,375  (0.96) 0.57 (815,439)386,814  (14.35) 6.80
                     
Impairment loss5,305  19,865       75,184 237,345      
Loss on disposal of DNI 5,140  -       72,845 -      
Intangible asset amortization, net4,380  2,268       62,080 27,096      
Retrenchment costs, net 3,270  -       45,915 -      
Accreted interest on DNI contingent consideration1,012  -       14,335 -      
Intangible asset amortization, net related to non-controlling interest(918) -       (13,008)-      
Stock-based compensation charge578  575       8,190 6,870      
Transaction costs873  110       12,371 1,314      
Intangible asset amortization, net related to equity accounted investments142  431       2,012 10,701      
Facility fees for debt51  120       723 1,434      
Refund related to litigation finalized in Korea, net-  (1,985)      - (23,717)     
Fundamental (34,951) 53,759  (0.62) 0.95 (534,792)647,857  (9.41) 11.40
                     
                     

Nine months ended March 31, 2019 and 2018

 Net (loss) income
(USD’000)
 (L)EPS,
basic
(USD)
  Net (loss) income
(ZAR’000)
 (L)EPS,
 basic
(ZAR)
 2019
 2018
 2019
 2018 2019
 2018
 2019 2018
                     
GAAP(123,924) 61,480  (2.18) 1.08 (1,705,572) 792,686  (30.03)13.96
                     
Intangible asset amortization, net 13,502  6,644       192,633  85,666     
Impairment loss 13,496  19,865       192,551  256,128     
Loss on disposal of DNI5,140  -       73,333  -     
Retrenchment costs, net3,775          53,087  -     
Intangible asset amortization, net related to non-controlling interest(2,737) -       (39,047) -     
Transaction costs2,723  2,050       38,848  26,432     
Accreted interest on DNI contingent consideration 1,848  -       26,360  -     
Stock-based compensation charge1,763  2,010       25,152  25,916     
Intangible asset amortization, net related to equity accounted investments427  1,925       6,092  17,835     
Facility fees for debt206  467       2,939  6,021     
Non-recurring Mastertrading allowance for doubtful accounts-  7,803       -  100,607     
Refund related to litigation finalized in Korea, net -  (1,985)      -  (25,593)    
Change in US tax rate-  860       -  11,088     
Profit on disposal of subsidiary-  (463)      -  (5,970)    
Fundamental(83,781) 100,656  (1.48) 1.77 (1,133,624) 1,290,816  (19.96)22.73
                     
                     

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, 2019 and 2018

 2019
 2018
    
Net (loss) income (USD’000)(54,784) 32,375 
Adjustments:   
Impairment loss5,305  19,865 
Loss on sale of business5,140  - 
Profit on sale of property, plant and equipment(147) (50)
Tax effects on above41  14 
    
Net (loss) income used to calculate headline earnings (USD’000)(44,445) 52,204 
    
Weighted average number of shares used to calculate net income per share basic (loss) earnings and headline (loss)
earnings per share basic (loss) earnings (‘000) 
56,828  56,716 
    
Weighted average number of shares used to calculate net income per share diluted (loss) earnings and headline (loss)
earnings per share diluted (loss) earnings (‘000) 
56,828  56,777 
    
Headline (loss) earnings per share:    
Basic, in USD(0.78) 0.92 
Diluted, in USD(0.78) 0.92 

Nine months ended March 31, 2019 and 2018

 2019
 2018
    
Net (loss) income (USD’000)(123,924) 61,480 
Adjustments:   
Impairment loss13,496  19,865 
Loss (Profit) on sale of business5,140  (463)
Profit on sale of property, plant and equipment(413) (50)
Tax effects on above116  14 
    
Net (loss) income used to calculate headline earnings (USD’000)(105,585) 80,846 
    
Weighted average number of shares used to calculate net income per share basic (loss) earnings and headline (loss)
earnings per share basic (loss) earnings (‘000)
56,795  56,788 
    
Weighted average number of shares used to calculate net income per share diluted (loss) earnings and headline (loss)
earnings per share diluted (loss) earnings (‘000)
56,819  56,842 
    
Headline (loss) earnings per share:    
Basic, in USD(1.86) 1.42 
Diluted, in USD(1.86) 1.42 

Calculation of the denominator for headline diluted (loss) earnings per share

 Q3 ‘19 Q3 ‘18 F2019 F2018
        
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP56,828 56,716 56,795 56,788
Effect of dilutive securities under GAAP- 61 24 54
Denominator for headline diluted (loss) earnings per share56,828 56,777 56,819 56,842

Weighted average number of shares used to calculate headline (loss) 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 (loss) earnings per share diluted because we do not use the two-class method to calculate headline (loss) earnings per share diluted.

Net1 Logo smaller.jpg

Copyright GlobeNewswire, Inc. 2016. All rights reserved.
You can register yourself on the website to receive press releases directly via e-mail to your own e-mail account.