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Net 1 Ueps Technologies Inc (UEPS) SEC Filing 10-K Annual report for the fiscal year ending Sunday, June 30, 2013

Net 1 Ueps Technologies Inc

CIK: 1041514 Ticker: UEPS

Exhibit 99.1

Net 1 UEPS Technologies, Inc. Reports 2013 Fourth Quarter and Full Year Results

  • Bulk enrollment substantially completed; 22 million registrations and 9.5 million cards issued as of June 30, 2013;

  • Revenue of $118 million, increased 25% in constant currency; and

  • Fundamental EPS of $0.28, up 22% in constant currency; includes $9 million of implementation and smart card costs.

JOHANNESBURG, August 22, 2013 – Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today announced results for the fourth quarter and full-year fiscal 2013.

Summary Financial Metrics

    Three months ended June 30,  
                % change     % change  
    2013     2012     in USD     in ZAR  
(All figures in USD ‘000s except per share data)                        
Revenue   117,882     107,616     10%     25%  
GAAP net income (loss)   8,285     (7,977 )   nm     nm  
Fundamental net income (1)   12,598     12,208     3%     21%  
GAAP earnings (loss) per share ($)   0.18     (0.17 )   nm     nm  
Fundamental earnings per share ($) (1)   0.28     0.27     5%     22%  
Fully-diluted shares outstanding (‘000’s)   45,713     45,542     1%        
Average period USD/ ZAR exchange rate   9.19     8.03     14%        

    Fiscal year ended June 30,  
                % change     % change  
    2013     2012     in USD     in ZAR  
(All figures in USD ‘000s except per share data)                        
Revenue   452,147     390,264     16%     31%  
GAAP net income   12,977     44,651     (71% )   (67% )
Fundamental net income (1)   34,822     64,094     (46% )   (38% )
GAAP earnings per share ($)   0.28     0.99     (71% )   (67% )
Fundamental earnings per share ($) (1)   0.76     1.42     (46% )   (39% )
Fully-diluted shares outstanding (‘000’s)   45,678     45,232     1%        
Average period USD/ ZAR exchange rate   8.71     7.72     13%        

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

Factors impacting comparability of our Q4 2013 and Q4 2012 results

  • Unfavorable impact from the strengthening of the US dollar: The US dollar appreciated by 14% against the ZAR during Q4 2013 which negatively impacted our reported results;
  • SASSA implementation costs: Our SASSA contract implementation and smart card costs of $9.0 million were 15% higher in ZAR when compared to Q4 2012;
  • DOJ and SEC investigation-related expenses: We incurred DOJ and SEC investigation-related expenses of $1.2 million, pre-tax, during Q4 2013;
  • Fair value charge resulting from issue of equity instrument pursuant to BEE transaction: We recorded a fair value charge of $14.2 million related to our BEE transaction which negatively impacted our reported results during Q4 2012; and
  • Capital gain paid related to intercompany transaction: We incurred a non-recurring capital gains tax of $1.5 million resulting from an intercompany capital transaction in South Africa in Q4 2012.

Comments and Outlook

“I am very pleased to report that we have completed our bulk enrollment on time despite higher than anticipated volumes. This incredibly complex and complicated exercise and its undeniable success, has once again validated SASSA's decision to award this nationally critical tender to us. It is not surprising that MasterCard this week declared the implementation as the best government social grants payment program worldwide," said Dr. Serge Belamant, Chairman and Chief Executive Officer of Net1. “My congratulations go out to my entire workforce! Net1 is now ready to execute on its strategic plans and has commenced with the deployment of both our financial and mobile services, and the early results look extremely impressive. We continue to optimize our company so as to capitalize on the businesses that can leverage our infrastructure and have the potential to add substantial value to our shareholders,” he concluded.


“Our one-time implementation costs are now effectively behind us and we therefore expect to demonstrate a marked improvement in profitability during fiscal 2014,” said Herman Kotzé, Chief Financial Officer of Net1. “For fiscal 2014, we expect fundamental earnings per share of at least $1.50, assuming a constant currency base of ZAR 8.71/ $1 and a share count of approximately 45.7 million shares. Our guidance also assumes the lost revenue and operating income from the roughly 370,000 beneficiaries on SASSA's database who have not re-registered and whose grants will likely be cancelled in September 2013” he concluded.

Completion of SASSA contract bulk enrollment

We completed the second phase of bulk enrollment by April 30, 2013, in accordance with the implementation plan agreed with SASSA. Having substantially concluded bulk enrollment in fiscal 2013, our temporary employee headcount, which peaked at approximately 5,500 employees for most of fiscal 2013, has since declined to 1,392 at June 30, 2013.

As of June 30, 2013, we had enrolled a total of 21.7 million people, which comprises approximately 9.5 million grant recipient cardholders and 12.2 million beneficiaries associated with these recipient cardholders in accordance with our second phase enrollment schedule, and issued them our UEPS/EMV smart card. During fiscal 2013, we incurred direct implementation expenses of approximately $56.2 million (ZAR 488.3 million), including staff, travel, temporary infrastructure hire, fixed premises hire for enrollment and stationery costs. We are unable to quantify the value of time spent by our executives and pension and welfare operations managers and staff that service the five provinces in which we operated under the previous contract and that have assisted in the implementation of the national contract. During fiscal 2012, we incurred direct implementation expenses of approximately $10.9 million (ZAR 83.9 million). We also expensed $10.3 million (ZAR 90.2 million) related to the cost of the UEPS/EMV smart cards issued during fiscal 2013, which is not included in the $56.2 million (ZAR 488.3 million) of direct implementation expenses described above. We did not expense any smart cards in fiscal 2012.

We also incurred approximately $6.9 million in capital expenditures related to the implementation during fiscal 2013. Since inception of the implementation we have incurred cumulative capital expenditures of $28.1 million. We have substantially completed the bulk enrollment of recipient cardholders and beneficiaries and do not expect any further significant capital expenditures related to this process.

SASSA has sent termination notices to all cardholder recipients and beneficiaries who had not presented themselves for enrollment during May, June and July 2013 in terms of the Promotion of Administrative Justice Act. As of July 30, 2013, there were an estimated 372,870 former grant recipient cardholders who had not presented themselves for enrollment. The grants applicable to these grant recipient cardholders will be suspended with effect from September 2013 and these beneficiaries will have to re-apply for their grants. Our revenue for fiscal 2014 will decline to the extent that these beneficiaries do not re-apply for their grants, but such decline may be offset by the amount of new grant recipient cardholders approved by SASSA.

SASSA tender award litigation

On March 27, 2013, a full bench of the South African Supreme Court of Appeal dismissed AllPay Consolidated Investment Holdings (Pty) Ltd’s appeal against the earlier ruling by the North Gauteng High Court that SASSA’s award of the tender to us would not be set aside. Accordingly, our SASSA contract to distribute social welfare grants to ten million South Africans every month, for a period of five years, remains in full force and effect. On April 18, 2013, AllPay applied for leave to appeal to the South African Constitutional Court, the highest court in the country, against the judgment of the Supreme Court. We and SASSA have opposed AllPay’s application. The hearing has been scheduled for September 10, 2013. Both the application for leave to appeal and appeal itself will be argued on September 10, 2013. We cannot predict when or how the Constitutional Court will rule on the matter.

Results of Operations by Segment and Liquidity

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

South African transaction-based activities

Segment revenue was $59.3 million in Q4 2013, up 1% compared with Q4 2012 in USD and up 16% on a constant currency basis. In ZAR, the increases in segment revenue were primarily due to higher revenues earned under our SASSA contract and higher transaction volumes at our South African transaction processors. Segment operating income margin was 15% and 9%, respectively, and increased primarily due to increase in transaction volumes. Excluding amortization of acquisition-related intangibles, Q4 2013 segment operating income margin was 16% compared with 12% in Q4 2012.


International transaction-based activities

KSNET continues to contribute the majority of our revenues and operating income in this operating segment. Segment revenue was $35.6 million in Q4 2013, up 15% compared with Q4 2012 in USD and 31% on a constant currency basis. The increase in segment revenue and operating income was primarily due to increased transaction-based revenues in Korea partially offset by start up expenses related to our VCC and XeoHealth initiatives. NUETS did not contribute as a result of the non-renewal of its Iraqi customer's contract in Q3 2013. Excluding the amortization of intangibles, Q4 2013 operating income margin was 13% compared to 10% during Q4 2012.

Smart card accounts

Segment revenue was $11.8 million in Q4 2013, up 43% compared with Q4 2012 in USD and 64% on a constant currency basis and increased as a result of the increase in smart card accounts. Q4 2013 segment operating income margin was 29%, compared to 28% during Q4 2012.

Financial services

UEPS-based lending contributes the majority of the revenue and operating income in this operating segment. Segment revenue was $2.1 million in Q4 2013, up 16% compared with Q4 2012 in USD and 33% higher on a constant currency basis, principally due to an increase in lending activities. Q4 2013 segment operating income margin was 17% compared with 54% during Q4 2012 primarily due to the allocation of UEPS-based lending corporate administration and overhead expenses to this segment from South African transaction-based activities. We have allocated all fiscal 2013 expenses to this segment in Q4 2013. We expect to allocate expenses to this operating segment on a quarterly basis in fiscal 2014 and therefore we expect an improved margin in Q1 2014 compared with Q4 2013. Smart Life did not contribute to operating income in the fourth quarter of fiscal 2013 as it continues to be restricted from issuing new insurance policies as a result of the suspension of its license in Q3 2013.

Hardware, software and related technology sales

Segment revenue was $9.2 million in Q4 2013, up 12% compared with Q4 2012 in USD and 28% on a constant currency basis. In constant currency, the increase in revenue resulted primarily from an increase in royalty fees and ad hoc hardware sales, offset by a lower contribution from most other major contributors to this segment. Excluding amortization of all intangibles, segment operating income margin was 25% compared to 26% during Q4 2012.

Corporate/eliminations

The decrease in our corporate expenses resulted primarily from the $14.2 million BEE transaction equity instrument charge incurred in Q4 2012, offset by legal fees we incurred in connection with the DOJ and SEC investigations and higher other corporate head office-related expenses.

Cash flow and liquidity

At June 30, 2013, we had cash and cash equivalents of $53.7 million, up from $39.0 million at June 30, 2012. The increase in our cash balances from June 30, 2012 was primarily due to cash generated from operations, offset by implementation costs and capital expenditures incurred to implement our SASSA contract, scheduled repayments of our Korean debt and the acquisitions of Pbel and SmartSwitch Botswana. For Q4 2013, net cash provided by operating activities was $24.9 million compared with net cash used by operating activities was $22.6 million in Q4 2012.

Excluding the impact of interest received, interest paid under our Korean debt and taxes paid, the increase in cash provided by operating activities resulted from improved cash generated from operations, partially offset, in ZAR, by higher implementation costs related to our SASSA contract. Capital expenditures for Q4 2013 and 2012 were $6 million and $16 million, respectively, and have decreased primarily due to lower capital expenditures related to our SASSA contract implementation in Q4 2013.

Use of Non-GAAP Measures

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

Fundamental net income and fundamental earnings per share

Fundamental net income and earnings per share is GAAP net income (loss) and earnings (loss) per share adjusted for (1) the amortization of acquisition-related intangible assets (net of deferred taxes), (2) stock-based compensation charges and (3) unusual non-recurring items, including the amortization of KSNET debt facility fees, as well as (a) in fiscal 2013, DOJ and SEC investigations-related expenses and acquisition-related costs; and (b) in fiscal 2012, the effects of a change in South African tax law and the creation of a valuation allowance related to foreign tax credits, equity instrument charge related to our BEE transaction, capital gains taxes paid resulting from an intercompany capital transaction in South Africa, the profit on liquidation of SmartSwitch Nigeria and loss on sale of 10% of Smart Life. Management believes that the fundamental net income and earnings per share metric enhances its own evaluation, as well as an investor’s understanding, of our financial performance. Attachment B presents the reconciliation between GAAP and fundamental net income and earnings per share.


Headline earnings per share/ headline loss per share (“HEPS”)

The inclusion of HEPS in this press release is a requirement of our listing on the JSE. HEPS basic and diluted is calculated using net income (loss) which has been determined based on GAAP. Accordingly, this may differ to the headline earnings (loss) per share calculation of other companies listed on the JSE as these companies may report their financial results under a different financial reporting framework, including but not limited to, International Financial Reporting Standards.

HEPS basic and diluted is calculated as GAAP net income (loss) adjusted for the loss (profit) on sale of property, plant and equipment, net of related tax effects, the loss attributable to the sale of 10% of Smart Life and the profit on liquidation of SmartSwitch Nigeria. Attachment C presents the reconciliation between our net income (loss) used to calculate earnings (loss) per share basic and diluted and HEPS basic and diluted and the calculation of the denominator for headline diluted earnings per share.

Conference Call

We will host a conference call to review Q4 2013 results on August 23, 2013, at 8:00 Eastern Time. To participate in the call, dial 1-866-652-5200 (U.S. only), 1-855-669-9657 (Canada only), 0808-162-4061 (U.K. only) or 0-800-200-648 (South Africa only) ten minutes prior to the start of the call. Callers should request “Net1 call” upon dial-in. The call will also be webcast on 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 September 22, 2013.

About Net1 (www.net1.com)

Net1 is a leading provider of alternative payment systems that leverage its Universal Electronic Payment System, or UEPS, to facilitate biometrically secure, real-time electronic transaction processing to unbanked and under-banked populations of developing economies around the world in an online or offline environment. Net1’s UEPS/EMV solution is also completely interoperable with global EMV standards that seamlessly permit access to all the UEPS functionality in a traditional EMV environment. In addition to payments, UEPS can be used for banking, healthcare management, payroll, remittances, voting and identification.

Net1 operates market-leading payment processors in South Africa, Republic of Korea, and Ghana. In addition, Net1’s proprietary Mobile Virtual Card technology offers secure mobile payments and banking services in developed and emerging countries while its MediKredit and XeoHealth subsidiaries provide its proprietary 5010 and ICD-10 compliant real-time claims adjudication system.

Net1 has a primary listing on the Nasdaq and a secondary listing on the JSE Limited.

Forward-Looking Statements

This announcement contains forward-looking statements that involve known and unknown risks and uncertainties. A discussion of various factors that cause our actual results, levels of activity, performance or achievements to differ materially from those expressed in such forward-looking statements are included in our filings with the Securities and Exchange Commission. We undertake no obligation to revise any of these statements to reflect future events.

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


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

    Three months ended     Fiscal year ended  
    June 30,     June 30,  
    2013     2012     2013     2012  
    (In thousands, except per share data)     (In thousands, except per share data)  
                         
REVENUE $  117,882   $ 107,616   $  452,147   $  390,264  
                         
EXPENSE                        
                         
         Cost of goods sold, IT processing, servicing 
         and support
  53,045     41,395     196,834     141,000  
                         
         Selling, general and administration   41,698     45,107     191,552     137,404  
                         
         Equity instrument issued pursuant to BEE 
         transaction
  -     14,211     -     14,211  
                         
         Depreciation and amortization   9,548     9,305     40,599     36,499  
                         
OPERATING INCOME (LOSS)   13,591     (2,402 )   23,162     61,150  
                         
INTEREST INCOME   3,888     2,595     12,083     8,576  
                         
INTEREST EXPENSE   1,849     2,130     7,966     9,345  
                         
INCOME (LOSS) BEFORE INCOME TAX EXPENSE   15,630     (1,937 )   27,279     60,381  
                         
INCOME TAX EXPENSE   7,484     6,151     14,656     15,936  
                         
NET INCOME (LOSS) BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   8,146     (8,088 )   12,623     44,445  
                         
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   147     120     351     220  
                         
NET INCOME (LOSS)   8,293     (7,968 )   12,974     44,665  
                         
LESS (ADD) NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST   8     9     (3 )   14  
                         
NET INCOME (LOSS) ATTRIBUTABLE TO NET1 $  8,285   $ (7,977 ) $  12,977   $  44,651  
                         
Net income (loss) per share, in United States dollars                
         Basic earnings (loss) attributable to Net1 
         shareholders
$ 0.18   $ (0.17 ) $ 0.28   $ 0.99  
         Diluted earnings (loss) attributable to Net1 
         shareholders
$ 0.18   $ (0.17 ) $ 0.28   $ 0.99  


NET 1 UEPS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets

    Unaudited     (A)  
    June 30,     June 30,  
    2013     2012  
    (In thousands, except share data)  
ASSETS    
CURRENT ASSETS            
     Cash and cash equivalents $  53,665   $  39,123  
     Pre-funded social welfare grants receivable   2,934     9,684  
     Accounts receivable, net of allowances   102,614     101,918  
     Finance loans receivable   8,350     8,141  
     Inventory   12,222     10,779  
     Deferred income taxes   4,938     5,591  
             Total current assets before settlement assets   184,723     175,236  
                     Settlement assets   752,476     409,166  
                             Total current assets   937,199     584,402  
PROPERTY, PLANT AND EQUIPMENT, net   48,301     52,616  
EQUITY-ACCOUNTED INVESTMENTS   1,183     1,508  
GOODWILL   175,806     182,737  
INTANGIBLE ASSETS, net   77,257     93,930  
OTHER LONG-TERM ASSETS, including reinsurance assets   36,576     40,700  
     TOTAL ASSETS   1,276,322     955,893  
LIABILITIES    
CURRENT LIABILITIES            
     Accounts payable   26,567     13,172  
     Other payables   33,808     40,167  
     Current portion of long-term borrowings   14,209     14,019  
     Income taxes payable   2,275     6,019  
             Total current liabilities before settlement obligations   76,859     73,377  
                 Settlement obligations   752,476     409,166  
                             Total current liabilities   829,335     482,543  
DEFERRED INCOME TAXES   18,727     20,988  
LONG-TERM BORROWINGS   66,632     79,760  
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities   21,659     25,791  
     TOTAL LIABILITIES   936,353     609,082  
COMMITMENTS AND CONTINGENCIES            
EQUITY    
NET1 EQUITY:            
     COMMON STOCK            
                 Authorized: 200,000,000 with $0.001 par value; 
                 Issued and outstanding shares, net of treasury - 2013: 45,592,550; 2012: 45,548,902
  59     59  
     PREFERRED STOCK            
                 Authorized shares: 50,000,000 with $0.001 par value; 
                 Issued and outstanding shares, net of treasury: March: -; June: -
  -     -  
     ADDITIONAL PAID-IN-CAPITAL   160,670     155,350  
     TREASURY SHARES, AT COST: 2013: 13,455,090; 2012: 13,455,090   (175,823 )   (175,823 )
     ACCUMULATED OTHER COMPREHENSIVE LOSS   (100,858 )   (75,722 )
     RETAINED EARNINGS   452,618     439,641  
             TOTAL NET1 EQUITY   336,666     343,505  
             NON-CONTROLLING INTEREST   3,303     3,306  
                     TOTAL EQUITY   339,969     346,811  
                             TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $  1,276,322   $  955,893  

(A) – Derived from audited financial statements


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

    Three months ended     Fiscal year ended  
    June 30,     June 30,  
    2013     2012     2013     2012  
    (In thousands)     (In thousands)  
Cash flows from operating activities                        
Net income (loss) $  8,293   $  (7,968 ) $  12,974   $  44,665  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                
Depreciation and amortization   9,548     9,305     40,599     36,499  
Loss from equity-accounted investments   (147 )   (120 )   (351 )   (220 )
Fair value adjustments   223     (1,392 )   631     (3,375 )
Interest payable   950     4,354     4,313     8,823  
Profit on disposal of property, plant and equipment   193     (7 )   110     (64 )
Net loss on sale of 10% of Smart Life   -     -     -     81  
Profit on liquidation of Smartswitch Nigeria   -     -     -     (3,994 )
Realized loss on sale of investments related to insurance business   -     -     -     25  
Stock-based compensation charge   582     893     3,907     2,775  
Fair value of BBEE equity instrument   -     14,211     -     14,211  
Facility fee amortized   67     (126 )   302     389  
Decrease in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable   (1,739 )   (16,653 )   (5,726 )   (31,974 )
Increase in inventory   (630 )   (4,940 )   (2,890 )   (5,271 )
Increase in accounts payable and other payables   9,868     (16,731 )   8,113     (18,496 )
(Decrease) Increase in taxes payable   (3,102 )   (2,147 )   (2,748 )   (7,483 )
Increase (Decrease) in deferred taxes   816     (1,257 )   (3,317 )   (16,185 )
   Net cash provided by (used in) operating activities   24,922     (22,578 )   55,917     20,406  
Cash flows from investing activities                        
Capital expenditures   (5,644 )   (15,702 )   (22,747 )   (39,167 )
Proceeds from disposal of property, plant and equipment   123     379     510     764  
Acquisitions, net of cash acquired   -     -     (2,143 )   (6,154 )
Repayment of loan by equity-accounted investment   -     -     3     122  
Settlement from former shareholders of KSNET   -     -     -     4,945  
Acquisition of available for sale securities   -     29     -     (948 )
Purchase of investments related to insurance business   -     -     -     (2,320 )
Proceeds from maturity of investments related to insurance business   -     -     -     2,321  
Other investing activity Net   -     -     545     (1 )
Net change in settlement assets   (255,565 )   (381,062 )   (423,984 )   (252,101 )
   Net cash used in investing activities   (261,086 )   (396,356 )   (447,816 )   (292,539 )
Cash flows from financing activities                        
Repayment of long-term borrowings   (7,201 )   (7,145 )   (14,508 )   (19,172 )
Proceeds from issue of common stock   -     -     240     -  
Acquisition of treasury stock   -     -     -     (1,129 )
Proceeds on sale of 10% of Smart Life   -     -     -     107  
Net change in settlement obligations   255,565     381,062     423,984     252,101  
   Net cash provided by financing activities   248,364     373,917     409,716     231,907  
Effect of exchange rate changes on cash   (1,151 )   (4,109 )   (3,275 )   (15,914 )
Net increase (decrease) in cash and cash equivalents   11,049     (49,126 )   14,542     (56,140 )
Cash and cash equivalents – beginning of period   42,616     88,250     39,123     95,263  
Cash and cash equivalents – end of period $  53,665   $  39,124   $  53,665   $  39,123  


Net 1 UEPS Technologies, Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended June 30, 2013 and 2012 and March 31, 2013

                                      Change – constant  
                          Change - actual     exchange rate(1)  
                          Q4 ‘13     Q4 ‘13     Q4 ‘13     Q4 ‘13  
                          vs     vs     vs     vs  
Key segmental data, in $ ’000,   Q4 ‘13       Q4 ‘12       Q3 ‘13     Q4‘12     Q3 ‘13     Q4‘12     Q3 ‘13  
   Revenue:                                              
       SA transaction-based activities $ 59,268     $ 58,434     $ 59,009     1%     0%     16%     9%  
       International transaction-based 
       activities
  35,600       31,003       33,119     15%     7%     31%     17%  
       Smart card accounts   11,750       8,189       8,657     43%     36%     64%     47%  
       Financial services   2,062       1,777       1,651     16%     25%     33%     36%  
       Hardware, software and related 
       technology sales
  9,202       8,213       8,705     12%     6%     28%     15%  
             Total consolidated revenue $ 117,882     $ 107,616     $ 111,141     10%     6%     25%     15%  
                                               
   Consolidated operating income (loss):                                              
       SA transaction-based activities $ 9,060     $ 5,181       ($4,197 )   75%     nm     100%     nm  
             Operating income (loss) excluding
              amortization
  9,632       6,809       (3,127 )   41%     nm     62%     nm  
             Amortization of intangible assets   (572 )     (1,628 )     (1,070 )   (65% )   (47% )   (60% )   (42% )
       International transaction-based activities   1,365       137       (1,362 )   896%     nm     1,039%     nm  
             Operating income excluding 
             amortization
  4,536       3,130       1,866     45%     143%     66%     164%  
             Amortization of intangible assets   (3,171 )     (2,993 )     (3,228 )   6%     (2% )   21%     7%  
       Smart card accounts   3,349       2,333       2,467     44%     36%     64%     47%  
       Financial services   354       951       1,147     (63% )   (69% )   (57% )   (67% )
       Hardware, software and related 
       technology sales
  2,216       2,074       1,699     7%     30%     22%     42%  
             Operating income (loss) excluding 
             amortization
  2,295       2,164       1,785     6%     29%     21%     40%  
             Amortization of intangible assets   (79 )     (90 )     (86 )   (12% )   (8% )   0%     (0% )
         Corporate/ Eliminations   (2,753 )     (13,078 )     (4,480 )   (79% )   (39% )   (76% )   (33% )
             Total operating income (loss) $ 13,591       ($2,402 )     ($4,726 )   nm     nm     nm     nm  
                                               
   Operating income margin (%)                                              
       SA transaction-based activities   15%       9%       (7% )                        
       International transaction-based activities   4%       0%       (4% )                
       International transaction-based activities
        excluding amortization
  13%       10%       6%                  
       Smart card accounts   29%       28%       28%                          
       Financial services   17%       54%       69%                          
       Hardware, software and related 
       technology sales
  24%       25%       20%                  
       Overall operating margin   12%       (2% )     (4% )                        

(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the fourth quarter of fiscal 2013 also prevailed during the fourth quarter of fiscal 2012 and the third quarter of fiscal 2013.


Fiscal year ended June 30, 2013 and 2012

                          Change –  
                          constant  
                    Change -     exchange  
                    actual     rate(1 )
                    F2013     F2013  
Key segmental data, in ’000, except                   vs     vs  
margins   F2013       F2012       F2012     F2012  
   Revenue:                            
       SA transaction-based activities $ 240,405     $ 201,207       19%     35%  
       International transaction-based activities   133,481       118,281       13%     27%  
       Smart card accounts   36,990       31,263       18%     34%  
       Financial services   6,545       8,121       (19% )   (9% )
       Hardware, software and related technology sales   34,726       31,392       11%     25%  
             Total consolidated revenue $ 452,147     $ 390,264       16%     31%  
                             
   Consolidated operating income (loss):                            
       SA transaction-based activities $ 13,196     $ 49,824       (74% )   (70% )
             Operating income excluding amortization   17,687       55,995       (68% )   (64% )
             Amortization of intangible assets   (4,491 )     (6,171 )     (27% )   (18% )
       International transaction-based activities   34       1,257       (97% )   (97% )
             Operating income excluding amortization   13,436       14,272       (6% )   6%  
             Amortization of intangible assets   (13,402 )     (13,015 )     3%     16%  
       Smart card accounts   10,543       12,820       (18% )   (7% )
       Financial services   3,646       4,636       (21% )   (11% )
       Hardware, software and related technology sales   6,694       3,619       85%     109%  
             Operating income excluding amortization   7,023       3,990       76%     99%  
             Amortization of intangible assets   (329 )     (371 )     (11% )   0%  
       Corporate/ Eliminations   (10,951 )     (11,006 )     (0% )   12%  
             Total operating income $ 23,162     $ 61,150       (62% )   (57% )
                             
   Operating income margin (%)                            
       SA transaction-based activities   5%       25%                
       International transaction-based activities   0%       1%            
       International transaction-based activities excluding 
       amortization
  10%       12%            
       Smart card accounts   29%       41%                
       Financial services   56%       57%                
       Hardware, software and related technology sales   19%       12%            
       Overall operating margin   5%       16%                

(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during fiscal 2013 also prevailed during fiscal 2012.


Net 1 UEPS Technologies, Inc.

Attachment B

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

Three months ended June 30, 2013 and 2012

                E(L)PS,                 E(L)PS,  
    Net income (loss)     basic     Net income (loss)     basic  
    (USD’000)     (USD)     (ZAR’000)     (ZAR)  
    2013     2012     2013     2012     2013     2012     2013     2012  
                                                 
GAAP   8,285     (7,977 )   0.18     (0.17 )   76,109     (64,078 )   1.67     (1.40 )
                                                 
     Intangible asset amortization, net .   2,888     3,532                 26,520     28,381              
     Stock-based compensation charge   582     893                 5,346     7,173              
     Facility fees for KSNET debt   67     84                 615     675              
     DOJ and SEC investigations- 
     related expenses
  776     -             7,129     -          
     BEE charge   -     14,211                 -     112,066              
     Capital taxes paid   -     1,465                 -     11,768              
                 Fundamental   12,598     12,208     0.28     0.27     115,719     95,985     2.54     2.09  

Fiscal year ended June 30, 2013 and 2012

    Net income     EPS, basic     Net income     EPS, basic  
    (USD’000)     (USD)     (ZAR’000)     (ZAR)  
    2013     2012     2013     2012     2013     2012     2013     2012  
                                                 
GAAP   12,977     44,651     0.28     0.99     113,035     344,643     2.48     7.63  
                                                 
     Intangible asset amortization, net .   13,679     14,602                 119,155     112,719              
     Stock-based compensation charge   3,907     2,775                 34,032     21,419              
     Facility fees for KSNET debt   302     389                 2,631     3,003              
     DOJ and SEC investigations- related expenses   3,888     -                 33,866     -              
     Acquisition-related costs   69     -                 601     -              
     Change in tax law   -     (18,315 )               -     (150,373 )            
     BEE charge   -     14,211                 -     112,066              
     Create FTC valuation allowance   -     8,232                 -     67,588              
     Capital taxes paid   -     (3,994 )               -     (30,828 )            
     Profit on liquidation of subsidiary   -     1,465                 -     11,308              
     Loss on sale of 10% of Smart Life .   -     78                 -     602              
Fundamental   34,822     64,094     0.76     1.42     303,320     492,147     6.66     10.89  


Net 1 UEPS Technologies, Inc.

Attachment C

Reconciliation of net income (loss) used to calculate earnings (loss) per share basic and diluted and headline earnings (loss) per share basic and diluted:

Three months ended June 30, 2013 and 2012

    2013     2012  
             
Net income (loss) (USD’000)   8,285     (7,977 )
Adjustments:            
     Loss (Profit) on sale of property, plant and equipment   193     (7 )
     Tax effects on above   (54 )   2  
             
Net income (loss) used to calculate headline earnings (USD’000)   8,424     (7,982 )
             
Weighted average number of shares used to calculate net income (loss) per share basic earnings (loss) and headline earnings (loss) per share basic earnings (loss) (‘000)   45,593     45,498  
             
Weighted average number of shares used to calculate net income (loss) per share diluted earnings (loss) and headline earnings (loss) per share diluted earnings (loss) (‘000)   45,713     45,542  
             
Headline earnings (loss) per share:            
     Basic, in USD   0.18     (0.17 )
     Diluted, in USD   0.18     (0.17 )
             
Fiscal year ended June 30, 2013 and 2012            
             
    2013     2012  
             
Net income (USD’000)   12,977     44,651  
Adjustments:            
     Profit on liquidation of SmartSwitch Nigeria   -     (3,994 )
     Loss on sale of 10% of Smart Life   -     78  
     Loss (Profit) on sale of property, plant and equipment   110     (64 )
     Tax effects on above   (31 )   18  
             
Net income used to calculate headline earnings (USD’000)   13,056     40,689  
             
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings (‘000)   45,553     45,187  
             
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings (‘000)   45,678     45,232  
             
Headline earnings per share:            
     Basic, in USD   0.28     0.90  
     Diluted, in USD   0.28     0.90  

Calculation of the denominator for headline diluted earnings per share

    Q4 ‘13     Q4 ‘12     F2013     F2012  
                         
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP   45,593     45,498     45,553     45,187  
     Effect of dilutive securities under GAAP   120     44     125     45  
         Denominator for headline diluted earnings per share   45,713     45,542     45,678     45,232  

Weighted average number of shares used to calculate headline earnings per share diluted represent the denominator for basic weighted-average common shares outstanding and unvested restricted shares expected to vest plus the effect of dilutive securities under GAAP. We use this number of fully-diluted shares outstanding to calculate headline earnings (loss) per share diluted because we do not use the two-class method to calculate headline earnings (loss) per share diluted.



The following information was filed by Net 1 Ueps Technologies Inc (UEPS) on Thursday, August 22, 2013 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Document And Entity Information
Consolidated Balance Sheets
Consolidated Balance Sheets (parenthetical)
Consolidated Statement Of Changes In Equity
Consolidated Statements Of Cash Flows
Consolidated Statements Of Comprehensive Income
Consolidated Statements Of Operations
Accounts Receivable, Net
Accounts Receivable, Net (details)
Accounts Receivable, Net (tables)
Acquisitions
Acquisitions (narrative) (details)
Acquisitions (schedule Of Cash Paid Net Of Cash Received Related To Company Acquisitions) (details)
Acquisitions (schedule Of Preliminary Purchase Price Allocation Translated At Applicable Foreign Exchange Rate) (details)
Acquisitions (schedule Of Preliminary Purchase Price Allocation) (details)
Acquisitions (tables)
Commitments And Contingencies
Commitments And Contingencies (future Minimum Payments Under Operating Leases) (details)
Commitments And Contingencies (narrative) (details)
Commitments And Contingencies (tables)
Common Stock
Common Stock (narrative) (details)
Common Stock (number Of Shares, Net Of Treasury) (details)
Common Stock (tables)
Description Of Business And Basis Of Presentation
Description Of Business And Basis Of Presentation (details)
Earnings Per Share
Earnings Per Share (narrative) (details)
Earnings Per Share (tables)
Earnings Per Share (weighted Average Number Of Outstanding Shares Used For The Calculation Of Earnings Per Share) (details)
Equity Instrument Granted Pursuant To Bee Transaction
Equity Instrument Granted Pursuant To Bee Transaction (details)
Fair Value Of Financial Instruments
Fair Value Of Financial Instruments (fair Value Of Assets And Liabilities Measured On Recurring Basis) (details)
Fair Value Of Financial Instruments (narrative) (details)
Fair Value Of Financial Instruments (outstanding Foreign Exchange Contracts) (details)
Fair Value Of Financial Instruments (tables)
Goodwill And Intangible Assets, Net
Goodwill And Intangible Assets, Net (carrying Value And Accumulated Amortization Of Intangible Assets) (details)
Goodwill And Intangible Assets, Net (carrying Value Of Goodwill) (details)
Goodwill And Intangible Assets, Net (fair Value Of Intangible Assets Acquired) (details)
Goodwill And Intangible Assets, Net (future Estimated Annual Amortization Expense) (details)
Goodwill And Intangible Assets, Net (goodwill Allocated To Reportable Segments) (details)
Goodwill And Intangible Assets, Net (narrative) (details)
Goodwill And Intangible Assets, Net (tables)
Income Taxes
Income Taxes (components Of Income Before Income Taxes) (details)
Income Taxes (narrative) (details)
Income Taxes (provisions For Income Taxes By Location Of Taxing Jurisdiction) (details)
Income Taxes (reconciliation Of Income Taxes) (details)
Income Taxes (schedule Of Deferred Tax Assets And Liabilities) (details)
Income Taxes (schedule Of Operating Loss Carryforwards) (details)
Income Taxes (schedule Of Reconciliation Of Total Amounts Of Unrecognized Tax Benefits) (details)
Income Taxes (tables)
Inventory
Inventory (narrative) (details)
Inventory (schedule Of Inventory By Categories) (details)
Inventory (tables)
Long-term Borrowings
Long-term Borrowings (details)
Operating Segments
Operating Segments (long-lived Assets Based On Geographical Location) (details)
Operating Segments (narrative) (details)
Operating Segments (revenue Based On Geographic Location) (details)
Operating Segments (summary Of Segment Information) (details)
Operating Segments (tables)
Other Payables
Other Payables (details)
Other Payables (tables)
Pre-funded Social Welfare Grants Receivable
Profit On Liquidation Of Smartswitch Nigeria
Profit On Liquidation Of Smartswitch Nigeria (details)
Property, Plant And Equipment, Net
Property, Plant And Equipment, Net (details)
Property, Plant And Equipment, Net (tables)
Reinsurance Assets And Policy Holder Liabilities Under Insurance And Investment Contracts
Reinsurance Assets And Policy Holder Liabilities Under Insurance And Investment Contracts (narrative) (details)
Reinsurance Assets And Policy Holder Liabilities Under Insurance And Investment Contracts (summary Of Movement In Assets And Policy Holder Liabilities Under Investment Contracts) (details)
Reinsurance Assets And Policy Holder Liabilities Under Insurance And Investment Contracts (summary Of The Movement In Reinsurance Assets And Policy Holder Liabilities Under Insurance Contracts) (details)
Reinsurance Assets And Policy Holder Liabilities Under Insurance And Investment Contracts (tables)
Related Party Transactions
Related Party Transactions (details)
Revenue
Revenue (details)
Revenue (tables)
Short-term Facilities
Short-term Facilities (details)
Significant Accounting Policies
Significant Accounting Policies (details)
Significant Accounting Policies (policy)
Significant Accounting Policies (tables)
Stock-based Compensation
Stock-based Compensation (narrative) (details)
Stock-based Compensation (range Of Assumptions Used To Value Options Granted) (details)
Stock-based Compensation (recorded Net Stock Compensation Charge) (details)
Stock-based Compensation (restricted Stock Activity) (details)
Stock-based Compensation (summarized Stock Option Activity) (details)
Stock-based Compensation (tables)
Supplemental Cash Flow Information
Supplemental Cash Flow Information (details)
Supplemental Cash Flow Information (tables)
Unaudited Quartely Results
Unaudited Quartely Results (details)
Unaudited Quartely Results (tables)
Ticker: UEPS
CIK: 1041514
Form Type: 10-K Annual Report
Accession Number: 0001062993-13-004373
Submitted to the SEC: Thu Aug 22 2013 4:30:09 PM EST
Accepted by the SEC: Thu Aug 22 2013
Period: Sunday, June 30, 2013
Industry: Functions Related To Depository Banking

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