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Net 1 Ueps Technologies Inc (UEPS) SEC Filing 10-K Annual report for the fiscal year ending Monday, June 30, 2014

Net 1 Ueps Technologies Inc

CIK: 1041514 Ticker: UEPS

Exhibit 99.1

Net 1 UEPS Technologies, Inc. Reports 2014 Fourth Quarter and Full Year Results

Q4 2014 Revenue and FEPS of $183 million and $0.91, a constant currency increase of 76% and 275% respectively;
   
Received $26.6 million in cash from SASSA related to recovery of implementation expenses;
   
Recognized a $11.3 million non-cash charge related to 2014 BEE transactions; and
   
Reportable operating segments reduced from five to three.

JOHANNESBURG, August 28, 2014 – Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today released results for the fourth quarter and full-year fiscal 2014.

Summary Financial Metrics

    Three months ended June 30,  
                % change     % change  
    2014     2013     in USD     in ZAR  
(All figures in USD ‘000s except per share data)                        
Revenue   182,753     117,882     55%     76%  
GAAP net income   28,584     8,285     245%     291%  
Fundamental net income (1)   44,386     12,598     252%     301%  
GAAP earnings per share ($)   0.59     0.18     223%     266%  
Fundamental earnings per share ($) (1)   0.91     0.28     225%     275%  
Fully-diluted shares outstanding (‘000’s)   48,855     45,713     7%        
Average period USD/ ZAR exchange rate   10.42     9.19     13%        

    Year ended June 30,  
                % change     % change  
    2014     2013     in USD     in ZAR  
(All figures in USD ‘000s except per share data)                        
Revenue   581,656     452,147     29%     54%  
GAAP net income   70,111     12,977     440%     545%  
Fundamental net income (1)   100,539     34,822     189%     245%  
GAAP earnings per share ($)   1.51     0.28     430%     532%  
Fundamental earnings per share ($) (1)   2.16     0.76     184%     238%  
Fully-diluted shares outstanding (‘000’s)   46,603     45,678     2%        
Average period USD/ ZAR exchange rate   10.40     8.71     19%        

(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 to fundamental net income and earnings per share.

Factors impacting comparability of our Q4 2014 and Q4 2013 results

  • Unfavorable impact from the strengthening of the US dollar against the ZAR: The US dollar appreciated by 13% against the ZAR during Q4 2014, which negatively impacted our reported results;
  • $26.6 million recovery of expenses and 2013 implementation costs: Our SASSA contract implementation is complete. In Q4 2014, we received approximately $26.6 million, or approximately $19.1 million, net of tax, from SASSA related to the recovery of additional implementation costs incurred during the beneficiary re-registration process in fiscal 2012 and 2013. Q4 2013 results include implementation-related expenditure, including smart card costs, of approximately $9.0 million;
  • Fair value charge resulting from issue of equity instruments pursuant to BEE transactions: The fair value non- cash charge of $11.3 million related to our BEE transactions adversely impacted our reported results during Q4 2014;
  • Increased contribution by KSNET: Our results were positively impacted by growth in our South Korean operations;
  • Growth in financial services: The expansion of our financial services offering resulted in higher year-over-year revenue and operating income from UEPS-based lending during Q4 2014;
  • Ad hoc hardware sales in fiscal 2014: We sold more terminals and cards during Q4 2014 as a result of ad hoc orders received from our customers; and
  • Higher revenue resulting from an increase in low-margin prepaid airtime and electricity sales: Our revenue has increased as a result of the growth of our prepaid airtime offering during Q4 2014, which has lower margins compared with our other South African businesses.

Comments and Outlook

“Our results once again demonstrate our ability to implement large and complex national projects efficiently, and to rationalize our cost structure in order to drive margin improvement. We can achieve such results due to our superior technological solutions and their ability to adapt seamlessly to the ever-changing needs of our markets and our customers. More importantly, we have been able to focus our attention on our growth strategy targeting international markets. This strategy is mobile- and payment-centric, and is designed to deliver solutions that incorporate a number of “killer” applications in the space of money transfers, loyalty programs, electronic wallets and secure CNP payments,” said Dr. Serge Belamant, Chairman and CEO of Net1. “Our new streamlined operational teams are ready for significant expansion not only locally but globally as well. This new focused approach will allow us to diversify our risk profile from a geographical, currency and customer point of view. I am delighted with our personnel and their commitments, and strongly believe that we are now entering a period of sustained growth that will result in continued shareholder value creation,” he concluded.

“I am proud of our financial achievements in fiscal 2014, which have provided the catalyst for our expected growth trajectory in fiscal 2015,” said Herman Kotzé, Chief Financial Officer of Net1. “For fiscal 2015, we expect fundamental earnings per share of at least $1.92, assuming a constant currency base of ZAR 10.40/ $1 and a share count of 46 million shares. Our fiscal 2014 fundamental earnings per share included approximately $0.40 related to the recovery of our SASSA implementation costs, which will not recur in fiscal 2015,” he concluded.

Transactions in preparation for any new potential SASSA tender

On August 27, 2014, we entered into a sale and subscription agreement with Business Venture Investments No 1567 (Proprietary) Limited (RF) (“BVI”), one of our BEE partners, in preparation for any new potential SASSA tender. Pursuant to the sale and subscription agreement: (i) we repurchased BVI’s remaining 1,837,432, shares of Net1 common stock for approximately $9.2 million in cash (translated at exchange rates prevailing as of August 27, 2014) and (ii) BVI has subscribed for new ordinary shares of CPS representing approximately 12.5% of CPS’ ordinary shares outstanding after the subscription for $1.4 million in cash (translated at exchange rates prevailing as of August 27, 2014). In connection with transactions described above, the CPS shareholder agreement that was negotiated as part of the original December 2013 Relationship Agreement became effective.

Change to internal reporting structure and restatement of previously reported information

In June 2014 we streamlined our operating structure and accordingly our reporting segments have been consolidated from five to three: South African transaction processing, International transaction processing and Financial inclusion and applied technologies. Previously reported information has been restated. For further information refer to Note 23 to our 2014 annual financial statements contained in our report on Form 10-K filed with the United States Securities and Exchange Commission on August 28, 2014. Attachment D presents our quarterly operating segment revenue and operating income results for fiscal 2014, 2013 and 2012.

Results of Operations by Segment and Liquidity

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

     South African transaction processing

The South African transaction processing segment consists mainly of pension and welfare benefit distribution services provided to the South African government, and transaction processing for retailers, utilities, medical-related claim service customers and banks.

Segment revenue was $88.3 million in Q4 2014, up 52% compared with Q4 2013 in USD and up 72% on a constant currency basis. In ZAR, increase in segment revenue was primarily due to the recovery of $26.6 million in implementation costs related to our SASSA contract and more low-margin transaction fees generated from beneficiaries using the South African National Payment System. Segment operating income margin was 44% and (0)%, respectively, and increased primarily due to the recovery of SASSA implementation costs. Segment operating income margin excluding the recovery of implementation costs was 20% for Q4 2014.

     International transaction processing

     The International transaction processing segment consists mainly of payment processing services to merchants and card issuers in South Korea. The segment also generates transaction fee revenue from transaction processing of UEPS-enabled smartcards in Botswana and transaction processing of medical-related claims in the United States. KSNET contributes the majority of our revenues and operating income in this segment. Segment revenue was $42.2 million in Q4 2014, up 17% compared with Q4 2013 in USD and 32% on a constant currency basis. Revenue increased primarily due to increased transaction processing activities in South Korea during Q4 2014. Operating income in Q4 2014 was higher due to an increase in revenue contribution from KSNET, which was partially offset by ongoing losses related to our XeoHealth launch in the United States, as well as ongoing competition in the South Korean marketplace. Segment operating income margin in Q4 2014 and Q4 2013 was 16% and 15%, respectively.


     Financial inclusion and applied technologies

The Financial inclusion and applied technologies segment includes our smart card accounts, lending and life insurance businesses. This segment also includes the economics from merchants and card holders using our merchant acquiring system, the sale of prepaid products (electricity and airtime) and the sale of hardware and software.

Segment revenue was $64.1 million in Q4 2014, up 116% compared with Q4 2013 in USD and 146% on a constant currency basis, and increased primarily due to higher mobile-based prepaid airtime sales, an increase in the number of UEPS-based loans as we rolled out our product nationally, an increase in intersegment revenues and more ad hoc terminal and smart card sales. Segment operating income margin was 28% and 48%, respectively, and decreased primarily as a result of more low-margin prepaid airtime and hardware sales.

     Corporate/eliminations

Corporate/eliminations includes our head office cost center, the amortization of acquisition-related intangible assets and once-off events, including in 2014, the equity instrument charges related to our BEE transactions, and the net loss for the deconsolidation of subsidiaries and businesses.

The increase in our corporate expenses resulted primarily from the non-cash charge related to the equity instruments issued pursuant to our BEE transactions, increases in general corporate audit fees, executive emoluments and other corporate head office-related expenses, all of which were partially offset by lower US government investigation and US lawsuit expenses.

     Cash flow and liquidity

At June 30, 2014, we had cash and cash equivalents of $58.7 million, up from $53.7 million at June 30, 2013. The increase in our cash balances from June 30, 2013, was primarily due to higher cash generated from our core business and the recovery of implementation costs from SASSA, which was partially offset by higher corporate tax payments, the expansion of our UEPS-based lending business, acquisition of terminals to maintain and expand our South Korean business activities, the repayment of a portion of our South Korean debt and acquisition of substantially all of the remaining shares of KSNET that we did not already own.

Excluding the impact of interest received, interest paid under our South Korean debt, taxes and recovery of implementation costs from SASSA, the decrease in cash from operating activities resulted from the expansion of our UEPS-based lending book, offset by cash inflows from improved trading activity and the substantial elimination of implementation costs in fiscal 2014. Capital expenditures for Q4 2014 and 2013 were $6.6 million and $5.6 million, respectively, and have increased primarily due to the acquisition of more payment processing terminals in South Korea.

Use of Non-GAAP Measures

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

     Fundamental net income and fundamental earnings per share

Fundamental net income and earnings per share is GAAP net income and earnings 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, transaction-related costs and US government investigations-related and US lawsuit expenses; as well as in fiscal 2014, the equity instruments charged related to our December 2013 BEE transactions and the net loss on deconsolidation of subsidiaries and business, net of tax. 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 (“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 profit on sale of property, plant and equipment, and, in 2014, the net loss on deconsolidation of subsidiaries and asset group, 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 and the calculation of the denominator for headline diluted earnings per share.


Conference Call

We will host a conference call to review Q4 2014 results on August 29, 2014, at 8:00 Eastern Time. To participate in the call, dial 1-855-481-5362 (US and Canada), 0808-162-4061 (U.K. only) or 0-800-200-648 (South Africa only) ten minutes prior to the start of the call. Callers should request “Net1 call” upon dial-in. The call will also be webcast on the Net1 homepage, www.net1.com. Please click on the webcast link at least ten minutes prior to the call. A webcast of the call will be available for replay on the Net1 website through September 21, 2014.

Fiscal 2015 earnings call dates

We expect to host quarterly conference calls to review our fiscal 2015 quarterly results in accordance with the schedule provided in the table below:

Conference call to review quarter ended:   Tentative date
September 30, 2014 (Q1, 2015)   November 7, 2014
December 31, 2014 (Q2, 2015)   February 6, 2015
March 31, 2015 (Q3, 2015)   May 8, 2015
June 30, 2015 (Q4, 2015)   August 21, 2015

The dates provided above are tentative and we will confirm the final dates and dial-in details closer to the quarterly conference call date.

About Net1 (www.net1.com)

Net1 is a leading provider of alternative payment systems that leverage its Universal Electronic Payment System (“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 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 and the Republic of Korea. In addition, Net1's proprietary MVC technology offers secure mobile payments and banking services in developed and emerging countries.

Net1 has a primary listing on NASDAQ and a secondary listing on the Johannesburg Stock Exchange.

Forward-Looking Statements

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

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


NET 1 UEPS TECHNOLOGIES, INC.
Consolidated Statements of Operations

    Unaudited     (A)  
    Three months ended     Year ended  
    June 30,     June 30,  
    2014     2013     2014     2013  
    (In thousands, except per share data)     (In thousands, except per share data)  
                         
REVENUE $  182,753   $ 117,882   $  581,656   $ 452,147  
                         
EXPENSE                        
                         
         Cost of goods sold, IT processing, servicing 
         and support
  72,641     53,045     260,232     196,834  
                         
         Selling, general and administration   46,156     41,698     168,072     191,552  
                         
         Equity instruments issued pursuant to
         BEE transactions
  11,268     -     11,268     -  
                         
         Depreciation and amortization   10,041     9,548     40,286     40,599  
                         
OPERATING INCOME   42,647     13,591     101,798     23,162  
                         
INTEREST INCOME   4,824     3,888     14,817     12,083  
                         
INTEREST EXPENSE   1,761     1,849     7,473     7,966  
                         
INCOME BEFORE INCOME TAX EXPENSE   45,710     15,630     109,142     27,279  
                         
INCOME TAX EXPENSE   17,260     7,484     39,379     14,656  
                         
NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   28,450     8,146     69,763     12,623  
                         
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   96     147     298     351  
                         
NET INCOME   28,546     8,293     70,061     12,974  
                         
ADD (LESS) NET LOSS (INCOME) ATTRIBUTABLE TO NON-CONTROLLING INTEREST   (38 )   8     (50 )   (3 )
                         
NET INCOME ATTRIBUTABLE TO NET1 $  28,584   $ 8,285   $  70,111   $ 12,977  
                         
Net income per share, in United States dollars                        
                         
         Basic earnings attributable to Net1 shareholders $ 0.59   $ 0.18   $ 1.51   $ 0.28  
                         
         Diluted earnings attributable to Net1 shareholders $ 0.59   $ 0.18   $ 1.50   $ 0.28  

(A) – Derived from audited financial statements


NET 1 UEPS TECHNOLOGIES, INC.
Consolidated Balance Sheets

    (A)     (A)  
    June 30,     June 30,  
    2014     2013  
    (In thousands, except share data)  
ASSETS    
CURRENT ASSETS            
     Cash and cash equivalents $  58,672   $  53,665  
     Pre-funded social welfare grants receivable   4,809     2,934  
     Accounts receivable, net of allowances   148,067     102,614  
     Finance loans receivable, net of allowances   53,124     8,350  
     Inventory   10,785     12,222  
     Deferred income taxes   7,451     4,938  
             Total current assets before settlement assets   282,908     184,723  
                     Settlement assets   725,987     752,476  
                             Total current assets   1,008,895     937,199  
PROPERTY, PLANT AND EQUIPMENT, net   47,797     48,301  
EQUITY-ACCOUNTED INVESTMENTS   878     1,183  
GOODWILL   186,576     175,806  
INTANGIBLE ASSETS, net   68,514     77,257  
OTHER LONG-TERM ASSETS, including reinsurance assets   38,285     36,576  
     TOTAL ASSETS   1,350,945     1,276,322  
LIABILITIES    
CURRENT LIABILITIES            
     Accounts payable   17,101     26,567  
     Other payables   42,257     33,808  
     Current portion of long-term borrowings   14,789     14,209  
     Income taxes payable   7,676     2,275  
             Total current liabilities before settlement obligations   81,823     76,859  
                    Settlement obligations   725,987     752,476  
                             Total current liabilities   807,810     829,335  
DEFERRED INCOME TAXES   15,522     18,727  
LONG-TERM BORROWINGS   62,388     66,632  
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities   23,477     21,659  
     TOTAL LIABILITIES   909,197     936,353  
COMMITMENTS AND CONTINGENCIES            
EQUITY    
     COMMON STOCK            
                 Authorized: 200,000,000 with $0.001 par value; 
                 Issued and outstanding shares, net of treasury - 2014: 47,819,299; 2013: 45,592,550
63 59
     PREFERRED STOCK            
                 Authorized shares: 50,000,000 with $0.001 par value; 
                 Issued and outstanding shares, net of treasury: 2014: -; 2013: -
- -
     ADDITIONAL PAID-IN-CAPITAL   202,401     160,670  
     TREASURY SHARES, AT COST: 2014: 15,883,212; 2013: 13,455,090   (200,681 )   (175,823 )
     ACCUMULATED OTHER COMPREHENSIVE LOSS   (82,741 )   (100,858 )
     RETAINED EARNINGS   522,729     452,618  
             TOTAL NET1 EQUITY   441,771     336,666  
             NON-CONTROLLING INTEREST   (23 )   3,303  
                     TOTAL EQUITY   441,748     339,969  
                             TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $  1,350,945   $  1,276,322  

(A) – Derived from audited financial statements


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

    Unaudited     A  
    Three months ended     Year ended  
    June 30,     June 30,  
    2014     2013     2014     2013  
    (In thousands)     (In thousands)  
Cash flows from operating activities                        
Net income $  28,546   $  8,293   $  70,061   $  12,974  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization   10,041     9,548     40,286     40,599  
Earnings from equity-accounted investments   (96 )   (147 )   (298 )   (351 )
Fair value adjustment   (104 )   223     (55 )   631  
Interest payable   404     950     2,100     4,313  
Facility fee amortized   81     67     738     302  
(Profit) Loss on disposal of property, plant and equipment   (392 )   193     (434 )   110  
Loss on deconsolidation of subsidiaries and business   55     -     55     -  
Stock compensation charge, net of forfeitures   898     582     3,718     3,907  
Fair value of BEE equity instruments granted   11,268     -     11,268     -  
Increase in accounts and finance loans receivable, and pre-funded grants receivable   (33,926 )   (1,739 )   (101,447 )   (5,726 )
(Increase) Decrease in inventory   (199 )   (630 )   780     (2,890 )
Increase in accounts payable and other payables   23,566     9,868     12,671     8,113  
(Decrease) Increase in taxes payable   (3,908 )   (3,102 )   5,523     (2,748 )
(Decrease) Increase in deferred taxes   (4,802 )   816     (7,821 )   (3,317 )
   Net cash provided by operating activities   31,432     24,922     37,145     55,917  
Cash flows from investing activities                        
Capital expenditures   (6,597 )   (5,644 )   (23,906 )   (22,747 )
Proceeds from disposal of property, plant and equipment   866     123     2,990     510  
Net cash outflow from sale of MediKredit   (669 )   -     (669 )   -  
Proceeds from sale of business   186     -     186     -  
Capital reduction/ repayment of loan by equity- accounted investment   564     -     539     3  
Acquisitions, net of cash acquired   -     -     -     (2,143 )
Other investing activities, net   -     -     570     545  
Net change in settlement assets   20,059     (255,565 )   (1,350 )   (423,984 )
   Net cash provided by (used in) investing activities   14,409     (261,086 )   (21,640 )   (447,816 )
Cash flows from financing activities                        
Repayment of long-term borrowings   -     (7,201 )   (87,008 )   (14,508 )
Long-term borrowings obtained   1,044     -     73,677     -  
Proceeds from bank overdraft   -     -     24,580     -  
Repayment of bank overdraft   -     -     (23,335 )   -  
Acquisition of interests in KSNET   -     -     (1,968 )   -  
Payment of facility fee   -     -     (872 )   -  
Proceeds from issue of common stock   110     -     198     240  
Net change in settlement obligations   (20,059 )   255,565     1,350     423,984  
   Net cash (used in) provided by financing activities   (18,905 )   248,364     (13,378 )   409,716  
Effect of exchange rate changes on cash   861     (1,151 )   2,880     (3,275 )
Net increase in cash and cash equivalents   27,797     11,049     5,007     14,542  
Cash and cash equivalents – beginning of period   30,875     42,616     53,665     39,123  
Cash and cash equivalents – end of period $  58,672   $  53,665   $  58,672   $  53,665  

(A) – Derived from audited financial statements


Net 1 UEPS Technologies, Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended June 30, 2014 and 2013 and March 31, 2014

                                  Change – constant  
                      Change - actual     exchange rate(1)  
                      Q4 ‘14     Q4 ‘14     Q4 ‘14     Q4 ‘14  
                      vs     vs     vs     vs  
Key segmental data, in $ ’000,   Q4 ‘14     Q4 ‘13     Q3 ‘14     Q4‘13     Q3 ‘14     Q4‘13     Q3 ‘14  
Revenue:                                          
South African transaction processing $ 88,265   $ 58,196   $ 57,397     52%     54%     72%     47%  
International transaction processing   42,201     36,193     35,245     17%     20%     32%     15%  
Financial inclusion and applied technologies   64,093     29,609     56,226     116%     14%     146%     9%  
         Subtotal: Operating segments   194,559     123,998     148,868     57%     31%     78%     25%  
         Intersegment eliminations   (11,806 )   (6,116 )   (10,742 )   93%     10%     119%     5%  
Consolidated revenue $ 182,753   $ 117,882   $ 138,126     55%     32%     76%     27%  
                                           
Operating income (loss):                                          
South African transaction processing $ 38,675     ($197 ) $ 9,137     nm     323%     nm     306%  
International transaction processing   6,647     5,263     4,642     26%     43%     43%     37%  
Financial inclusion and applied technologies   18,126     14,254     16,459     27%     10%     44%     6%  
         Subtotal: Operating segments   63,448     19,320     30,238     228%     110%     273%     101%  
         Corporate/Eliminations   (20,801 )   (5,729 )   (6,289 )   263%     231%     312%     217%  
                 Consolidated operating income
                  (loss)
$ 42,647   $ 13,591   $ 23,949     214%     78%     256%     71%  
                                           
Operating income margin (%)                                          
South African transaction processing   44%     (0% )   16%                          
International transaction processing   16%     15%     13%                          
Financial inclusion and applied technologies   28%     48%     29%                  
         Consolidated operating margin   23%     12%     17%                          

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


Year ended June 30, 2014 and 2013

                      Change –  
                      constant  
                Change -     exchange  
                actual     rate(1)  
                F2014     F2014  
                vs     vs  
Key segmental data, in ’000, except margins   F2014     F2013     F2013     F2013  
Revenue:                        
South African transaction processing $ 261,577   $ 242,739     8%     29%  
International transaction processing   152,725     135,954     12%     34%  
Financial inclusion and applied technologies   207,595     108,001     92%     129%  
         Subtotal: Operating segments   621,897     486,694     28%     53%  
         Intersegment eliminations   (40,241 )   (34,547 )   16%     39%  
                 Consolidated revenue $ 581,656   $ 452,147     29%     54%  
                         
Operating income (loss):                        
South African transaction processing $ 61,401     ($21,316 )   nm     nm  
International transaction processing   21,952     14,208     55%     84%  
Financial inclusion and applied technologies   60,685     57,491     6%     26%  
         Subtotal: Operating segments   144,038     50,383     186%     241%  
         Corporate/Eliminations   (42,240 )   (27,221 )   55%     85%  
                 Consolidated operating income (loss) $ 101,798   $ 23,162     340%     425%  
                         
Operating income margin (%)                        
South African transaction processing   23%     (9% )            
International transaction processing   14%     10%              
Financial inclusion and applied technologies   29%     53%              
         Overall operating margin   18%     5%              

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


Net 1 UEPS Technologies, Inc.

Attachment B

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

Three months ended June 30, 2014 and 2013

                EPS,                 EPS,  
    Net income     basic     Net income     basic  
    (USD’000)     (USD)     (ZAR’000)     (ZAR)  
    2014     2013     2014     2013     2014     2013     2014     2013  
                                                 
GAAP   28,584     8,285     0.59     0.18     297,897     76,109     6.12     1.67  
                                                 
     Intangible asset amortization, net .   2,960     2,888                 30,842     26,520              
     Stock-based compensation charge   922     582                 9,609     5,346              
     Facility fees for KSNET debt   79     67                 823     615              
     US government investigations- 
     related and US lawsuit expenses
  53     776             552     7,129          
     BEE equity instruments charge   11,268     -                 118,740     -              
     Net loss on deconsolidation of
     subsidiaries and business, net of tax
  443     -             4,617     -          
     Transaction-related costs   77     -                 806     -              
          Fundamental   44,386     12,598     0.91     0.28       463,886     115,719     9.53     2.54  

Year ended June 30, 2014 and 2013

                                        EPS,  
    Net income     EPS, basic     Net income     basic  
    (USD’000)     (USD)     (ZAR’000)     (ZAR)  
    2014     2013     2014     2013     2014     2013     2014     2013  
                                                 
GAAP   70,111     12,977     1.51     0.28     728,916     113,035     15.68     2.48  
                                                 
     Intangible asset amortization, net .   12,490     13,679                 129,846     119,155              
     Stock-based compensation charge   2,914     3,907                 30,296     34,032              
     Facility fees for KSNET debt   657     302                 6,831     2,631              
     US government investigations- 
     related and US lawsuit expenses
  2,579     3,888             26,813     33,866          
     BEE equity instruments charge   11,268     -                 118,740     -              
     Net loss on deconsolidation of 
     subsidiaries and business, net of tax
  443     -             4,606     -          
     Transaction-related costs   77     69                 806     601              
          Fundamental   100,539     34,822     2.16     0.76     1,046,854     303,320     22.52     6.66  


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 June 30, 2014 and 2013

    2014     2013  
             
Net income (USD’000)   28,584     8,285  
Adjustments:            
     Loss on deconsolidation of subsidiaries and business   55     -  
     (Profit) Loss on sale of property, plant and equipment   (392 )   193  
     Tax effects on above   (287 )   (54 )
             
Net income used to calculate headline earnings (USD’000)   27,960     8,424  
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings (‘000)   48,695     45,593  
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings (‘000)   48,855     45,713  
Headline earnings per share:            
     Basic, in USD   0.57     0.18  
     Diluted, in USD   0.57     0.18  

Year ended June 30, 2014 and 2013

    2014     2013  
             
Net income (USD’000)   70,111     12,977  
Adjustments:            
     Loss on deconsolidation of subsidiaries and business   55     -  
     (Profit) Loss on sale of property, plant and equipment   (434 )   110  
     Tax effects on above   (276 )   (31 )
             
Net income used to calculate headline earnings (USD’000)   69,456     13,056  
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings (‘000)   46,484     45,553  
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings (‘000)   46,603     45,678  
Headline earnings per share:            
     Basic, in USD   1.49     0.29  
     Diluted, in USD   1.49     0.29  

Calculation of the denominator for headline diluted earnings per share

    Q4 ‘14     Q4 ‘13     F2014     F2013  
                         
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP   48,695     45,593     46,484     45,553  
     Effect of dilutive securities under GAAP   160     120     119     125  
         Denominator for headline diluted earnings per share   48,855     45,713     46,603     45,678  

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


Net 1 UEPS Technologies, Inc.

Attachment D

Presentation of quarterly revenue and operating income by segment for fiscal 2012 to 2014

     The tables below present quarterly revenue and operating income generated by our three reportable segments for the fiscal 2014, 2013 and 2012, and reconciliations to consolidated revenue and operating income (loss), as well as the US dollar/ ZAR exchange rates applicable per fiscal quarter and year:

    In United States Dollars (US GAAP)  
    Fiscal 2014  
    Quarter     Quarter     Quarter     Quarter     Full  
    1     2     3     4     Year  
Operating Segment   $’000     $’000     $’000     $’000     $’000  
Revenue:                              
South African transaction processing   57,161     58,754     57,397     88,265     261,577  
International transaction processing   37,541     37,738     35,245     42,201     152,725  
Financial inclusion and applied technologies   36,796     50,480     56,226     64,093     207,595  
       Subtotal: Operating segments   131,498     146,972     148,868     194,559     621,897  
       Intersegment eliminations   (8,004 )   (9,689 )   (10,742 )   (11,806 )   (40,241 )
               Consolidated revenue   123,494     137,283     138,126     182,753     581,656  
Operating (loss) income:                              
South African transaction processing   6,461     7,128     9,137     38,675     61,401  
International transaction processing   5,524     5,139     4,642     6,647     21,952  
Financial inclusion and applied technologies   12,835     13,265     16,459     18,126     60,685  
       Subtotal: Operating segments   24,820     25,532     30,238     63,448     144,038  
       Corporate/Eliminations   (8,420 )   (6,730 )   (6,289 )   (20,801 )   (42,240 )
               Consolidated operating income   16,400     18,802     23,949     42,647     101,798  
                               
Income and expense items: $1 = ZAR   10.00     10.16     10.87     10.42     10.40  

    In United States Dollars (US GAAP)  
    Fiscal 2013  
    Quarter     Quarter     Quarter     Quarter     Full  
    1     2     3     4     Year  
Operating Segment   $’000     $’000     $’000     $’000     $’000  
Revenue:                              
South African transaction processing   62,420     61,708     60,415     58,196     242,739  
International transaction processing   32,397     33,664     33,700     36,193     135,954  
Financial inclusion and applied technologies   26,615     25,563     26,214     29,609     108,001  
       Subtotal: Operating segments   121,432     120,935     120,329     123,998     486,694  
       Intersegment eliminations   (9,750 )   (9,493 )   (9,188 )   (6,116 )   (34,547 )
               Consolidated revenue   111,682     111,442     111,141     117,882     452,147  
Operating (loss) income:                              
South African transaction processing   (3,299 )   (6,233 )   (11,587 )   (197 )   (21,316 )
International transaction-based activities   3,329     3,583     2,033     5,263     14,208  
Financial inclusion and applied technologies   14,913     14,286     14,038     14,254     57,491  
       Subtotal: Operating segments   14,943     11,636     4,484     19,320     50,383  
       Corporate/Eliminations   (5,618 )   (6,664 )   (9,210 )   (5,729 )   (27,221 )
               Consolidated operating income (loss) .   9,325     4,972     (4,726 )   13,591     23,162  
                               
Income and expense items: $1 = ZAR   8.26     8.74     8.47     9.19     8.71  



    In United States Dollars (US GAAP)  
    Fiscal 2012  
    Quarter     Quarter     Quarter     Quarter     Full  
    1     2     3     4     Year  
Operating Segment   $’000     $’000     $’000     $’000     $’000  
Revenue:                              
South African transaction processing   45,632     43,985     43,753     61,260     194,630  
International transaction processing   31,053     29,446     28,635     31,491     120,625  
Financial inclusion and applied technologies   24,454     19,771     19,591     26,976     90,792  
       Subtotal: Operating segments   101,139     93,202     91,979     119,727     406,047  
       Intersegment eliminations   (1,213 )   (1,144 )   (1,315 )   (12,111 )   (15,783 )
               Consolidated revenue   99,926     92,058     90,664     107,616     390,264  
Operating (loss) income:                              
South African transaction processing   17,001     13,549     5,590     (2,234 )   33,906  
International transaction processing   4,346     3,519     3,295     3,489     14,649  
Financial inclusion and applied technologies   11,968     9,479     9,078     15,359     45,884  
       Subtotal: Operating segments   33,315     26,547     17,963     16,614     94,439  
       Corporate/Eliminations   (2,469 )   (6,319 )   (5,485 )   (19,016 )   (33,289 )
               Consolidated operating income (loss) .   30,846     20,228     12,478     (2,402 )   61,150  
                               
Income and expense items: $1 = ZAR   7.09     8.18     7.85     8.03     7.72  



The following information was filed by Net 1 Ueps Technologies Inc (UEPS) on Thursday, August 28, 2014 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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Inside this 10-K Annual Report

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 And Finance Loans Receivable, Net
Accounts Receivable, Net And Finance Loans Receivable, Net (narrative) (details)
Accounts Receivable, Net And Finance Loans Receivable, Net (schedule Of Accounts Receivable) (details)
Accounts Receivable, Net And Finance Loans Receivable, Net (schedule Of Finance Loans Receivable) (details)
Accounts Receivable, Net And Finance Loans Receivable, Net (tables)
Accumulated Other Comprehensive (loss) Income
Accumulated Other Comprehensive (loss) Income (changes In Accumulated Other Comprehensive (loss) Income ) (details)
Accumulated Other Comprehensive (loss) Income (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 (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)
Deconsolidation Of Businesses Sold Or Liquidated And Disposal Of Business
Deconsolidation Of Businesses Sold Or Liquidated And Disposal Of Business (narrative) (details)
Deconsolidation Of Businesses Sold Or Liquidated And Disposal Of Business (profit (loss) On Deconsolidation Of Businesses Sold Or Liquidated And Disposal Of Business) (details)
Deconsolidation Of Businesses Sold Or Liquidated And Disposal Of Business (tables)
Description Of Business And Basis Of Presentation
Earnings Per Share
Earnings Per Share (income From Continuing Operations And Share Data Used In Basic And Diluted Earnings Per Share Computations) (details)
Earnings Per Share (narrative) (details)
Earnings Per Share (tables)
Equity Instruments Issued Pursuant To Bee Transactions
Equity Instruments Issued Pursuant To Bee Transactions (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 (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 (movement In Valuation Allowance) (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 (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 (reconciliation Of Reportable Segments Measure Of Profit Or Loss To Income) (details)
Operating Segments (reconciliation Of Reportable Segments Revenue) (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
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)
Subsequent Events
Subsequent Events (details)
Supplemental Cash Flow Information
Supplemental Cash Flow Information (cash Flow Movements If Cash Had Been Transferred) (details)
Supplemental Cash Flow Information (schedule Of Supplemental Cash Flow Disclosures) (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: 0001062993-14-005255
Submitted to the SEC: Thu Aug 28 2014 4:16:36 PM EST
Accepted by the SEC: Thu Aug 28 2014
Period: Monday, June 30, 2014
Industry: Functions Related To Depository Banking

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