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Net 1 Ueps Technologies Inc (UEPS) SEC Filing 10-K Annual report for the fiscal year ending Thursday, June 30, 2016

Net 1 Ueps Technologies Inc

CIK: 1041514 Ticker: UEPS

Exhibit 99.1

Net 1 UEPS Technologies, Inc. Reports Fourth Quarter and Full Year 2016 Results

JOHANNESBURG, August 25, 2016 – Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today released results for the fourth quarter and full-year fiscal 2016.

  • Q4 2016 Revenue of $151.3 million, an increase of 15% in constant currency;

  • Q4 2016 FEPS of $0.51, which includes an adverse impact of $2.0 million, or $0.042 per share, attributable to taxes;

  • Closed IFC transaction with the issue of 10 million shares for $107.7 million on May 11, 2016.

Summary Financial Metrics

    Three months ended June 30,  
                % change     % change  
    2016     2015     in USD     in ZAR  
(All figures in USD ‘000s except per share data)                        
Revenue   151,259     164,286     (8% )   15%  
GAAP net income   24,356     23,914     2%     27%  
Fundamental net income (1)   26,299     27,233     (3% )   20%  
GAAP earnings per share ($)   0.48     0.51     (7% )   16%  
Fundamental earnings per share ($) (1)   0.51     0.58     (12% )   10%  
Fully-diluted shares outstanding (‘000’s)   51,224     46,944     10%        
Average period USD/ ZAR exchange rate   15.02     12.04     25%        

    Year ended June 30,  
                % change     % change  
    2016     2015     in USD     in ZAR  
(All figures in USD ‘000s except per share data)                        
Revenue   590,749     625,979     (6% )   19%  
GAAP net income   82,454     94,735     (13% )   10%  
Fundamental net income (1)   92,113     108,205     (15% )   7%  
GAAP earnings per share ($)   1.72     2.03     (15% )   7%  
Fundamental earnings per share ($) (1)   1.92     2.32     (17% )   5%  
Fully-diluted shares outstanding (‘000’s)   48,105     46,913     3%     3%  
Average period USD/ ZAR exchange rate   14.38     11.43     26%        

(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 2016 and Q4 2015 results

  • Unfavorable impact from the strengthening of the U.S. dollar against primary functional currencies: The U.S. dollar appreciated by 26% against the ZAR and 9% against the KRW during Q4 2016, which negatively impacted our reported results;
  • Higher financial services revenue and transaction fees: We experienced growth in lending revenues due to an increase in the number of loans extended, and an increase in transaction fees;
  • Ongoing contributions from EPE and Smart Life and expansion of branch network: Our EPE and Smart Life offerings contributed to an increase in revenue in ZAR, as well as an associated increase in establishment costs for our branch network;
  • Increase in ad hoc terminal and card sales: Our reported results were positively impacted by higher ad hoc terminal and card sales during Q4, 2016;
  • Gain on change in accounting for Finbond: We recognized a gain of $1.6 million, net of tax, related to the change to the equity method of accounting from available-for-sale method for Finbond ;
  • Tax impact of dividends from South African subsidiary: Our income tax expense includes approximately $2.0 million related to the tax impact, including withholding taxes, resulting from further distributions from our South African subsidiary during fiscal 2016, which helped reduce the impact of a weakened ZAR on our reported cash balances. The conversion of a significant portion of our ZAR cash reserves to USD also had a negative impact on our interest income due to the material difference between ZAR and USD deposit rates; and
  • Issue of 10 million shares of our common stock: Our earnings per share and fundamental earnings per share for Q4 2016 were adversely impacted by the issuance of 10 million shares of our common stock to IFC Investors, partially offset by modestly higher interest income due to the cash consideration received for the share issue.

“As a disruptive force providing technology-based solutions to facilitate financial inclusion, we have built a business model that is defensible, differentiated, sustainable and socially responsible, and that once again has delivered top and bottom line constant currency growth despite on-going political and regulatory interference in South Africa, and macroeconomic events globally,” said Serge Belamant, Chairman and CEO of Net1. “Being disruptive is not for the fainthearted, but we believe that unless norms, cartels and traditional thinking are challenged, progress will be obstructed at the cost of those who need it most. In fiscal 2017, we will continue to grow our South African businesses, but will also directly market and sell our UEPS/EMV solutions, and their related financial products, in other developing economies with the help of our partners like the IFC, further aided by focused acquisitions. We have spent the past few months on the restructuring and building of our management teams, and are now ready and able to scale our operations internationally,” he concluded.

“During fiscal 2017, we expect to implement our strategic plan by investing between $15 and $20 million on building out our direct international sales force, management teams and infrastructure; establishing a presence in new countries and further developing our products across Europe and many emerging countries in Africa, Asia and Latin America. These investments will be a drag on our reported results but the resultant top line benefits should start to accrue in the second half of fiscal 2017, and more meaningfully in fiscal 2018 and beyond,” said Herman Kotze, Chief Financial Officer of Net1. “In South Africa, we expect our CPS business to remain flat, while our financial inclusion businesses should continue to grow in excess of 15%. As a result of these factors, and taking into consideration the approximately 10 million shares issued to the IFC in May 2016, for fiscal 2017, we anticipate our fundamental earnings per share to be at least $1.65. Our guidance assumes that our existing contract with SASSA remains in effect for the full year on the existing terms and conditions, an updated constant currency base of ZAR 14.38/ $1, a share count of 54.1 million shares, and a tax rate between 33%-35%,” he concluded.

Purchase of shares under 10b5-1 plan and unscheduled Korean debt repayment

As of August 24, 2016, we had repurchased approximately 1.2 million shares of our common stock under our $50 million 10b5-1 plan that we adopted on June 29, 2016 and that expires at the end of August 2016.

On July 29, 2016, we prepaid KRW 30 billion (approximately $26.0 million, translated at exchange rates applicable as of June 30, 2016) of our Korean debt facility. We had outstanding long-term debt of KRW 30.0 billion following this unscheduled payment, and a replenished revolver facility of KRW 10 billion which expires in 2018.

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

Segment revenue was $53.6 million in Q4 2016, down 10% compared with Q4 2015 in USD, but 12% higher on a constant currency basis. In ZAR, the increase in segment revenue and operating income was primarily due to higher EPE transaction revenue as a result of increased usage of our ATMs, more low-margin transaction fees generated from card holders using the South African National Payment System, increased inter-segment transaction processing activities, and a modest increase in the number of social welfare grants distributed. Our operating income margin for Q4 2016 and 2015 was 24% and 19%, respectively, and was higher primarily due to higher EPE revenue as a result of increased ATM transactions, an increase in inter-segment transaction processing activities, an increase in the number of beneficiaries paid in Q4 2016 and a modest increase in the margin of transaction fees generated from cardholders using the South African National Payment System, partially offset by annual salary increases granted to our South African employees.

International transaction processing

Segment revenue was $47.2 million in Q4 2016, up 11% compared with Q4 2015 in USD, and up 38% on a constant currency basis. Revenue increased in constant currency primarily due to higher transaction volume at KSNET during Q4 2016 and the contribution from Transact24 and Masterpayment from April 2016. Operating income during Q4 2016 was higher primarily due to higher processing activity at KSNET, partially offset by an increase in depreciation expenses at KSNET and ongoing ZAZOO start-up costs. Operating income margin for Q4 2016 and 2015 was constant at 17%.

Financial inclusion and applied technologies

Segment revenue was $62.1 million in Q4 2016, down 15% compared with Q4 2015 in USD and up 6% on a constant currency basis. In ZAR, Financial inclusion and applied technologies revenue and operating income increased primarily due to more ad hoc terminal and card sales, more insurance policies sold and higher lending service fees, partially offset by lower sales of prepaid airtime and other value-added services . Operating income for Q4 2016 was also adversely impacted by establishment costs for Smart Life and expansion of our branch network as well as an increase in inter-segment charges. Operating income margin for the Financial inclusion and applied technologies segment was 22% and 27% during Q4 2016 and 2015, respectively, and has decreased primarily due to establishment costs for Smart Life, expansion of our branch network and an increase in inter-segment charges.


Corporate/eliminations

Our corporate expenses have decreased largely due to the impact of the stronger USD on goods and services procured in other currencies, primarily the ZAR, lower amortization costs and the gain resulting from the change in accounting for Finbond, partially offset by modest increases in USD denominated goods and services purchased from third parties and directors’ fees.

Cash flow and liquidity

At June 30, 2016, we had cash and cash equivalents of $223.6 million, up from $117.6 million at June 30, 2015. The increase in our cash balances from June 30, 2015, was primarily due to the cash received from issue of our common stock to the IFC Investors and the expansion of all of our core businesses, partially offset by the strengthening of the U.S. dollar against our primary functional currencies, repurchase of shares of our common stock, provisional tax payments, acquisitions and capital expenditures.

Excluding the impact of interest received, interest paid under our Korean debt and taxes, the increase in cash from operating activities resulted from improved trading activity during fiscal 2016. Capital expenditures for Q4 2016 and 2015 were $7.1 million and $11.6 million, respectively, and have decreased primarily due to the acquisition of fewer payment processing terminals in South Korea. During Q4 2016, we paid $25.9 million for 100% of the issued and outstanding shares of Masterpayment. We received approximately $107.7 million from the issuance of approximately 10 million shares of our common stock to the IFC Investors. Finally, we paid $2.7 million related to the repurchase of our common stock under our buy-back authorization and made a scheduled Korean long-term debt repayment of $8.7 million

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 and US government investigations-related and US lawsuit expenses as well as, in fiscal 2016, a fair value gain resulting from the acquisition of Transact24, a gain resulting from the change in accounting for Finbond and costs related to the IFC transaction and to acquisitions consummated or ultimately not pursued, and in fiscal 2015, a refund (net of taxes) related to Korean industry-wide litigation that has now been finalized. 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 fiscal 2016, a fair value gain resulting from the acquisition of Transact24 and a gain resulting from the change in accounting for Finbond. 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 2016 results on August 26, 2016, 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 18, 2016.


About Net1 (www.net1.com)

Net1 is a leading provider of alternative payment systems that leverage its Universal Electronic Payment System (“UEPS”) or utilize its proprietary mobile technologies. The Company operates market-leading payment processors in South Africa and the Republic of Korea. Through Transact24, Net1 offers debit, credit and prepaid processing and issuing services for Visa, MasterCard and ChinaUnionPay in China and other territories across Asia-Pacific, Europe and Africa, and the United States. Through Masterpayment, Net1 provides payment processing and enables working capital financing in Europe.

UEPS permits the Company 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 enable 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’s mobile technologies include its proprietary mobile payments solution - MVC, which offers secure mobile-based payments, as well as mobile banking and prepaid value-added services in developed and emerging countries. The Company intends to deploy its varied mobile solutions through its ZAZOO business unit, which is an aggregation of innovative technology companies and is based in the United Kingdom.

Net1 has a primary listing on the 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.
Condensed Consolidated Statements of Operations

    Unaudited     (A)  
    Three months ended     Year ended  
    June 30,     June 30,  
    2016     2015     2016     2015  
    (In thousands, except per share data)     (In thousands, except per share data)  
REVENUE $  151,259   $  164,286   $  590,749    $ 625,979  
EXPENSE                        
         Cost of goods sold, IT processing, servicing and support   70,785     80,582     290,101     297,856  
         Selling, general and administration   37,879     40,797     145,886     158,919  
         Depreciation and amortization   10,412     10,294     40,394     40,685  
OPERATING INCOME   32,183     32,613     114,368     128,519  
INTEREST INCOME   4,008     4,467     15,292     16,355  
INTEREST EXPENSE   543     1,096     3,423     4,456  
INCOME BEFORE INCOME TAX EXPENSE   35,648     35,984     126,237     140,418  
INCOME TAX EXPENSE   10,774     11,980     42,080     44,136  
NET INCOME BEFORE EARNINGS FROM                        
EQUITY-ACCOUNTED INVESTMENTS   24,874     24,004     84,157     96,282  
EARNINGS FROM EQUITY-ACCOUNTED                        
INVESTMENTS   61     219     639     452  
NET INCOME   24,935     24,223     84,796     96,734  
LESS NET INCOME ATTRIBUTABLE TO                        
NON-CONTROLLING INTEREST   579     309     2,342     1,999  
NET INCOME ATTRIBUTABLE TO NET1 $  24,356   $  23,914   $  82,454    $ 94,735  
Net income per share, in United States dollars                        
         Basic earnings attributable to Net1 shareholders $ 0.48   $ 0.51   $ 1.72   $ 2.03  
         Diluted earnings attributable to Net1 shareholders $ 0.48   $ 0.51   $ 1.71   $ 2.02  

(A) – Derived from audited financial statements



NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets

    (A)     (A)  
    June 30,     June 30,  
    2016     2015  
    (In thousands, except share data)  
ASSETS    
CURRENT ASSETS            
     Cash and cash equivalents $  223,644   $  117,583  
     Pre-funded social welfare grants receivable   1,580     2,306  
     Accounts receivable, net of allowances of – 2016: $1,669; 2015: $1,956 (B)   107,805     121,335  
     Finance loans receivable, net of allowances of – 2016: $4,494; 2015: $4,227   37,009     40,373  
     Inventory   10,004     12,979  
     Deferred income taxes   6,956     7,298  
             Total current assets before settlement assets   386,998     301,874  
                     Settlement assets (C)   536,725     692,442  
                             Total current assets   923,723     994,316  
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – 2016: $99,969; 2015: $94,014   54,977     52,320  
EQUITY-ACCOUNTED INVESTMENTS   25,645     14,329  
GOODWILL   179,478     166,437  
INTANGIBLE ASSETS, net of accumulated amortization of – 2016: $91,208; 2015: $84,668   48,556     47,124  
OTHER LONG-TERM ASSETS, including reinsurance assets (B)   31,121     42,430  
     TOTAL ASSETS   1,263,500     1,316,956  
             
LIABILITIES    
CURRENT LIABILITIES            
     Accounts payable   14,097     21,453  
     Other payables   37,479     45,595  
     Current portion of long-term borrowings   8,675     8,863  
     Income taxes payable   5,235     6,287  
             Total current liabilities before settlement obligations   65,486     82,198  
                     Settlement obligations (C)   536,725     692,442  
                             Total current liabilities   602,211     774,640  
DEFERRED INCOME TAXES   12,559     10,564  
LONG-TERM BORROWINGS   43,134     50,762  
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities   2,376     2,205  
     TOTAL LIABILITIES   660,280     838,171  
COMMITMENTS AND CONTINGENCIES            
EQUITY    
     COMMON STOCK            
                 Authorized: 200,000,000 with $0.001 par value; 
                 Issued and outstanding shares, net of treasury - 2016: 55,271,954; 2015: 
                 46,679,565
 

74
   

64
 
     PREFERRED STOCK            
                 Authorized shares: 50,000,000 with $0.001 par value; 
                 Issued and outstanding shares, net of treasury: 2016: -; 2015: -
 
-
   
-
 
     ADDITIONAL PAID-IN-CAPITAL   223,978     213,896  
     TREASURY SHARES, AT COST: 2016: 20,483,932; 2015: 18,057,228   (241,627 )   (214,520 )
     ACCUMULATED OTHER COMPREHENSIVE LOSS   (189,700 )   (139,181 )
     RETAINED EARNINGS   700,322     617,868  
             TOTAL NET1 EQUITY   493,047     478,127  
             REDEEMABLE COMMON STOCK   107,672     -  
             NON-CONTROLLING INTEREST   2,501     658  
                     TOTAL EQUITY   603,220     478,785  
             
                             TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $  1,263,500   $  1,316,956  

(A) – Derived from audited financial statements

(B) – We have restated amounts in our unaudited condensed consolidated balance sheet as at June 30, 2015. We have decreased accounts receivable, net of allowances and increased other long-term assets by approximately $27.4 million. This restatement has no impact on our previously reported consolidated statement of operations, consolidated statements of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows.

(C) – As described in Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K, we have restated our settlement assets and obligations balances. The restatement resulted in an increase in settlement assets and obligations as of June 30, 2015, of $30.5 million.



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

    Unaudited     (A)  
    Three months ended     Year ended  
    June 30,     June 30,  
    2016     2015     2016     2015  
    (In thousands)     (In thousands)  
Cash flows from operating activities                        
Net Income $  24,935   $  24,223   $  84,796   $  96,734  
Depreciation and amortization   10,412     10,294     40,394     40,685  
Earnings from equity-accounted investments   (61 )   (219 )   (639 )   (452 )
Fair value adjustment   (94 )   518     519     248  
Interest payable   132     7     1,829     1,283  
Facility fee amortized   35     38     138     208  
Gain on release from accumulated other comprehensive income   (2,176 )   -     (2,176 )   -  
Gain on fair value of Transact24   -     -     (1,909 )   -  
Profit on disposal of property, plant and equipment   (173 )   (1 )   (286 )   (296 )
Stock compensation charge, net of forfeitures   953     513     3,598     3,195  
Decrease (Increase) in accounts and finance loans receivable, and pre-funded grants receivable   11,810     (4,135 )   (3,401 )   1,399  
Decrease (Increase) in inventory   1,496     (1,075 )   1,001     (3,846 )
(Decrease) Increase in accounts payable and other payables   (9,403 )   6,804     (7,840 )   (850 )
(Decrease) Increase in taxes payable   (2,681 )   (3,507 )   763     606  
(Decrease) Increase in deferred taxes   21     (1,631 )   (235 )   (3,656 )
Net cash provided by operating activities   35,206     31,829     116,552     135,258  
Cash flows from investing activities                        
Capital expenditures   (7,099 )   (11,614 )   (35,797 )   (36,436 )
Proceeds from disposal of property, plant and equipment   596     80     1,349     857  
Acquisitions, net of cash acquired   (14,101 )   -     (15,767 )   -  
Acquisition of available for sale securities   -     -     (8,900 )   -  
Acquisition of equity of equity-accounted investment   -     (13,200 )   -     (13,200 )
Proceeds from sale of business   -     -     -     1,895  
Other investing activities, net   -     -     (5 )   (29 )
Net change in settlement assets (B)   (161,343 )   (24,314 )   53,364     (33,870 )
Net cash provided by (used in) investing activities   (181,947 )   (49,048 )   (5,756 )   (80,783 )
Cash flows from financing activities                        
Proceeds from issue of common stock   107,682     265     111,444     2,045  
Acquisition of treasury stock   (2,725 )   -     (26,637 )   (9,151 )
Acquisition of interests in non-controlling interests   (11,189 )   -     (11,189 )   -  
Repayment of long-term borrowings   (8,716 )   -     (8,716 )   (14,128 )
Long-term borrowings obtained   -     789     2,107     3,765  
Sale of equity to non-controlling interest   -           -     1,407  
Dividends paid to non-controlling interest   -     -     -     (1,024 )
Net change in settlement obligations (B)   161,343     24,314     (53,364 )   33,870  
Net cash provided by financing activities   246,395     25,368     13,645     16,784  
Effect of exchange rate changes on cash   721     (1,568 )   (18,380 )   (12,348 )
Net increase in cash and cash equivalents   100,375     6,581     106,061     58,911  
Cash and cash equivalents – beginning of period   123,269     111,002     117,583     58,672  
Cash and cash equivalents – end of period $  223,644   $  117,583   $  223,644   $  117,583  

(A) – Derived from audited financial statements

(B) – As described in Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K, we have restated our settlement assets and obligations balances. The restatement resulted in an increase in cash flows from investing activities and an increase in cash flows from financing activities of $21.3 million during F2015, and an increase in cash flows from investing activities and an increase in cash flows from financing activities of $1.5 million during Q4, 2015.



Net 1 UEPS Technologies, Inc.
 
Attachment A
 
Operating segment revenue, operating income and operating margin:
 
Three months ended June 30, 2016 and 2015 and March 31, 2016

                                  Change – constant  
                      Change - actual     exchange rate(1)
                      Q4 ‘16     Q4 ‘16     Q4 ‘16     Q4 ‘16  
                      vs     vs     vs     vs  
Key segmental data, in $ ’000,   Q4 ‘16     Q4 ‘15     Q3 ‘16     Q4‘15     Q3 ‘16     Q4‘15     Q3 ‘16  
Revenue:                                          
South African transaction processing $ 53,577   $ 59,774   $ 50,594     (10% )   6%     12%     1%  
International transaction processing   47,154     42,573     40,588     11%     16%     38%     10%  
Financial inclusion and applied technologies   62,071     73,042     54,286     (15% )   14%     6%     9%  
         Subtotal: Operating segments   162,802     175,389     145,468     (7% )   12%     16%     6%  
         Intersegment eliminations   (11,543 )   (11,103 )   (10,732 )   4%     8%     30%     2%  
                Consolidated revenue $ 151,259   $ 164,286   $ 134,736     (8% )   12%     15%     7%  
                                           
Operating income (loss):                                          
South African transaction processing $ 12,662   $ 11,268   $ 13,133     12%     (4% )   40%     (8% )
International transaction processing   7,793     7,134     4,813     9%     62%     36%     54%  
Financial inclusion and applied technologies   13,457     19,385     11,469     (31% )   17%     (13% )   11%  
         Subtotal: Operating segments   33,912     37,787     29,415     (10% )   15%     12%     9%  
         Corporate/Eliminations   (1,729 )   (5,174 )   (3,224 )   (67% )   (46% )   (58% )   (49% )
                 Consolidated operating income $ 32,183   $ 32,613   $ 26,191     (1% )   23%     23%     17%  
                                           
Operating income margin (%)                                          
South African transaction processing   24%     19%     26%                          
International transaction processing   17%     17%     12%                          
Financial inclusion and applied technologies   22%     27%     21%                  
         Consolidated operating margin   21%     20%     19%                          

(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the Q4 2016 also prevailed during Q4 2015 and Q3 2016.


Year ended June 30, 2016 and 2015

                      Change –  
                      constant  
                Change -     exchange  
                actual     rate(1)
                F2016     F2016  
                vs     vs  
Key segmental data, in ’000, except margins   F2016     F2015     F2015     F2015  
Revenue:                        
South African transaction processing $ 212,574     236,452     (10% )   13%  
International transaction processing   169,807     164,554     3%     30%  
Financial inclusion and applied technologies   249,403     272,600     (9% )   15%  
         Subtotal: Operating segments   631,784     673,606     (6% )   18%  
         Intersegment eliminations   (41,035 )   (47,627 )   (14% )   8%  
               Consolidated revenue $ 590,749     625,979     (6% )   19%  
                         
Operating income:                        
South African transaction processing $ 51,386     51,008     1%     27%  
International transaction processing   23,389     26,805     (13% )   10%  
Financial inclusion and applied technologies   54,999     72,725     (24% )   (5% )
         Subtotal: Operating segments   129,774     150,538     (14% )   9%  
         Corporate/Eliminations   (15,406 )   (22,019 )   (30% )   (12% )
                 Consolidated operating income $ 114,368     128,519     (11% )   12%  
                         
Operating income margin (%)                        
South African transaction processing   24%     22%              
International transaction processing   14%     16%              
Financial inclusion and applied technologies   22%     27%              
         Overall operating margin   19%     21%              

(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during fiscal 2016 also prevailed during fiscal 2015.


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, 2016 and 2015

                EPS,                 EPS,  
    Net income     basic     Net income     basic  
    (USD’000)   (USD)     (ZAR’000)     (ZAR)  
    2016     2015     2016 2015     2016     2015     2016     2015  
                                           
GAAP   24,356     23,914     0.48 0.51     365,778     288,035     7.16     6.18  
                                           
     Intangible asset amortization, net .   2,213     2,751           33,229     33,131              
     Accounting change for Finbond   (1,732 )   -           (26,011 )   -              
     Stock-based compensation charge   954     513           14,327     6,179              
     Transaction costs   473     -           7,104     -              
     Facility fees for KSNET debt   35     38           526     458              
     US government investigations-       
     related and US lawsuit expenses
  -     17         -     205          
                 Fundamental   26,299     27,233     0.51 0.58     394,953     328,008     7.73     7.04  

Year ended June 30, 2016 and 2015

                EPS,                 EPS,  
    Net income     basic     Net income     basic  
    (USD’000)     (USD)     (ZAR’000)     (ZAR)  
    2016     2015     2016 2015     2016     2015     2016     2015  
                                           
GAAP   82,454     94,735     1.72 2.03     1,186,035     1,082,584     24.78     23.17  
                                           
     Intangible asset amortization, net .   8,413     11,263           120,989     128,708              
     Stock-based compensation charge   3,598     3,195           51,754     36,511              
     Gain resulting from acquisition of Transact24   (1,909 )   -         (27,459 )   -            
     Accounting change for Finbond   (1,732 )   -           (24,913 )   -              
     Transaction costs   1,018     -           14,643     -              
     US government investigations-
     related and US lawsuit expenses
  133     158         1,913     1,806            
     Facility fees for KSNET debt   138     208           1,985     2,377              
     Refund related to litigation finalized in Korea, net   -     (1,354 )       -     (15,473 )          
                 Fundamental   92,113     108,205     1.92 2.32     1,324,947     1,236,513     27.68      26.46  


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, 2016 and 2015

    2016     2015  
             
Net income (USD’000)   24,356     23,914  
Adjustments:            
     Accounting change for Finbond   (1,732 )   -  
     Profit on sale of property, plant and equipment   (173 )   (64 )
     Tax effects on above   48     18  
             
Net income used to calculate headline earnings (USD’000)   22,499     23,868  
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings (‘000)   51,118     46,620  
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings (‘000)   51,224     46,944  
Headline earnings per share:            
     Basic, in USD   0.44     0.51  
     Diluted, in USD   0.44     0.51  

Year ended June 30, 2016 and 2015

    2016     2015  
             
Net income (USD’000)   82,454     94,735  
Adjustments:            
     Gain resulting from acquisition of Transact24   (1,909 )   -  
     Accounting change for Finbond   (2,176 )   -  
     Profit on sale of property, plant and equipment   (286 )   (296 )
     Tax effects on above   524     83  
             
Net income used to calculate headline earnings (USD’000)   78,607     94,522  
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings (‘000)   47,863     46,733  
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings (‘000)   48,105     46,913  
Headline earnings per share:            
     Basic, in USD   1.64     2.02  
     Diluted, in USD   1.63     2.01  

Calculation of the denominator for headline diluted earnings per share

    Q4 ‘16     Q4 ‘15     F2016     F2015  
                         
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP   51,118     46,620     47,863     46,733  
Effect of dilutive securities under GAAP   106     324     242     180  
         Denominator for headline diluted earnings per share   51,224     46,944     48,105     46,913  

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.



The following information was filed by Net 1 Ueps Technologies Inc (UEPS) on Thursday, August 25, 2016 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 Net 1 Ueps Technologies Inc's 10-K Annual Report:

Financial Statements, Disclosures and Schedules

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 (change In Accumulated Other Comprehensive (loss) Income Per Component) (details)
Accumulated Other Comprehensive (loss) Income (narrative) (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 Final 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
Description Of Business And Basis Of Presentation (narrative) (details)
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 (narrative) (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 Tax (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)
Inventory
Inventory (schedule Of Inventory) (details)
Inventory (tables)
Long-term Borrowings
Long-term Borrowings (narrative) (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 (schedule Of Other Payables) (details)
Other Payables (tables)
Pre-funded Social Welfare Grants Receivable
Property, Plant And Equipment, Net
Property, Plant And Equipment, Net (schedule Of 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 (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 (narrative) (details)
Revenue
Revenue (narrative) (details)
Revenue (schedule Of Revenue) (details)
Revenue (tables)
Short-term Facilities
Short-term Facilities (narrative) (details)
Significant Accounting Policies
Significant Accounting Policies (narrative) (details)
Significant Accounting Policies (policy)
Significant Accounting Policies (schedule Of Intangible Assets Useful Lives) (details)
Significant Accounting Policies (schedule Of Property Plant And Equipment Expected Economic Lives) (details)
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 (cash Flow Movements If Cash Had Been Transferred) (details)
Supplemental Cash Flow Information (narrative) (details)
Supplemental Cash Flow Information (schedule Of Supplemental Cash Flow Disclosures) (details)
Supplemental Cash Flow Information (tables)
Unaudited Quarterly Results
Unaudited Quarterly Results (schedule Of Unaudited Consolidated Statements Of Operations) (details)
Unaudited Quarterly Results (tables)
Ticker: UEPS
CIK: 1041514
Form Type: 10-K Annual Report
Accession Number: 0001062993-16-011301
Submitted to the SEC: Thu Aug 25 2016 4:38:34 PM EST
Accepted by the SEC: Thu Aug 25 2016
Period: Thursday, June 30, 2016
Industry: Functions Related To Depository Banking

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