| Fri 6 Nov 2009, 9:45 | | NT1 - Net 1 UEPS Technologies Inc. - Net 1 UEPS Technologies Inc. Announces |
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NT1
NT1
NT1 - Net 1 UEPS Technologies, Inc. - Net 1 UEPS Technologies, Inc. Announces
2010 First Quarter Results
Net 1 UEPS Technologies, Inc.
Registered in the state of Florida, USA
(IRS Employer Identification No. 98-0171860)
Nasdaq share code: UEPS
JSE share code: NT1
ISIN: US64107N2062
("Net1" or "the Company")
Net 1 UEPS Technologies, Inc. Announces 2010 First Quarter Results
JOHANNESBURG, November 5, 2009 - Net 1 UEPS Technologies, Inc. ("Net1" or the
"Company") (Nasdaq: UEPS; JSE: NT1) today announced results for the three
months ended September 30, 2009. Revenue during 1Q 2010 was $65.5 million, a
year over year decline of 4% in US dollars ("USD") and 3% in constant
currency. Earnings per share under US generally accepted accounting principles
("GAAP") in 1Q 2010 was $0.37 versus $0.45 a year ago, a decline of 18% in USD
and 18% in constant currency. Fundamental earnings per share for 1Q 2010 was
$0.45 compared to $0.39 in the 1Q 2009, representing an increase of 15% in USD
and 15% in constant currency.
Summary Financial Metrics
Three months ended September 30,
2009 2008 (2) % %
change change
in USD in ZAR
(All figures in USD `000s except per
share data)
Revenue 65,514 67,935 (4)% (3)%
GAAP net income 17,941 26,244 (32)% (32)%
Fundamental net income (1) 21,804 22,696 (4)% (4)%
GAAP earnings per share ($) 37 45 (18)% (18)%
Fundamental earnings per share ($) (1) 45 39 15% 15%
Fully diluted shares outstanding (`000`s) 48,918 58,362 (16)%
Average period USD/ ZAR exchange rate 7.82 7.80 -%
(1) Fundamental net income and earnings per share is GAAP net income and
earnings per share excluding the amortization of acquisition-related
intangible assets, net of deferred taxes, and stock-based compensation
charges. In addition, the calculation of fundamental net income and earnings
per share for 1Q 2009 also excludes the effects of the change in the Company`s
fully distributed tax rate from 35.45% to 34.55%, JSE listing costs, a bank
facility fee and a foreign exchange gain, net of tax, related to a short-term
investment.
(2) Basic and fundamental earnings per shares for 1Q 2009, have been
retrospectively adjusted, as required by FSP EITF 03-6-1 (Topic 260), to
include participating securities in the weighted average number of outstanding
shares of common stock.
The following factors had significant impact on the comparability of our 2010
first quarter results to last year:
- Inflation-adjusted fixed fees on pension distribution: 1Q 2010 results was
favorably impacted by the inflation-adjusted fixed fee effective from April
2009 for the distribution of a minimum number of social welfare grants;
- Increased transaction volumes at EasyPay: 1Q 2010 results were favorably
impacted by increased transaction volumes at EasyPay resulting from growth in
value added services;
- Tax comparison: 1Q 2009 results were favorably impacted by a reduction in
the Company`s fully-distributed tax rate, which became effective in 1Q 2009.
- Intangible asset amortization related to acquisitions: 1Q 2010 and 1Q 2009,
respectively, includes $2.9 million and $0.9 million intangible asset
amortization related to acquisitions;
- Non-recurring items: In 1Q 2009, hardware and software revenue included one-
time contributions of $6.2 million from Ghana and Nedbank, while GAAP EPS was
positively influenced by a $4.0 million foreign exchange gain, all of which
had no impact in 1Q 2010.
Comments and Outlook
"Our results, particularly within core transaction-based activities,
demonstrate the strength of our business model and the power of our
technology, allowing us to take advantage of opportunities created by economic
challenges globally," said Dr. Serge Belamant, Chairman and Chief Executive
Officer of Net1. "While we did face difficult year-over-year comparisons in
our hardware, software and related technology sales segment, we continue to
grow both revenue and profitability in transaction-based activities. We remain
an integral distributor of welfare grants for the South African government,
and we continue to make progress on business development activities that
should allow us to export our technology to more countries around the globe.
We remain committed to delivering sustainable growth for all of our stake
holders," he concluded.
"We reiterate our guidance of at least 20% constant currency fundamental
earnings per share growth for fiscal year 2010," said Herman Kotze, Chief
Financial Officer of Net1. "Our growth during 1Q 2010 was driven by our core
pension and welfare business, further penetration of our merchant acquiring
platform and increased contribution of value-added services at EasyPay as well
as contributions from our activities in Iraq," he concluded.
Results of operations
Net1`s frequently asked questions and operating metrics will be posted on the
Company`s website (www.net1.com).
Transaction-based activities
Transaction-based activities revenue was $45 million, up 11% from 1Q 2009 in
USD and 12% higher on a constant currency basis. Revenue and operating income
increased as a result of the standard pricing formula agreed with SASSA, which
resulted in a higher average revenue per grant, increased transactions
processed through EasyPay and the opening of the October 2009 payfile in the
last three days of September 2009, compared to the last two days of September
2008. Operating margin increased to 59% from 54% during 1Q 2010 primarily as a
result of the early opening of the October 2009 pay file, higher average
revenue per grant paid due to the standard pricing formula for all provinces
and improved margins at EasyPay. Excluding amortization of intangibles for
EasyPay and RMT, segment operating margin was 61% in 1Q 2010.
Smart card accounts
Smart card account revenue of $8.1 million declined 6% year-over-year both in
USD and on a constant currency basis. Operating margin for the segment
remained consistent at 45%.
Financial services
Financial services revenue of $0.8 million, was down 56% from 1Q 2009 in both
USD and constant currency, principally due to the divestiture of the Company`s
traditional microlending business in 3Q 2009. Operating margin for the segment
however, improved significantly to 67% from 18% in 1Q 2009 as a result of the
sale of this low-margin business, and higher profitability in our underlying
UEPS-based lending activities.
Hardware, software and related technology sales
Revenue of $11.7 million decreased 32% year-over-year both in USD and in
constant currency. The decrease was due primarily to cyclical pressure on
certain commodity hardware products we sell, non-recurring revenues from Ghana
and Nedbank during 1Q 2009 and lower revenues from BGS. During 1Q 2009, Ghana
and Nedbank had one-time contributions of $6.2 million to segment revenue.
Operating margin for the segment was (15)% in 1Q 2010 compared to 24% in the
quarter last year, due to non-recurring Ghana and Iraq sales in the prior year
and high intangible asset amortization related to the BGS acquisition.
Excluding amortization of all intangibles, segment operating margin was 7%.
Cash flow and liquidity
At September 30, 2009, the Company had cash and equivalents of $139 million,
down from $221 million at June 30, 2009. For 1Q 2010, the Company generated
operating cash flow of $37.0 million compared to cash used in operating
activities of $33.0 million in 1Q 2009. Capital expenditures for 1Q 2010 were
$0.6 million.
Repurchase of Brait Shares
In July 2009, the Company repurchased all Company shares held by Brait S.A.
and its investment affiliates for an aggregate repurchase price, including
transaction costs, of $125 million. The buyback of Brait`s 9,221,526 shares
represented 16.9% of the Company`s then outstanding shares.
Use of Non-GAAP Measures
US securities laws require that when we publish any non-GAAP measures, we
disclose the reason for using the non-GAAP measure and provide reconciliation
to the directly comparable GAAP measure. The presentation of fundamental net
income and fundamental earnings per share and headline earnings per share are
non-GAAP measures.
Fundamental net income and fundamental earnings per share
Under GAAP, the Company is required to fair value all intangible assets on the
date of the acquisition and amortize these intangible assets over their
expected useful lives. In addition, under GAAP, the Company is required to
measure the fair value of options and other stock-based awards, and recognize
a stock-based compensation charge over the requisite service period. The
Company`s GAAP net income and earnings per share for the three months
September 30, 2009 and 2008, include amortization of intangibles and stock-
based compensation, as well as, in 2008, JSE listing costs, a bank facility
fee and a foreign exchange gain, net of tax, related to a short-term
investment. Finally, the effect of the change in the fully distributed tax
rate from 35.45% to 34.55% in July 2008 was included in net income and
earnings per share for the three months ended September 30, 2008. The Company
excludes all of the above-mentioned amounts when calculating fundamental net
income and earnings per share, because management believes that these
adjustments enhance its own evaluation, as well as an investor`s
understanding, of the Company`s financial performance. Attachment B presents
the reconciliation between GAAP and fundamental net income and earnings per
share.
Headline earnings per share ("HEPS")
The inclusion of HEPS in this press release is a requirement of our listing on
the JSE. HEPS basic and diluted is calculated using net income which has been
determined based on GAAP. Accordingly, this may differ to the headline
earnings per share calculation of other companies listed on the JSE as these
companies may report their financial results under a different financial
reporting framework, including but not limited to, International Financial
Reporting Standards. HEPS basic and diluted is calculated as GAAP net income
adjusted for the loss (profit) on sale of property, plant and equipment, net
of related tax effects. Attachment C presents the reconciliation between our
net income used to calculate earnings per share basic and diluted and HEPS
basic and diluted.
Conference Call
Net1 will host a conference call to review first quarter results on November
6, 2009, at 8:00 a.m. Eastern Time. To participate in the call, dial 1-800-860-
2442 (US only), 1-866-605-3852 (Canada only), 0-800-917-7042 (UK only) or 0-
800-200-648 (South Africa only) five minutes prior to the start of the call.
Callers should request "Net1 call" upon dial-in. The call will also be webcast
on the Net1 homepage, www.net1.com. Please click on the webcast link at least
10 minutes prior to the call. A webcast of the call will be available for
replay on the Net1 website through November 27, 2009.
About Net1 (www.net1.com)
Net1 provides its universal electronic payment system, or UEPS, as an
alternative payment system for the unbanked and under-banked populations of
developing economies. Our market-leading system enables the estimated four
billion people who generally have limited or no access to a bank account, to
enter affordably into electronic transactions with each other, government
agencies, employers, merchants and other financial service providers. Our
universal electronic payment system, or UEPS, uses smart cards that operate in
real-time but offline, unlike traditional payment systems offered by major
banking institutions that require immediate access through a communications
network to a centralized computer. This offline capability means that users of
the Net1 system can enter into transactions at any time with other card
holders even in the most remote areas so long as a portable offline smart card
reader is available. In addition to payments and purchases, UEPS can be used
for banking, healthcare management, international money transfers, voting and
identification.
The Company also focuses on the development and provision of secure
transaction technology, solutions and services. The Company`s core
competencies around secure online transaction processing, cryptography and
integrated circuit card (chip/smart card) technologies are principally applied
to electronic commerce transactions in the telecommunications, banking,
retail, energy and utilities market sectors. Additionally, through our
majority-owned subsidiary, BGS Smartcard System AG ("BGS") based in Austria,
the Company implements, develops and integrates smart card-based offline and
online financial transaction systems in cooperation with banks, enterprises
and government authorities in Russia and the other members of the Commonwealth
of Independent States.
Net1 has a primary listing on the Nasdaq and a secondary listing on the JSE
Limited.
Forward-Looking Statements
This announcement contains forward-looking statements that involve known and
unknown risks and uncertainties. A discussion of various factors that cause
the Company`s actual results, levels of activity, performance or achievements
to differ materially from those expressed in such forward-looking statements
are included in the Company`s filings with the Securities and Exchange
Commission. The Company undertakes no obligation to revise any of these
statements to reflect future circumstances or the occurrence of unanticipated
events.
Investor Relations Contact:
Dhruv Chopra
Vice President of Investor Relations
Phone: +1-212-626-6675
Email: dchopra@net1.com
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
September 30,
2009 2008
(In thousands, except per
share data)
REVENUE $ 65,514 $ 67,935
EXPENSE
Cost of goods sold, IT processing, 16,827 19,236
servicing and support
Selling, general and 17,740 17,998
administration
Depreciation and amortization 4,579 3,423
OPERATING INCOME 26,368 27,278
UNREALIZED FOREIGN EXCHANGE GAIN - 6,076
RELATED TO SHORT-TERM INVESTMENT
INTEREST INCOME, net 2,371 3,162
INCOME BEFORE INCOME TAXES 28,739 36,516
INCOME TAX EXPENSE 11,031 9,902
NET INCOME FROM CONTINUING 17,708 26,614
OPERATIONS BEFORE LOSS FROM EQUITY-
ACCOUNTED INVESTMENTS
LOSS FROM EQUITY-ACCOUNTED (111) (310)
INVESTMENTS
NET INCOME 17,597 26,304
(ADD) LESS: NET (LOSS) INCOME (344) 60
ATTRIBUTABLE TO NON-CONTROLLING
INTEREST
NET INCOME ATTRIBUTABLE TO NET1 $ 17,941 $ 26,244
Net income per share, in cents
Basic earnings attributable to Net1 36.8 45.2
shareholders
Diluted earnings attributable to 36.7 45.0
Net1 shareholders
NET 1 UEPS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
Unaudited (A)
September 30, June 30,
2009 2009
In thousands, except share
data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 139,312 $ 220,786
Pre-funded social welfare grants 3,624 4,930
receivable
Accounts receivable, net of allowances 43,766 42,475
of - September: $355; June: $395
Finance loans receivable, net of 2,588 2,563
allowances of - September: $243; June:
$226
Deferred expenditure on smart cards 40 8
Inventory 6,617 7,250
Deferred income taxes 13,597 12,282
Total current assets 209,544 290,294
OTHER LONG-TERM ASSETS, including available 7,567 7,147
for sale securities
PROPERTY, PLANT AND EQUIPMENT, NET OF 7,342 7,376
ACCUMULATED DEPRECIATION OF - September:
$30,637; June: $28,169
EQUITY-ACCOUNTED INVESTMENTS 2,471 2,583
GOODWILL 121,935 116,197
INTANGIBLE ASSETS, NET OF ACCUMULATED 75,447 75,890
AMORTIZATION OF -
September: $36,350; June: $31,150
TOTAL ASSETS 424,306 499,487
LIABILITIES
CURRENT LIABILITIES
Accounts payable 4,230 5,481
Other payables 68,563 61,454
Income taxes payable 17,799 10,874
Total current liabilities 90,592 77,809
DEFERRED INCOME TAXES 45,543 41,737
OTHER LONG-TERM LIABILITIES, including 4,125 4,185
noncontrolling interest loans
COMMITMENTS AND CONTINGENCIES - -
TOTAL LIABILITIES 140,260 123,731
EQUITY
NET1 EQUITY:
COMMON STOCK
Authorized: 200,000,000 with $0.001 par
value;
Issued and outstanding shares, net of 59 59
treasury - September: 45,378,397; June:
54,506,487
ADDITIONAL PAID-IN-CAPITAL 129,056 126,914
TREASURY SHARES, AT COST: September: (173,671) (48,637)
13,149,042; June: 3,927,516
ACCUMULATED OTHER COMPREHENSIVE LOSS (44,985) (58,472)
RETAINED EARNINGS 371,294 353,353
TOTAL NET1 EQUITY 281,753 373,217
NON-CONTROLLING INTEREST 2,293 2,539
TOTAL EQUITY 284,046 375,756
TOTAL LIABILITIES AND SHAREHOLDERS` EQUITY $ 424,306 $ 499,487
(A) - Derived from audited financial statements
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Three months ended
September 30,
2009 2008
(In thousands)
Cash flows from operating activities
Net income $ 17,597 $ 26,304
Depreciation and amortization 4,579 3,423
Loss from equity-accounted investments 111 310
Fair value adjustments (142) (6,048)
Interest payable 78 639
(Profit) Loss on disposal of property, (1) 1
plant and equipment
Stock-based compensation charge 1,422 1,205
Facility fee amortized - 748
Decrease (Increase) in accounts 5,529 (46,141)
receivable, pre-funded social welfare
grants receivable and finance loans
receivable
Increase in deferred expenditure on smart (30) (23)
cards
Decrease (Increase) in inventory 1,015 (217)
Increase (Decrease) in accounts payable 25 (14,415)
and other payables
Increase in taxes payable 6,211 3,409
Increase (Decrease) in deferred taxes 575 (2,170)
Net cash provided by (used in) 36,969 (32,975)
operating activities
Cash flows from investing activities
Capital expenditures (641) (2,844)
Proceeds from disposal of property, plant 49 1
and equipment
Acquisition of BGS, net of cash acquired - (95,328)
Acquisition of shares in equity-accounted - (550)
investments
Net cash used in investing activities (592) (98,721)
Cash flows from financing activities
Proceeds from issue of share capital, net 720 155
of share issue expenses
Treasury stock acquired (126,304) -
Proceeds from short-term loan facility - 110,000
Payment of facility fee - (1,100)
Repayment of non-controlling interest - 2
loan
Proceeds from bank overdrafts - (1)
Repayment of loans (137) -
Net cash provided by financing (125,721) 109,056
activities
Effect of exchange rate changes on cash 7,870 (3,911)
Net decrease in cash and cash equivalents (81,474) (26,551)
Cash and cash equivalents - beginning of 220,786 272,475
period
Cash and cash equivalents - end of period $ 139,312 $ 245,924
Net 1 UEPS Technologies, Inc.
Attachment A
Operating segment revenue, operating income and operating margin:
Three months ended September 30, 2009 and 2008
Q1 `10 Q1 `09 Change
Key segmental data, in $ USD USD In USD In Constant
`000, except margins Currency(1)
Revenue:
Transaction-based activities 44,978 40,344 11% 12%
Smart card accounts 8,074 8,570 (6)% (6)%
Financial services 792 1,784 (56)% (56)%
Hardware, software and 11,670 17,237 (32)% (32)%
related technology sales
Total consolidated revenue 65,514 67,935 (4)% (3)%
Consolidated operating
income (loss):
Transaction-based activities 26,668 21,638 23% 23%
Smart card accounts 3,670 3,895 (6)% (6)%
Financial services 531 327 62% 63%
Hardware, software and (1,713) 4,134 (141)% (141)%
related technology sales
Corporate/ Eliminations (2,788) (2,716) 3% 3%
Total operating income 26,368 27,278 (3)% (3)%
Operating income margin (%)
Transaction-based activities 59% 54%
Smart card accounts 45% 45%
Financial services 67% 18%
Hardware, software and (15)% 24%
related technology sales
Overall operating margin 40% 40%
(1) - This information shows what the change in these items would have
been if the USD/ ZAR exchange rate that prevailed during the first
quarter of fiscal 2010 also prevailed during the first quarter of fiscal
2009.
Net 1 UEPS Technologies, Inc.
Attachment B
Reconciliation of GAAP net income to fundamental net income:
Three months ended September 30, 2009 and 2008
Net Income EPS,basic Net income EPS, basic
(USD`000) (USD (ZAR`000) (ZAR
cents) cents)
2009 2008 2009 2008 2009 2008 2009 2008
GAAP 17,941 26,244 37 45 140,214 204,822 287 353
Amortization 2,441 1,490 19,073 11,631
of intangible
assets(1)
Customer 3,237 1,203 25,299 9,389
relationship
s
Software and - 851 - 6,642
unpatented
Technology
Trademarks 87 87 679 679
Deferred tax (883) (651) (6,905) (5,079)
benefit
Stock-based 1,422 1,205 11,113 9,404
charge
JSE listing - 441 - 3,442
costs
Facility fee - 748 - 5,838
Foreign - (3,976) - (31,940)
exchange gain
related to a
short-term
investment,
net of tax of
$2,100
Change in tax - (3,456) - (26,524)
rate (2)
Fundamental 21,804 22,696 45 39 170,400 176,673 349 304
(1) Amortization of Prism, EasyPay, RMT and BGS intangibles, net of
deferred tax benefit.
(2) Represents the effect of the change in the fully distributed tax rate
from 35.45% to 34.55% in fiscal 2009.
Net 1 UEPS Technologies, Inc.
Attachment C
Reconciliation of net income used to calculate earnings per share basic and
diluted and headline earnings per share basic and diluted:
Three months ended September 30, 2009 and 2008
2009 2008
Net income (USD`000) 17,941 26,244
Adjustments:
(Profit) Loss on sale of property, plant and (1) 1
equipment (USD`000)
Tax effects on above (USD`000) - -
Net income used to calculate headline earnings 17,940 26,245
(USD`000)
Weighted average number of shares used to 48,815 58,031
calculate net income per share basic earnings
and headline earnings per share basic earnings
(`000)
Weighted average number of shares used to 48,918 58,362
calculate net income per share diluted earnings
and headline earnings per share diluted earnings
(`000)
Headline earnings per share:
Basic earnings - common stock and linked units, 37 45
in US cents
Diluted earnings - common stock and linked 37 45
units, in US cents
Johannesburg
6 November 2009
Sponsor:
Deutsche Securities (SA) (Proprietary) Limited
Date: 06/11/2009 09:45:01 Produced by the JSE SENS Department.
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