Net 1 files 2019 Form 10-K with SEC and cures Nasdaq delinquency

10/25/2019, 10:05 PM (Source: GlobeNewswire)

JOHANNESBURG, South Africa, Oct. 25, 2019 (GLOBE NEWSWIRE) -- Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today announced that it has filed its Annual Report on Form 10-K with the United States Securities and Exchange Commission for the year ended June 30, 2019. Filing of the Form 10-K cures the Nasdaq delinquency reported on October 3, 2019. We do not need to file a plan of compliance with Nasdaq and believe that we are now in compliance with Nasdaq’s continued listing requirements.

Final results amended as a result of September 30, 2019 Supreme Court ruling:

Our preliminary results released on September 26, 2019, have been updated for the impact of the Supreme Court ruling on September 30, 2019. The Supreme Court ruling declined our subsidiary, Cash Paymaster Services (Pty) Ltd’s (“CPS”), appeal of the refund of ZAR 317.0 million plus interest to the South Africa Social Security Agency (“SASSA”) related to the recovery of additional implementation costs incurred by CPS during the beneficiary re-registration process in fiscal 2012 and 2013. CPS is liable to repay SASSA ZAR 317.0 million, plus interest from June 2014 to date of payment. As a result, we recorded the liability at June 30, 2019, of $34.0 million (ZAR 479.4 million, translated at exchange rates applicable as of June 30, 2019, comprising a revenue refund of $19.7 million (ZAR 277.6 million), accrued interest of $11.4 million (ZAR 161.0 million), unclaimed indirect taxes of $2.8 million (ZAR 39.4 million) and estimated costs of $0.1 million (ZAR 1.4 million)).  

Below is a summary of the changes to our audited consolidated financial statements for Q4 2019 and full year 2019, as a result of the liability recorded compared with our preliminary results (“Prelim”) reported on September 26, 2019:

 Q4 2019 F2019
 Final
 Prelim
 Mvt
 Final
  Prelim
 Mvt
(All figures in USD ‘000s except per share data)                 
Revenue51,472  71,181  (19,709) 360,990  380,699  (19,709)
GAAP operating (loss) income(49,646) (15,607) (34,039) (113,508) (79,469) (34,039)
Adjusted (negative) EBITDA(1)(749) (749) -  (12,621) (12,621) - 
GAAP net (loss) income(183,694) (149,655) (34,039) (307,618) (273,579) (34,039)
Fundamental (loss) earnings (1)(173,128) (139,089) (34,039) (256,906) (222,867) (34,039)
GAAP (loss) earnings per share ($)(3.23) (2.63) (0.60) (5.42) (4.82) (0.60)
Fundamental (loss) earnings per share ($)(1)(3.05) (2.45) (0.60) (4.53) (3.93) (0.60)
Headline (loss) earnings per share ($)(1)(3.11) (2.51) (0.60) (4.98) (4.38) (0.60)
                  

(1) Adjusted negative EBITDA and fundamental (loss) earnings per share are non-GAAP measures and are described below under “Use of Non-GAAP Measures”. 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. See Attachment C for a reconciliation of net (loss) income used to calculate (loss) earnings per share basic and diluted and headline (loss) earnings per share basic and diluted.

We reiterate our fiscal 2020 guidance for adjusted EBITDA of at least $16 million using a constant currency base of ZAR 14.27/$1, driven by growth in South Korea and South Africa, and reduced losses from our IPG business.

Summary Financial Metrics

 Three months ended June 30,
 2019 2018
As
restated
(1)
 % change
in USD

 % change
in ZAR
(All figures in USD ‘000s except per share data)           
Revenue51,472  149,194  (65%) (57%)
GAAP operating (loss) income(49,646) 10,072  nm  nm 
Adjusted (negative) EBITDA(2)(749) 24,301  nm  nm 
GAAP (loss) earnings per share ($)(3.23) 0.05  nm  nm 
Continuing(3.23) 0.10  nm  nm 
Discontinued-  (0.05) nm  nm 
Fundamental (loss) earnings per share ($)(2)(3.05) 0.22  nm  nm 
Fully-diluted shares outstanding (‘000’s)56,804  56,816  (0%)  
Average period USD/ ZAR exchange rate14.29  11.45  25%  
Non-cash adjustments included (before tax impact):140,827  12,834  997%  
Allowance for doubtful finance loans receivables1,148  1,798  (36%)  
Change in fair value of equity securities125,360  5,370  2,234%  
Loss on disposal of DNI631  -  nm   
Loss on acquisition of DNI-  4,614  nm   
Impairment loss6,249  1,052  494%  
Impairment of Cedar Cell note7,439  -  nm   
           


  
 Fiscal year ended June 30,
 2019 2018
As
restated
(1)
 % change
in USD

 % change
in ZAR
(All figures in USD ‘000s except per share data)           
Revenue360,990  612,889  (41%) (34%)
GAAP operating (loss) income(113,508) 58,949  nm  nm 
Adjusted (negative) EBITDA(2)(12,621) 127,155  nm  nm 
GAAP (loss) earnings per share ($)(5.42) 1.13  nm  nm 
Continuing(5.40) 1.09  nm  nm 
Discontinued(0.02) 0.04  nm  nm 
Fundamental (loss) earnings per share ($)(2)(4.53) 2.00  nm  nm 
Fully-diluted shares outstanding (‘000’s)56,778  56,858  (0%)  
Average period USD/ ZAR exchange rate14.27  12.70  12%  
Non-cash adjustments included (before tax impact):238,554  6,416  3,618%  
Allowance for doubtful finance loans receivables32,786  13,358  145%  
Change in fair value of equity securities167,459  (32,473) nm   
Loss on disposal of DNI5,771  -  nm   
Loss on acquisition of DNI-  4,614  nm   
Impairment loss19,745  20,917  (6%)  
Impairment of Cedar Cell note12,793  -  nm   
           

(1) 2018 restated to correct an error identified by its equity method investment – Finbond Group Limited. The financial information for the three months and year ended June 30, 2018, have been restated with the effect of decreasing GAAP net (loss) income by $0.1 million, respectively. GAAP (loss) earnings per share were unaffected.

(2) Adjusted negative EBITDA, fundamental loss (earnings), fundamental (loss) earnings per share and headline (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 Q4 2019 and Q4 2018 results

  • Decline in revenue: Our revenues declined 57% in ZAR primarily due to the expiration of our SASSA contract, the reversal of revenue of $19.7 million (ZAR 277.6 million) following the September 2019 Supreme Court ruling, the 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;
  • Increase in operating losses: Lower revenue, coupled with a high-fixed cost infrastructure, additional costs recorded related to the September 2019 Supreme Court ruling of $14.3 million (ZAR 201.8 million), ongoing IPG operating losses, and a goodwill impairment resulted in an operating loss. We also incurred $1.0 million in retrenchment costs during Q4 2019;
  • Non-cash losses, impairments and fair-value adjustments: We incurred a $0.6 million non-cash loss on disposal of an 8% interest in DNI, a goodwill impairment loss of $6.2 million, a fair value adjustment loss of $125.4 million for Cell C and a $7.4 million impairment of our Cedar Cell note;
  • Implementation costs to be refunded to SASSA of $34.0 million: We recorded an accrual of $34.0 million related to the September 2019 Supreme Court ruling comprising a revenue refund of $19.7 million (ZAR 277.6 million), accrued interest of $11.4 million (ZAR 161.0 million), unclaimed indirect taxes of $2.8 million (ZAR 39.4 million) and estimated costs of $0.1 million (ZAR 1.4 million); and
  • Adverse foreign exchange movements: The U.S. dollar appreciated 23% against the ZAR and 10% against the KRW during Q4 2019, which adversely impacted our reported results.

Results of Operations by Segment and Liquidity

South African transaction processing

Segment revenue was $18.9 million in Q4 2019, down 63% on a constant currency basis compared with Q4 2018 but up from $17.4 million in Q3 2019. The year-over-year 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 were 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 in Q2 2019. 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 Q4 2019 included retrenchment costs of $1.0 million (ZAR 14.3 million). Our operating (loss) income margin for Q4 2019 and 2018 was (13.1%) and 6.7%, respectively. Excluding restructuring costs, the operating loss margin for Q4 2019 and Q3 2019 was (7.5%) and (57.5%) respectively.

International transaction processing

Segment revenue was $36.4 million in Q4 2019, down 16% compared with Q4 2018 but up from $34.4 million in Q3 2019. Segment revenue was lower during Q4 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 Q4 2019 was higher compared to fiscal 2018 due to an improved contribution from KSNET, primarily as a result of a lower depreciation expense, and partially offset by the decrease in IPG revenues. Operating income margin for Q4 2019 and 2018, and Q3 2019 was 6.1%, 4.8%, and 5.6% respectively.

Financial inclusion and applied technologies

Segment revenue was $17.4 million in Q4 2019, down 59% compared with Q4 2018 in constant currency and Q3 2019 revenue (excluding DNI) of $18.8 million. 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. Operating income was significantly lower than Q4 2018, primarily due to lower revenue generation and higher expenses incurred to maintain and expand our financial service infrastructure. Operating (loss) income for this operating segment for Q4 2019 includes a goodwill impairment of $6.2 million. Operating (loss) income margin for Q4 2019 and 2018 was (61.2%) and 25.5%, respectively. Excluding the goodwill impairment, segment operating loss and margin for Q4 2019 were ($4.5) million and (26.0%), respectively, and excluding DNI and retrenchment costs, segment operating loss and margin for Q3, 2019 were ($3.3) million and (17.8%), respectively.

Corporate/eliminations

Our corporate expenses increased primarily due to the accrual of $14.3 million related to the September 2019 Supreme Court ruling, higher non-employee director expenses, transaction-related expenditures and external service provider fees, partially offset by a reversal of stock compensation charge of $1.8 million related to stock options and restricted stock forfeited.

Cash flow, liquidity and consideration of going concern

At June 30, 2019, our cash and cash equivalents were $46.1 million and comprised of KRW-denominated balances of KRW 30.1 billion ($26.1 million), ZAR-denominated balances of ZAR 184.3 million ($13.1 million), U.S. dollar-denominated balances of $2.4 million, and other currency deposits, primarily Botswana pula, of $4.5 million, all amounts translated at exchange rates applicable as of June 30, 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 cash dividends received from 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 Q4 2019 and 2018 were $2.1 million and $1.8 million, respectively, and primarily relate to the acquisition of additional ATMs in South Africa. We made an unscheduled South African debt facility payment of $1.0 million (ZAR 15 million) and settled our outstanding South African long-term borrowings in full.

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, and in fiscal 2019, the accrual of $34.0 million related to the September 2019 Supreme Court ruling, and in fiscal 2018, the non-cash re-measurement loss related to the acquisition of DNI, 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 impairment losses, 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, the non-cash re-measurement loss related to the acquisition of DNI, 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 and the re-measurement loss on the acquisition of DNI. 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.
Consolidated Statements of Operations
    
 Unaudited (1)
 Three months ended Year ended
  June 30,  June 30,
  2019  2018
(As
restated)
(R)
  2019   2018
(As
restated)
(R)
             
 (In thousands, except per share data) (In thousands, except per share data)
           
REVENUE$51,472 $149,194  $360,990  $612,889 
           
EXPENSE          
           
Cost of goods sold, IT processing, servicing and support 41,668  78,030   215,348   304,536 
           
Selling, general and administration 46,380  51,586   202,056   193,003 
           
Depreciation and amortization 6,821  8,454   37,349   35,484 
           
Impairment loss 6,249  1,052   19,745   20,917 
           
OPERATING (LOSS) INCOME (49,646) 10,072   (113,508)  58,949 
           
CHANGE IN FAIR VALUE OF EQUITY SECURITIES (125,360) (5,370)  (167,459)  32,473 
           
LOSS ON DISPOSAL OF DNI 631  -   5,771   - 
           
INTEREST INCOME 1,289  2,982   7,229   17,885 
           
INTEREST EXPENSE 1,694  2,069   10,724   8,941 
           
IMPAIRMENT OF CEDAR CELLULAR NOTE 7,439  -   12,793   - 
           
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE (183,481) 5,615   (303,026)  100,366 
           
INCOME TAX (BENEFIT) EXPENSE 2,023  8,840   3,725   48,597 
           
NET (LOSS) INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS (185,504) (3,225)  (306,751)  51,769 
           
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS 1,820  4,208   1,482   11,597 
           
NET (LOSS) INCOME (183,684) 983   (305,269)  63,366 
Continuing (183,684) 3,794   (307,959)  60,975 
Discontinued -  (2,811)  2,690   2,391 
           
LESS (ADD) NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST 10  (1,783)  2,349   (880)
Continuing 10  (1,783)  (1,352)  (880)
Discontinued -  -   3,701   - 
           
NET (LOSS) INCOME ATTRIBUTABLE TO NET1$(183,694) 2,766   (307,618)  64,246 
Continuing (183,694) 5,577   (306,607)  61,855 
Discontinued - $(2,811) $(1,011) $2,391 
           
Net (loss) income per share, in U.S. dollars          
Basic (loss) earnings attributable to Net1 shareholders (3.23) 0.05   (5.42)  1.13 
Continuing (3.23) 0.10   (5.40)  1.09 
Discontinued -  (0.05)  (0.02)  0.04 
Diluted (loss) earnings attributable to Net1 shareholders (3.23) 0.05   (5.42)  1.13 
Continuing (3.23) 0.10   (5.40)  1.09 
Discontinued -  (0.05)  (0.02)  0.04 
           
(R) Certain amounts have been restated to correct an insignificant misstatement.
(1) Derived from audited consolidated financial statements.
 


 
NET 1 UEPS TECHNOLOGIES, INC.
Consolidated Balance Sheets
 (A) (A) (R)
 June 30,  June 30,
 2019
 2018
    
 (In thousands, except share data)
ASSETS
CURRENT ASSETS     
Cash and cash equivalents$46,065  $87,075 
Restricted cash 75,446   - 
Pre-funded social welfare grants receivable -   2,965 
Accounts receivable, net of allowance of – 2019: $1,241; 2018: $1,101 and other receivables 72,494   93,448 
Finance loans receivable, net of allowance of – 2019: $9,291; 2018: $16,403 30,631   61,463 
Inventory 7,535   10,361 
Current assets of discontinued operation -   22,482 
Total current assets before settlement assets 232,171   277,794 
Settlement assets 63,479   149,047 
Total current assets 295,650   426,841 
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – 2019: $117,866; 2018: $126,026 18,554   25,737 
EQUITY-ACCOUNTED INVESTMENTS 151,116   86,016 
GOODWILL 149,387   169,079 
INTANGIBLE ASSETS, net of accumulated amortization of – 2019: $127,100; 2018: $121,466 11,889   27,129 
DEFERRED INCOME TAXES 2,151   4,776 
OTHER LONG-TERM ASSETS, including reinsurance assets 44,189   235,032 
LONG-TERM ASSETS OF DISCONTINUED OPERATION -   242,704 
TOTAL ASSETS 672,936   1,217,314 
      
LIABILITIES
CURRENT LIABILITIES     
Short-term credit facilities for ATM funding 75,446   - 
Short-term credit facilities 9,544   - 
Accounts payable 17,005   21,106 
Other payables 66,449   41,645 
Current portion of long-term borrowings -   44,079 
Income taxes payable 6,223   5,742 
Current liabilities of discontinued operation -   20,914 
Total current liabilities before settlement obligations 174,667   133,486 
Settlement obligations 63,479   149,047 
Total current liabilities 238,146   282,533 
DEFERRED INCOME TAXES 4,682   16,067 
LONG-TERM BORROWINGS -   5,469 
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities 3,007   30,289 
LONG-TERM LIABILITIES OF DISCONTINUED OPERATION -   38,387 
TOTAL LIABILITIES 245,835   372,745 
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 - 2019: 56,568,425; 2018: 56,685,925 80   80 
PREFERRED STOCK     
Authorized shares: 50,000,000 with $0.001 par value;     
Issued and outstanding shares, net of treasury: June: -; June: - -   - 
ADDITIONAL PAID-IN-CAPITAL 276,997   276,201 
TREASURY SHARES, AT COST: 2019: 24,891,292; 2018: 24,891,292 (286,951)  (286,951)
ACCUMULATED OTHER COMPREHENSIVE LOSS (199,273)  (184,538)
RETAINED EARNINGS 528,576   836,194 
TOTAL NET1 EQUITY 319,429   640,986 
NON-CONTROLLING INTEREST -   95,911 
TOTAL EQUITY 319,429   736,897 
      
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY$672,936  $1,217,314 
      
(R) Certain amounts have been restated to correct an insignificant misstatement.
(A) Derived from audited consolidated financial statements.
 



 
NET 1 UEPS TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
          
 Unaudited (A)
 Three months ended Year ended
  June 30,  June 30,
  2019  2018(R)
(as restated)
  2019    2018(R)
(as restated)
            
 (In thousands) (In thousands)
          
Cash flows from operating activities         
Net (loss) income$(183,684)$983  $(305,269)$63,366 
Depreciation and amortization 6,821  8,454   37,349  35,484 
Impairment loss 6,249  1,052   19,745  20,917 
Allowance for doubtful accounts receivable charged 1,148  1,798   32,786  13,358 
Earnings from equity-accounted investments (1,820) (4,208)  (1,482) (11,597)
Interest on Cedar Cellular note (447) (626)  (2,397) (1,395)
Impairment of Cedar Cellular note 7,439  -   12,793  - 
Change in fair value of equity securities 125,360  5,370   167,459  (32,473)
SASSA implementation costs to be refunded 34,039  -   34,039  - 
Fair value adjustments and foreign currency re-measurements (18) 623   73  414 
Interest payable (57) 118   237  (146)
Facility fee amortized 115  122   321  589 
Loss (Profit) on disposal of business 631  -   5,771  (463)
Loss on fair value of DNI -  4,614   -  4,614 
(Profit) Loss on disposal of property, plant and equipment (73) (31)  (486) 40 
Stock compensation charge, net of forfeitures (1,279) 597   393  2,607 
Dividends received from equity accounted investments 864  -   1,318  4,111 
Decrease (Increase) in accounts and finance loans receivable, and pre-funded grants receivable 5,130  20,170   11,663  17,732 
Decrease (Increase) in inventory 430  255   4,042  (2,521)
(Decrease) Increase in accounts payable and other payables (3,199) 4,820   (14,538) 10,595 
Increase (Decrease) in taxes payable 1,286  (6,954)  3,428  1,137 
(Decrease) Increase in deferred taxes (482) (2,316)  (11,705) 5,936 
Net cash (used in) provided by operating activities (1,547) 34,841   (4,460) 132,305 
          
Cash flows from investing activities         
Capital expenditures (2,136) (1,848)  (9,416) (9,649)
Proceeds from disposal of property, plant and equipment 264  83   1,045  658 
Acquisition of intangible assets -  -   (1,384) - 
Investment in equity of equity-accounted investments -  (1,000)  (2,989) (133,335)
Disposal of DNI -  -   (2,114) - 
Investment in MobiKwik -  -   (1,056) - 
Repayment of loans by equity-accounted investments 1,029  9,180   1,029  9,180 
Proceeds on return of investment -  -   284  - 
Investment in Cell C -  -   -  (151,003)
Loans to equity-accounted investments -  -   -  (10,635)
Acquisition of held to maturity investment -  -   -  (9,000)
Acquisitions, net of cash acquired   (6,202)  -  (6,202)
Other investing activities, net -  (207)  -  (61)
Net change in settlement assets 2,198  210,405   79,077  490,795 
Net cash provided by investing activities 1,355  210,411   64,476  180,748 
          
Cash flows from financing activities         
Proceeds from bank overdraft 238,229  2,528   822,754  44,900 
Repayment of bank overdraft (238,146) (5,932)  (740,969) (62,925)
Repayment of long-term borrowings (1,047) (16,095)  (37,357) (77,062)
Long-term borrowings utilized -  -   14,613  113,157 
Dividends paid to non-controlling interest (19) -   (4,104) - 
Payment of guarantee fee -  -   (394) (754)
Acquisition of non-controlling interests (180) -   (180) - 
Net change in settlement obligations (2,198) (210,405)  (79,077) (490,795)
Net cash used in financing activities (3,361) (229,904)  (24,714) (473,479)
          
Effect of exchange rate changes on cash 2,126  (12,466)  (3,845) (7,977)
Net (decrease) increase in cash, cash equivalents and restricted cash (1,427) 2,882   31,457  (168,403)
Cash, cash equivalents and restricted cash – beginning 122,938  87,172   90,054  258,457 
Cash, cash equivalents and restricted cash – end of period (1)$121,511 $90,054  $121,511 $90,054 
          
Cash, cash equivalents and restricted cash – end of year for the year ended June 30, 2018, includes $2,979 related to DNI.
(R) Certain amounts have been restated to correct an insignificant misstatement.
(A) Derived from audited consolidated financial statements.
(1) Cash, cash equivalents and restricted cash as of June 30, 2019, includes restricted cash of approximately $75.4 million related to cash withdrawn from our 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 June 30, 2019 and 2018 and March 31, 2019

      Change - actual
 Change –
constant
exchange rate
(1)
Key segmental data, in ’000, except marginsQ4 ‘19 Q4 ‘18 Q3 ‘19
 Q4 ‘19
vs
Q4‘18
 Q4 ‘19
vs
Q3 ‘19
 Q4 ‘19
vs
Q4‘18
 Q4 ‘19
vs
Q3 ‘19
Revenue:                       
South African transaction processing$18,945  $63,954  $17,374  (70%) 9% (63%) 10%
International transaction processing 36,399   43,580   34,358  (16%) 6% 4% 7%
Financial inclusion and applied technologies 17,573   53,888   36,650  (67%) (52%) (59%) (52%)
Continuing 17,573   53,888   18,808  (67%) (7%) (59%) (6%)
Discontinued -   -   17,842  nm  nm  nm  nm 
Subtotal: Operating segments 72,917   161,422   88,382  (55%) (17%) (44%) (17%)
Intersegment eliminations and revenue refund (21,445)  (12,228)  (1,898) 75% 1,030% 119% 1,039%
Consolidated revenue 51,472   149,194   86,484  (65%) (40%) (57%) (40%)
Continuing 51,472   149,194   68,642  (65%) (25%) (57%) (24%)
Discontinued $-   $-  $17,842  nm  nm  nm  nm 
             
Operating (loss) income:         
South African transaction processing($2,474) $4,275  ($12,954) nm  (81%) nm  (81%)
International transaction processing 2,209   2,089   1,909  6% 16% 32% 17%
Financial inclusion and applied technologies (10,749)  13,747   3,227  nm  nm  nm  nm 
Continuing (10,749)  13,747   (4,911) nm  119% nm  121%
Discontinued -   -   8,138  nm  nm  nm  nm 
Subtotal: Operating segments (11,014)  20,111   (7,818) nm  41% nm  42%
Corporate/Eliminations (38,632)  (10,039)  (13,865) 285% 179% 380% 181%
Continuing (38,632)  (5,425)  (6,399) 612% 504% 789% 509%
Discontinued -   (4,614)  (7,466) nm  nm  nm  nm 
Consolidated operating (loss) income (49,646)  10,072   (21,683) nm  129% nm  131%
Continuing (49,646)  14,686   (22,355) nm  122% nm  124%
Discontinued $-  ($4,614) $672  nm  nm  nm  nm 
             
Operating (loss) income margin (%)         
South African transaction processing (13.1%)  6.7%  (74.6%)     
International transaction processing 6.1%  4.8%  5.6%     
Financial inclusion and applied technologies (61.2%)  25.5%  8.8%     
Continuing (61.2%)  25.5%  (26.1%)     
Discontinued nm   nm   45.6%     
Consolidated operating margin (96.5%)  6.8%  (25.1%)     
Continuing (96.5%)  9.8%  (32.6%)     
Discontinued nm   nm   3.8%     
             
(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during Q4 2019 also prevailed during Q4 2018 and Q3 2019.
 

Fiscal year ended June 30, 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$96,038  $268,047  (64%) (60%)
International transaction processing 148,268   180,027  (18%) (7%)
Financial inclusion and applied technologies 146,184   221,906  (34%) (26%)
Continuing 89,847   221,906  (60%) (54%)
Discontinued 56,337   -  nm  nm 
Subtotal: Operating segments 390,490   669,980  (42%) (34%)
Intersegment eliminations and revenue refund (29,500)  (57,091) (48%) (42%)
Consolidated revenue 360,990   612,889  (41%) (34%)
Continuing 304,653   612,889  (50%) (44%)
Discontinued$56,337  $0  nm  nm 
       
Operating (loss) income:      
South African transaction processing($30,771) $42,796  nm  nm 
International transaction processing 2,837   (12,478) nm  nm 
Financial inclusion and applied technologies (14,758)  55,372  nm  nm 
Continuing (39,158)  55,372  nm  nm 
Discontinued 24,400   -  nm  nm 
Subtotal: Operating segments (42,692)  85,690  nm  nm 
Corporate/Eliminations (70,816)  (26,741) 165% 198%
Continuing (58,097)  (22,127) 163% 195%
Discontinued (12,719)  (4,614) 176% 210%
Consolidated operating (loss) income (113,508)  58,949  nm  nm 
Continuing (125,189)  63,563  nm  nm 
Discontinued$11,681  ($4,614) nm  nm 
       
Operating (loss) income margin (%)      
South African transaction processing (32.0%)  16.0%   
International transaction processing 1.9%  (6.9%)   
Financial inclusion and applied technologies (10.1%)  25.0%   
Continuing (43.6%)  25.0%   
Discontinued 43.3%  nm    
Consolidated operating margin (31.4%)  9.6%   
Continuing (41.1%)  9.6%   
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 fiscal 2019 also prevailed during fiscal 2018.
 

(Loss) Earnings from equity-accounted investments:

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

 Q4 2019 Q4 2018(R) % change
 F2019
 F2018(R) % change
Bank Frick$353  ($1,581) nm  ($1,542) ($606) 154%
Share of net income 493   (1,033) nm   1,109   201  452%
Amortization of intangible assets, net of deferred tax (140)  (144) (3%)  (567)  (403) 41%
Other -   (404) nm   (2,084)  (404) 416%
DNI(1) 865   1,803  (52%)  865   7,005  (88%)
Share of net income 1,380   2,642  (48%)  1,380   9,510  (85%)
Amortization of intangible assets, net of deferred tax (515)  (839) (39%)  (515)  (2,505) (79%)
Finbond(2) 953   4,093  (77%)  2,828   5,194  (46%)
Other (351)  (107) nm   (669)  4  nm 
Earnings from equity-accounted investments$1,820  $4,208  (57%) $1,482  $11,597  (87%)
                      

(R) Finbond results have been restated to correct a misstatement.
(1) DNI was included as an equity-accounted investment from August 1, 2017 until June 30, 2018, the date upon which we obtained control and commenced consolidation of DNI, and then again from March 31, 2019. 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 months and year ended June 30, 2019 and 2018

 Three months
ended

June 30,
 Year
ended

June 30,
 2019 2018 2019 2018
           
Operating (loss) income - GAAP(49,646) 10,072 (113,508) 58,949 
      
Depreciation and amortization6,821  8,454 37,349  35,484 
Impairment loss6,249  1,052 19,745  20,917 
(Negative) EBITDA(36,576) 19,578 (56,414) 115,350 
Impact of accrual of implementation costs to be refunded to SASSA34,039  - 34,039  - 
Retrenchment costs1,026  - 6,269  - 
Transaction costs762  109 3,485  2,396 
Refund of Korean indirect taxes-  - -  (2,545)
Loss resulting from acquisition of DNI-  4,614 -  4,614 
Non-recurring Mastertrading allowance for doubtful accounts-  - -  7,803 
(Loss) Profit on disposal of subsidiary-  - -  (463)
Adjusted (negative) EBITDA(749) 24,301 (12,621) 127,155 
           

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 June 30, 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(183,694) 2,766 (3.23) 0.05 (2,624,695) 31,660 (46.21) 0.55
            
Impairment loss6,249  1,052    89,288  14,442   
Loss on disposal of DNI631  -    9,016  -   
Intangible asset amortization, net2,785  2,261    39,807  25,883   
Retrenchment costs, net739  -    10,621  -   
Stock-based compensation charge(1,370) 597    (19,575) 6,833   
Transaction costs762  189    10,888  2,163   
Intangible asset amortization, net related to equity accounted investments655  983    9,359  11,251   
Facility fees for debt115  122    1,643  1,396   
Loss on resulting from acquisition of DNI-  4,614     63,332   
Fundamental(173,128) 12,584 (3.05) 0.22 (2,473,648) 156,960 (43.55) 2.76
                    

Fiscal year ended June 30, 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(307,618) 64,246  (5.42) 1.13 (4,389,554) 815,610  (77.34) 14.36
          
Intangible asset amortization, net16,290  9,385     232,452  119,126    
Impairment loss19,745  20,917     281,751  265,543    
Loss on disposal of DNI5,771  -     82,349  -    
Retrenchment costs, net4,514  -     63,708  -    
Intangible asset amortization, net related to non-controlling interest(2,737) -     (39,054) -    
Transaction costs3,485  2,239     49,727  28,424    
Accreted interest on DNI contingent consideration1,848      26,360     
Stock-based compensation charge393  2,607     5,608  33,096    
Intangible asset amortization, net related to equity accounted investments1,082  2,908     15,439  36,917    
Facility fees for debt321  589     4,580  7,477    
Non-recurring Mastertrading allowance for doubtful accounts-  7,803     -  99,060    
Loss resulting from acquisition of DNI-  4,614     -  63,332    
Refund related to litigation finalized in Korea, net-  (1,985)    -  (25,200)   
Change in US tax rate-  860     -  10,918    
Profit on disposal of subsidiary-  (463)    -  (5,878)   
Fundamental(256,906) 113,720  (4.53) 2.00 (3,666,634) 1,448,425  (64.60) 25.50
                      

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 June 30, 2019 and 2018

 2019
 2018
    
Net (loss) income (USD’000)(183,694) 2,766 
Adjustments:   
Impairment loss6,249  1,052 
Loss resulting from acquisition of DNI631  - 
Loss on acquisition of DNI  4,614 
Profit on sale of property, plant and equipment(73) (31)
Tax effects on above20  9 
    
Net (loss) income used to calculate headline earnings (USD’000)(176,867) 8,410 
    
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)56,804  56,773 
    
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)56,804  56,816 
    
Headline (loss) earnings per share:   
Basic, in USD(3.11) 0.15 
Diluted, in USD(3.11) 0.15 
      

Fiscal year ended June 30, 2019 and 2018

 2019 2018
    
Net (loss) income (USD’000)(307,618) 64,246 
Adjustments:   
Impairment loss19,745  20,917 
Loss (Profit) on sale of business5,771  (463)
Loss resulting from acquisition of DNI-  4,614 
Profit on sale of property, plant and equipment(486) 40 
Tax effects on above136  (11)
    
Net (loss) income used to calculate headline earnings (USD’000)(282,452) 89,343 
    
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)56,760  56,807 
    
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)56,778  56,858 
    
Headline (loss) earnings per share:   
Basic, in USD(4.98) 1.57 
Diluted, in USD(4.97) 1.57 
      

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

 Q4 ‘19 Q4 ‘18 F2019 F2018
        
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP56,804 56,773 56,760 56,807
Effect of dilutive securities under GAAP- 43 18 51
Denominator for headline diluted (loss) earnings per share56,804 56,816 56,778 56,858
        

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.

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