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Net 1 UEPS Technologies, Inc. Reports Third Quarter 2017 Results

JOHANNESBURG, SOUTH AFRICA--(Marketwired - May 04, 2017) - Net 1 UEPS Technologies, Inc. (NASDAQ: UEPS) (JSE: NT1) today released results for Q3 2017.

  • Q3 2017 Revenue of $147.9 million, an increase of 10%, down 8% in constant currency;
  • Q3 2017 Fundamental net income of $23.5 million, an increase of 19%, down 1% in constant currency; and
  • Q3 2017 FEPS of $0.43, an increase of 0%, which includes a 19% adverse impact related to higher share count.
Summary Financial Metrics                
 
    Three months ended March 31,
            % change   % change
    2017   2016   in USD   in ZAR
(All figures in USD '000s except per share data)                
Revenue   147,944   134,736   10%   (8%)
GAAP net income   18,392   18,420   (0%)   (17%)
Fundamental net income (1)   23,468   19,787   19%   (1%)
GAAP earnings per share ($)   0.34   0.40   (15%)   (29%)
Fundamental earnings per share ($) (1)   0.43   0.43   0%   (16%)
Fully-diluted shares outstanding ('000's)   54,808   46,430   19%    
Average period USD/ ZAR exchange rate   13.22   15.82   (16%)    
 
    Nine months ended March 31,
            % change   % change
    2017   2016   in USD   in ZAR
(All figures in USD '000s except per share data)                
Revenue   455,010   439,490   4%   1%
GAAP net income   61,665   58,098   6%   3%
Fundamental net income (1)   71,859   65,978   9%   6%
GAAP earnings per share ($)   1.15   1.24   (6%)   (9%)
Fundamental earnings per share ($) (1)   1.34   1.41   (5%)   (8%)
Fully-diluted shares outstanding ('000's)   53,088   47,074   13%   13%
Average period USD/ ZAR exchange rate   13.77   14.17   (3%)    
(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 Q3 2017 and Q3 2016 results

  • Earnings and FEPS dilution impact from issue of additional shares of common stock: Our Q3 2017 fundamental earnings per share was impacted by the weighted average issuance of five million shares of our common stock in February 2017 and 10 million shares in Q4 2016, partially offset by buy backs of 5.5 million shares;
  • Favorable impact from the weakening of the U.S. dollar against South African Rand: The U.S. dollar depreciated by 16% against the ZAR during Q3 2017, which positively impacted our reported results;
  • Growth in lending and insurance businesses: We continued to experience volume growth and operating efficiencies in our lending and insurance businesses during Q3 2017, which has resulted in an improved contribution to our financial inclusion revenue and operating income;
  • Ongoing contributions from EasyPay Everywhere: EPE revenue and operating income growth was driven primarily by ongoing EPE adoption as we further expanded our customer base utilizing our ATM infrastructure;
  • Masterpayment expansion costs: Masterpayment incurred additional investment as it grows its staff complement to execute its expansion plan into new markets;
  • Regulatory changes in South Korea pertaining to fees on card transactions: The regulations governing the fees that may be charged on card transactions have adversely impacted our revenues and operating income in South Korea;
  • Lower prepaid sales resulting from improved security features to our Manje products: The introduction of our new biometric-linking feature adversely impacted the number of transacting users purchasing prepaid products through our mobile channel;
  • Higher transaction-related costs in fiscal 2017: We incurred $1.4 million in transaction-related costs pertaining to various acquisition and investment initiatives pursued during Q3 2017;
  • Gain on acquisition of T24 during fiscal 2016: We recognized a fair value adjustment gain of $1.9 million related to the acquisition of T24 during Q3 2016. We accounted for T24 as an equity method investment prior to obtaining control and recognized a gain arising from the consolidation and purchase accounting adjustments related to the T24 acquisition; and
  • Tax impact of dividends from South African subsidiary in fiscal 2016: Our income tax expense for Q3 2016 includes approximately $2.1 million related to the tax impact, including withholding taxes, resulting from distributions from our South African subsidiary during fiscal 2016.

"The last few months have been challenging, aggravated by the tarnishing of our reputation and questioning of our business practices due to frivolous and unsubstantiated public attacks. Although we devoted a substantial amount of time to manage these issues, we believe that we have made sufficient progress towards the finalization of our South African and international expansion strategy," said Serge Belamant, CEO of Net1. "Consistent with our service delivery track record over the last five years, the distribution of grants in April and May has gone smoothly and without any delay or interruption and we continue to fulfill our obligations in accordance with the Constitutional Court's order. We remain willing to support a smooth transition to SASSA or whomever they determine to be the most suitable service provider when our current contract expires. In the interim, we continue to provide seamless and timely access to grants for beneficiaries and our technology continues to save the South African government an estimated ZAR 2 billion per annum through the identification and removal of fraudulent beneficiaries," he added.

"We intend to shortly commence with the implementation of our strategic plan to accelerate growth, diversification and geographic footprint," added Serge Belamant. "In South Africa we will partner, invest in or acquire the right institutions to expand our addressable market and fuel innovation, which in turn will lead to the creation of new products and business models. Internationally, our UEPS/EMV banking platform will be the cornerstone from which we can service the needs of the developed and developing world, while also providing the bridge between the two," he concluded.

"We expect to make substantial progress towards completion of a number of investment transactions during the last quarter of fiscal 2017, including Blue Label, DNI and Cell C," said Herman Kotze, Chief Financial Officer of Net1. "These transactions will have a limited impact on our full year results and we reaffirm our fundamental earnings per share guidance for fiscal 2017 to be at least $1.69 using a constant currency base of ZAR 14.38/$1, a share count of 54.5 million shares, and a tax rate between 33%-35%," he concluded.

Recent Developments

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 $64.0 million in Q3 2017, up 26% in USD compared with Q3 2016, and up 6% on a constant currency basis. In ZAR, the increase in segment revenue was primarily due to higher EPE transaction revenue as a result of increased usage of our ATMs, increased inter-segment transaction processing activities and a modest increase in the number of social welfare grants distributed. Operating income decreased primarily due to the impact of annual salary increases granted to our South African employees, partially offset by higher EPE transaction revenue as a result of increased usage of our ATMs and a modest increase in the number of social welfare grants distributed.

Our operating income margin for Q3 2017 and 2016 was 24% and 26%, respectively. Our fiscal 2017 margin includes higher EPE revenue, and an increase in the number of beneficiaries paid in Q3 2017, which was partially offset by annual salary increases granted.

  • International transaction processing

Segment revenue was $41.5 million in Q3 2017, up 2% in USD compared with Q3 2016, and down 15% on a constant currency basis. In calendar 2016, South Korean regulators introduced specific regulations governing the fees that may be charged on card transactions, as is the case in most other developed economies. These regulations have a direct impact on card issuers in South Korea and consistent with global practices, card issuers have renegotiated their fees with South Korean VAN companies, including KSNET, which has had an adverse impact on KSNET's financial performance.

Segment revenue increased during Q3 2017, primarily due to the inclusion of Masterpayment; however, this growth was partially offset by a lower contribution from KSNET due to the regulatory changes described above. Operating income during Q3 2017 was lower due to lower revenue at KSNET, losses incurred by Masterpayment as it grows its staff complement to execute its expansion plan into new markets, and ongoing ZAZOO start-up costs in the UK and India, which was partially offset by a positive contribution by T24. Operating income margin for Q3 2017 and 2016 was 5% and 12%, respectively.

  • Financial inclusion and applied technologies

Segment revenue was $56.9 million in Q3 2017, up 5% in USD compared with Q3 2016 and down 12% on a constant currency basis. In ZAR, Financial inclusion and applied technologies revenue decreased primarily due to fewer prepaid airtime and other value added services sales, as well as fewer ad-hoc terminal sales, partially offset by increased volumes in our lending and insurance businesses, and an increase in inter-segment revenues. Operating income margin for the Financial inclusion and applied technologies segment was 25% and 21% during Q3 fiscal 2017 and 2016, respectively, and has increased primarily due to improved revenues from our lending and insurance businesses and an increase in inter-segment revenues and fewer low margin prepaid product sales, offset by fewer ad hoc terminal and annual salary increases granted to our South African employees.

  • Corporate/eliminations

Our corporate expenses have increased primarily due to higher transaction-related expenditures, higher amortization costs and modest increases in U.S. dollar denominated goods and services purchased from third parties and directors' fees. Our corporate expenses for the third quarter of fiscal 2016, includes a gain related to the acquisition of T24.

  • Cash flow and liquidity

At March 31, 2017, our cash and cash equivalents were $223.0 million, and excludes $44.7 million of restricted cash. The decrease in our cash balances from June 30, 2016, was primarily due to repurchase of shares of our common stock; unscheduled repayments of our Korean debt; payment of taxes; the investment in MobiKwik, C4U Malta and Pros Software; a loan to Finbond and capital expenditures, which was partially offset by the sale of 5 million shares of our common stock and expansion of most of our core businesses.

Excluding the impact of taxes, interest received and interest paid under our Korean debt, the increase in cash from operating activities resulted from improved trading activity during fiscal 2017, offset by the timing of receipt of amounts from customers. Capital expenditures for Q3 2017 and 2016 were $1.9 million and $8.1 million, respectively, and have decreased primarily due to the acquisition of fewer payment processing terminals in South Korea. We provided a $2.0 million loan to KZ One, the holding company of our Nigerian initiative One Credit. We sold 5 million shares of our common stock for $45.0 million and received approximately $0.6 million from the exercise of stock options. We also utilized approximately $0.3 million of our Korean borrowings to pay quarterly interest due.

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 Korean debt facility fees and US government investigations-related expenses as well as, in fiscal 2017, a refund (net of taxes) related to Korean industry-wide litigation that has now been finalized and costs related to transactions and acquisition consummated or ultimately not pursued. 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) loss on sale of property, plant and equipment. 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 Q3 2017 results on May 5, 2017, 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 May 28, 2017.

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, ChinaUnionPay, Alipay and WeChat 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.

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.

 
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
 
    Three months ended   Nine months ended
    March 31,   March 31,
    2017   2016   2017   2016
    (In thousands, except per share data)   (In thousands, except per share data)
REVENUE   $ 147,944   $ 134,736   $ 455,010   $ 439,490
                         
EXPENSE                        
                         
  Cost of goods sold, IT processing, servicing and support     70,912     63,266     219,210     219,316
                         
  Selling, general and administration     42,195     35,998     122,366     108,007
                         
  Depreciation and amortization     10,290     9,281     31,117     29,982
                         
OPERATING INCOME     24,547     26,191     82,317     82,185
                         
INTEREST INCOME     5,124     3,345     14,489     11,284
                         
INTEREST EXPENSE     467     852     1,773     2,880
                         
INCOME BEFORE INCOME TAX EXPENSE     29,204     28,684     95,033     90,589
                         
INCOME TAX EXPENSE     10,233     9,816     32,320     31,306
                         
NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS     18,971     18,868     62,713     59,283
                         
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS     45     2     778     578
                         
NET INCOME     19,016     18,870     63,491     59,861
                         
LESS NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST     624     450     1,826     1,763
                         
NET INCOME ATTRIBUTABLE TO NET1   $ 18,392   $ 18,420   $ 61,665   $ 58,098
                         
Net income per share, in U.S. dollars                        
  Basic earnings attributable to Net1 shareholders   $ 0.34   $ 0.40   $ 1.16   $ 1.24
  Diluted earnings attributable to Net1 shareholders   $ 0.34   $ 0.40   $ 1.16   $ 1.23
 
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets
    Unaudited     (A)  
    March 31,     June 30,  
    2017     2016  
    (In thousands, except share data)  
ASSETS            
CURRENT ASSETS            
  Cash and cash equivalents   $ 222,972     $ 223,644  
  Restricted cash     44,735       -  
  Pre-funded social welfare grants receivable     1,615       1,580  
  Accounts receivable, net of allowances of - March: $3,362; June: $1,669     122,540       107,805  
  Finance loans receivable, net of allowances of - March: $3,536; June: $4,494     43,539       37,009  
  Inventory     10,560       10,004  
  Deferred income taxes     6,841       6,956  
    Total current assets before settlement assets     452,802       386,998  
      Settlement assets     513,713       536,725  
        Total current assets     966,515       923,723  
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - March: $124,527; June: $99,969     43,901       54,977  
EQUITY-ACCOUNTED INVESTMENTS     38,920       25,645  
GOODWILL     190,174       179,478  
INTANGIBLE ASSETS, net of accumulated amortization of - March: $105,620; June: $91,208     42,904       48,556  
OTHER LONG-TERM ASSETS, including reinsurance assets     39,281       31,121  
  TOTAL ASSETS     1,321,695       1,263,500  
                 
LIABILITIES                
CURRENT LIABILITIES                
  Short-term credit facilities     -       -  
  Accounts payable     13,555       14,097  
  Other payables     38,319       37,479  
  Current portion of long-term borrowings     8,941       8,675  
  Income taxes payable     11,223       5,235  
    Total current liabilities before settlement obligations     72,038       65,486  
      Settlement obligations     513,713       536,725  
        Total current liabilities     585,751       602,211  
DEFERRED INCOME TAXES     11,143       12,559  
LONG-TERM BORROWINGS     16,335       43,134  
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities     2,725       2,376  
  TOTAL LIABILITIES     615,954       660,280  
COMMITMENTS AND CONTINGENCIES                
EQUITY                
  COMMON STOCK                
    Authorized: 200,000,000 with $0.001 par value;                
    Issued and outstanding shares, net of treasury - March: 57,590,085; June: 55,271,954     79       74  
  PREFERRED STOCK                
    Authorized shares: 50,000,000 with $0.001 par value;                
    Issued and outstanding shares, net of treasury: March: -; June: -     -       -  
  ADDITIONAL PAID-IN-CAPITAL     269,533       223,978  
  TREASURY SHARES, AT COST: March: 23,621,541; June: 20,483,932     (273,238 )     (241,627 )
  ACCUMULATED OTHER COMPREHENSIVE LOSS     (164,510 )     (189,700 )
  RETAINED EARNINGS     761,987       700,322  
    TOTAL NET1 EQUITY     593,851       493,047  
    REDEEMABLE COMMON STOCK     107,672       107,672  
    NON-CONTROLLING INTEREST     4,218       2,501  
      TOTAL EQUITY     705,741       603,220  
                       
        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 1,321,695     $ 1,263,500  
(A) - Derived from audited financial statements
 
NET 1 UEPS TECHNOLOGIES, INC. 
Unaudited Condensed Consolidated Statements of Cash Flows 
 
    Three months ended     Nine months ended  
    March 31,     March 31,  
    2017     2016     2017     2016  
    (In thousands)     (In thousands)    
Cash flows from operating activities                        
Net income   $ 19,016     $ 18,870     $ 63,491     $ 59,861  
Depreciation and amortization     10,290       9,281       31,117       29,982  
Earnings from equity-accounted investments     (45 )     (2 )     (778 )     (578 )
Fair value adjustments     (50 )     (2,387 )     (61 )     613  
Interest payable     75       343       84       1,697  
Profit on disposal of property, plant and equipment     (98 )     (29 )     (571 )     (113 )
Gain on fair value of T24     -       (1,909 )     -       (1,909 )
Stock-based compensation charge (reversal), net     621       954       (68 )     2,645  
Facility fee amortized     27       34       94       103  
Dividends received from equity accounted investments     -       -       370       -  
(Increase) Decrease in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable     (16,612 )     15,914       (2,261 )     (15,211 )
Decrease (Increase) in inventory     3,893       (340 )     308       (495 )
(Decrease) Increase in accounts payable and other                                
payables     (1,486 )     4,009       (4,386 )     1,563  
Increase in taxes payable     6,678       4,479       5,819       3,444  
Decrease in deferred taxes     (506 )     (19 )     (1,752 )     (256 )
  Net cash provided by operating activities     21,803       49,198       91,406       81,346  
Cash flows from investing activities                                
Capital expenditures     (1,949 )     (8,053 )     (8,498 )     (28,698 )
Proceeds from disposal of property, plant and equipment     330       136       1,344       753  
Investment in MobiKwik     -       -       (15,347 )     -  
Loans to equity accounted investments     (2,000 )     -       (12,044 )     -  
Acquisitions, net of cash acquired     -       (1,666 )     (4,651 )     (1,666 )
Acquisition of available for sale securities     -       (8,900 )     -       (8,900 )
Other investing activities     -       (5 )     -       (5 )
Net change in settlement assets     (165,945 )     (111,118 )     54,827       171,516  
  Net cash (used in) provided by investing activities     (169,564 )     (129,606 )     15,631       133,000  
Cash flows from financing activities                                
Proceeds from issue of common stock     45,629       -       45,629       3,762  
Acquisition of treasury stock     -       (12,726 )     (32,081 )     (23,912 )
Repayment of long-term borrowings     -       -       (28,493 )     -  
Guarantee fee paid     -       -       (1,145 )     -  
Dividends paid to non-controlling interest     -       -       (613 )     -  
Long-term borrowings utilized     274       676       521       2,107  
Net change in settlement obligations     165,955       111,118       (54,817 )     (171,516 )
  Net provided by (cash used) in financing activities     211,858       99,068       (70,999 )     (189,559 )
Effect of exchange rate changes on cash     4,719       3,192       8,025       (19,101 )
Net increase in cash, cash equivalents and restricted cash     68,816       21,852       44,063       5,686  
Cash, cash equivalents and restricted cash - beginning of period     198,891       101,417       223,644       117,583  
Cash, cash equivalents and restricted cash - end of period   $ 267,707     $ 123,269     $ 267,707     $ 123,269  
(A) - Net change in settlement assets and net change in settlement obligations included in the unaudited condensed consolidated statement of cash flows for the three and nine months ended March 31, 2016, have been increased by $19.7 million and $59.5 million, respectively, as a result of the restatement described in Note 2 -- (Significant accounting policies -- Settlement assets and settlement obligations) to the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2016.
 
Net 1 UEPS Technologies, Inc.       
 
Attachment A       
 
Operating segment revenue, operating income and operating margin:     
 
Three months ended March 31, 2017 and 2016 and March 31, 2017     
 
                        Change - constant
                Change - actual   exchange rate(1)
                Q3 '17   Q3 '17   Q3 '17   Q3 '17
                vs   vs   vs   vs
Key segmental data, in $ '000,   Q3 '17   Q3 '16   Q2 '17   Q3'16   Q2 '17   Q3'16   Q2 '17
Revenue:                            
South African transaction processing   $63,967   $50,594   $59,862   26%   7%   6%   1%
International transaction processing   41,514   40,588   44,000   2%   (6%)   (15%)   (11%)
Financial inclusion and applied technologies   56,881   54,286   59,258   5%   (4%)   (12%)   (9%)
  Subtotal: Operating segments   162,362   145,468   163,120   12%   (0%)   (7%)   (6%)
  Intersegment eliminations   (14,418)   (10,732)   (11,687)   34%   23%   12%   17%
    Consolidated revenue   $147,944   $134,736   $151,433   10%   (2%)   (8%)   (7%)
                             
Operating income (loss):                            
South African transaction processing   $15,531   $13,133   $15,372   18%   1%   (1%)   (4%)
International transaction processing   1,968   4,813   3,904   (59%)   (50%)   (66%)   (52%)
Financial inclusion and applied technologies   14,064   11,469   14,107   23%   (0%)   3%   (5%)
  Subtotal: Operating segments   31,563   29,415   33,383   7%   (5%)   (10%)   (10%)
  Corporate/Eliminations   (7,016)   (3,224)   (7,794)   118%   (10%)   82%   (15%)
    Consolidated operating income   $24,547   $26,191   $25,589   (6%)   (4%)   (22%)   (9%)
                             
Operating income margin (%)                            
South African transaction processing   24%   26%   26%                
International transaction processing   5%   12%   9%                
Financial inclusion and applied technologies   25%   21%   24%                
  Consolidated operating margin   17%   19%   17%                
(1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the third quarter of fiscal 2017 also prevailed during the third quarter of fiscal 2016 and the second quarter of fiscal 2017.
 
Nine months ended March 31, 2017 and 2016    
 
                Change -
                constant
            Change -   exchange
            actual   rate(1)
            F2017   F2017
            vs   vs
Key segmental data, in '000, except margins   F2017   F2016   F2016   F2016
Revenue:                
South African transaction processing   $181,397   158,997   14%   11%
International transaction processing   131,704   122,653   7%   4%
Financial inclusion and applied technologies   179,681   187,332   (4%)   (7%)
  Subtotal: Operating segments   492,782   468,982   5%   2%
  Intersegment eliminations   (37,772)   (29,492)   28%   24%
    Consolidated revenue   $455,010   439,490   4%   1%
                 
Operating income:                
South African transaction processing   $44,451   38,724   15%   12%
International transaction processing   11,689   15,596   (25%)   (27%)
Financial inclusion and applied technologies   43,354   41,542   4%   1%
  Subtotal: Operating segments   99,494   95,862   4%   1%
  Corporate/Eliminations   (17,177)   (13,677)   26%   22%
    Consolidated operating income   $82,317   82,185   0%   (3%)
                 
Operating income margin (%)                
South African transaction processing   25%   24%        
International transaction processing   9%   13%        
Financial inclusion and applied technologies   24%   22%        
  Overall operating margin   18%   19%        
(1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the year to date of fiscal 2017 also prevailed during the year to date of fiscal 2016.
 
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 March 31, 2017 and 2016
 
            EPS,           EPS,
    Net income   basic   Net income   basic
    (USD'000)   (USD)   (ZAR'000)   (ZAR)
    2017   2016   2017   2016   2017   2016   2017   2016
                                 
GAAP   18,392     18,420     0.34   0.40   243,190     291,377     4.45   6.29
                                         
  Intangible asset amortization, net   2,772     1,743             36,653     27,586          
  Transaction costs   1,439     545             19,027     8,621          
  Stock-based compensation charge   621     954             8,211     15,091          
  US government investigations-related expenses   217     -             2,869     -          
  Facility fees for Korean debt   27     34             357     538          
  Gain on fair value of T24   -     (1,909 )           -     (30,198 )        
    Fundamental   23,468     19,787     0.43   0.43   310,307     313,015     5.68   6.75
 
 
Nine months ended March 31, 2017 and 2016
 
            EPS,           EPS,
    Net income   basic   Net income   basic
    (USD'000)   (USD)   (ZAR'000)   (ZAR)
    2017   2016   2017   2016   2017   2016   2017   2016
                                         
GAAP   61,665     58,098     1.15   1.24   849,009     823,149     15.82   17.59
                                         
  Intangible asset amortization, net   7,637     6,182             105,124     87,588          
  Transaction costs   2,928     726             40,313     10,286          
  Stock-based compensation (reversal) charge   (68 )   2,645             (936 )   37,475          
  Refund related to litigation finalized in Korea, net   (643 )   -             (8,853 )   -          
  Facility fees for Korean debt   94     103             1,294     1,459          
  US government investigations-related expenses   246     133             3,387     1,884          
  Gain on fair value of T24   -     (1,909 )           -     (27,047 )        
    Fundamental   71,859     65,978     1.34   1.41   989,338     934,794     18.44   19.98
 
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 March 31, 2017 and 2016            
             
    2017     2016  
             
Net income (USD'000)   18,392     18,420  
Adjustments:            
  Gain on fair value of T24   -     (1,909 )
  Profit on sale of property, plant and equipment   (98 )   (29 )
  Tax effects on above   27     8  
Net income used to calculate headline earnings (USD'000)   18,321     16,490  
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000)   54,639     46,341  
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000)   54,808     46,430  
Headline earnings per share:            
  Basic, in USD   0.34     0.36  
  Diluted, in USD   0.33     0.36  
             
Nine months ended March 31, 2017 and 2016            
   
    2017     2016  
             
Net income (USD'000)   61,665     58,098  
Adjustments:            
  Gain on fair value of T24   -     (1,909 )
  Profit on sale of property, plant and equipment   (571 )   (113 )
  Tax effects on above   160     32  
Net income used to calculate headline earnings (USD'000)   61,254     56,108  
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000)   52,961     46,786  
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000)   53,088     47,074  
Headline earnings per share:            
  Basic, in USD   1.16     1.20  
  Diluted, in USD   1.15     1.19  
             
Calculation of the denominator for headline diluted earnings per share            
 
    Q3 '17   Q3 '16   F2017   F2016
                 
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP   54,639   46,341   52,961   46,786
  Effect of dilutive securities under GAAP   169   89   127   288
    Denominator for headline diluted earnings per share   54,808   46,430   53,088   47,074

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.

/EINPresswire.com/ -- Investor Relations Contact:
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