UEPS - Net 1 files 2019 Form 10-K with SEC and cures Nasdaq delinquency

October, 25 2019 04:05 PM Net 1 UEPS Technologies Inc.

JOHANNESBURG, South Africa, Oct. 25, 2019 (GLOBE NEWSWIRE) -- Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today announced that it has filed its Annual Report on Form 10-K with the United States Securities and Exchange Commission for the year ended June 30, 2019. Filing of the Form 10-K cures the Nasdaq delinquency reported on October 3, 2019. We do not need to file a plan of compliance with Nasdaq and believe that we are now in compliance with Nasdaq’s continued listing requirements.

Final results amended as a result of September 30, 2019 Supreme Court ruling:

Our preliminary results released on September 26, 2019, have been updated for the impact of the Supreme Court ruling on September 30, 2019. The Supreme Court ruling declined our subsidiary, Cash Paymaster Services (Pty) Ltd’s (“CPS”), appeal of the refund of ZAR 317.0 million plus interest to the South Africa Social Security Agency (“SASSA”) related to the recovery of additional implementation costs incurred by CPS during the beneficiary re-registration process in fiscal 2012 and 2013. CPS is liable to repay SASSA ZAR 317.0 million, plus interest from June 2014 to date of payment. As a result, we recorded the liability at June 30, 2019, of $34.0 million (ZAR 479.4 million, translated at exchange rates applicable as of June 30, 2019, comprising a revenue refund of $19.7 million (ZAR 277.6 million), accrued interest of $11.4 million (ZAR 161.0 million), unclaimed indirect taxes of $2.8 million (ZAR 39.4 million) and estimated costs of $0.1 million (ZAR 1.4 million)).

Below is a summary of the changes to our audited consolidated financial statements for Q4 2019 and full year 2019, as a result of the liability recorded compared with our preliminary results (“Prelim”) reported on September 26, 2019:


Q4 2019

F2019

Final

Prelim

Mvt

Final

Prelim

Mvt
(All figures in USD ‘000s except per share data)

















Revenue
51,472


71,181


(19,709
)

360,990


380,699


(19,709
)
GAAP operating (loss) income
(49,646
)

(15,607
)

(34,039
)

(113,508
)

(79,469
)

(34,039
)
Adjusted (negative) EBITDA⁽¹⁾
(749
)

(749
)

-


(12,621
)

(12,621
)

-

GAAP net (loss) income
(183,694
)

(149,655
)

(34,039
)

(307,618
)

(273,579
)

(34,039
)
Fundamental (loss) earnings⁽¹⁾
(173,128
)

(139,089
)

(34,039
)

(256,906
)

(222,867
)

(34,039
)
GAAP (loss) earnings per share ($)
(3.23
)

(2.63
)

(0.60
)

(5.42
)

(4.82
)

(0.60
)
Fundamental (loss) earnings per share ($)⁽¹⁾
(3.05
)

(2.45
)

(0.60
)

(4.53
)

(3.93
)

(0.60
)
Headline (loss) earnings per share ($)⁽¹⁾
(3.11
)

(2.51
)

(0.60
)

(4.98
)

(4.38
)

(0.60
)

(1) Adjusted negative EBITDA and fundamental (loss) earnings per share are non-GAAP measures and are described below under “Use of Non-GAAP Measures”. See Attachment B for a reconciliation of GAAP operating (loss) income to negative EBITDA and Adjusted negative EBITDA, and GAAP net (loss) income to fundamental net (loss) income and (loss) earnings per share. See Attachment C for a reconciliation of net (loss) income used to calculate (loss) earnings per share basic and diluted and headline (loss) earnings per share basic and diluted.

We reiterate our fiscal 2020 guidance for adjusted EBITDA of at least $16 million using a constant currency base of ZAR 14.27/$1, driven by growth in South Korea and South Africa, and reduced losses from our IPG business.

Summary Financial Metrics


Three months ended June 30,

2019

2018 As restated⁽¹⁾

% change in USD

% change in ZAR
(All figures in USD ‘000s except per share data)











Revenue
51,472


149,194


(65
%)

(57
%)
GAAP operating (loss) income
(49,646
)

10,072


nm


nm

Adjusted (negative) EBITDA⁽²⁾
(749
)

24,301


nm


nm

GAAP (loss) earnings per share ($)
(3.23
)

0.05


nm


nm

Continuing
(3.23
)

0.10


nm


nm

Discontinued
-


(0.05
)

nm


nm

Fundamental (loss) earnings per share ($)⁽²⁾
(3.05
)

0.22


nm


nm

Fully-diluted shares outstanding (‘000’s)
56,804


56,816


(0
%)


Average period USD/ ZAR exchange rate
14.29


11.45


25
%


Non-cash adjustments included (before tax impact):
140,827


12,834


997
%


Allowance for doubtful finance loans receivables
1,148


1,798


(36
%)


Change in fair value of equity securities
125,360


5,370


2,234
%


Loss on disposal of DNI
631


-


nm



Loss on acquisition of DNI
-


4,614


nm



Impairment loss
6,249


1,052


494
%


Impairment of Cedar Cell note
7,439


-


nm




Fiscal year ended June 30,

2019

2018 As restated⁽¹⁾

% change in USD

% change in ZAR
(All figures in USD ‘000s except per share data)











Revenue
360,990


612,889


(41
%)

(34
%)
GAAP operating (loss) income
(113,508
)

58,949


nm


nm

Adjusted (negative) EBITDA⁽²⁾
(12,621
)

127,155


nm


nm

GAAP (loss) earnings per share ($)
(5.42
)

1.13


nm


nm

Continuing
(5.40
)

1.09


nm


nm

Discontinued
(0.02
)

0.04


nm


nm

Fundamental (loss) earnings per share ($)⁽²⁾
(4.53
)

2.00


nm


nm

Fully-diluted shares outstanding (‘000’s)
56,778


56,858


(0
%)


Average period USD/ ZAR exchange rate
14.27


12.70


12
%


Non-cash adjustments included (before tax impact):
238,554


6,416


3,618
%


Allowance for doubtful finance loans receivables
32,786


13,358


145
%


Change in fair value of equity securities
167,459


(32,473
)

nm



Loss on disposal of DNI
5,771


-


nm



Loss on acquisition of DNI
-


4,614


nm



Impairment loss
19,745


20,917


(6
%)


Impairment of Cedar Cell note
12,793


-


nm

(1) 2018 restated to correct an error identified by its equity method investment – Finbond Group Limited. The financial information for the three months and year ended June 30, 2018, have been restated with the effect of decreasing GAAP net (loss) income by $0.1 million, respectively. GAAP (loss) earnings per share were unaffected.

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

Factors impacting comparability of our Q4 2019 and Q4 2018 results

Decline in revenue: Our revenues declined 57% in ZAR primarily due to the expiration of our SASSA contract, the reversal of revenue of $19.7 million (ZAR 277.6 million) following the September 2019 Supreme Court ruling, the significant decline in EPE account numbers driven by SASSA’s auto-migration of accounts to SAPO, and a reduction in EPE-related financial and value-added services and transaction fees due to a smaller customer base;
Increase in operating losses: Lower revenue, coupled with a high-fixed cost infrastructure, additional costs recorded related to the September 2019 Supreme Court ruling of $14.3 million (ZAR 201.8 million), ongoing IPG operating losses, and a goodwill impairment resulted in an operating loss. We also incurred $1.0 million in retrenchment costs during Q4 2019;
Non-cash losses, impairments and fair-value adjustments: We incurred a $0.6 million non-cash loss on disposal of an 8% interest in DNI, a goodwill impairment loss of $6.2 million, a fair value adjustment loss of $125.4 million for Cell C and a $7.4 million impairment of our Cedar Cell note;
Implementation costs to be refunded to SASSA of $34.0 million: We recorded an accrual of $34.0 million related to the September 2019 Supreme Court ruling comprising a revenue refund of $19.7 million (ZAR 277.6 million), accrued interest of $11.4 million (ZAR 161.0 million), unclaimed indirect taxes of $2.8 million (ZAR 39.4 million) and estimated costs of $0.1 million (ZAR 1.4 million); and
Adverse foreign exchange movements: The U.S. dollar appreciated 23% against the ZAR and 10% against the KRW during Q4 2019, which adversely impacted our reported results.

Results of Operations by Segment and Liquidity

South African transaction processing

Segment revenue was $18.9 million in Q4 2019, down 63% on a constant currency basis compared with Q4 2018 but up from $17.4 million in Q3 2019. The year-over-year decrease in segment revenue and operating income was primarily due to the substantial decrease in the number of SASSA grant recipients paid under our SASSA contract as the contract ended at the end of Q1 2019. Our revenue and operating income were also adversely impacted by the significant reduction in the number of SASSA grant recipients with SASSA-branded Grindrod cards linked to Grindrod bank accounts as well as a lower number of EPE accounts in Q2 2019. These decreases in revenue and operating income were partially offset by higher transaction revenue as a result of increased usage of our ATMs. Operating income for this operating segment for Q4 2019 included retrenchment costs of $1.0 million (ZAR 14.3 million). Our operating (loss) income margin for Q4 2019 and 2018 was (13.1%) and 6.7%, respectively. Excluding restructuring costs, the operating loss margin for Q4 2019 and Q3 2019 was (7.5%) and (57.5%) respectively.

International transaction processing

Segment revenue was $36.4 million in Q4 2019, down 16% compared with Q4 2018 but up from $34.4 million in Q3 2019. Segment revenue was lower during Q4 2019, primarily due to a contraction in IPG transactions processed, specifically meaningfully lower crypto-exchange and China processing activity, and modestly lower KSNET revenue as a result of lower transaction values processed. Operating income during Q4 2019 was higher compared to fiscal 2018 due to an improved contribution from KSNET, primarily as a result of a lower depreciation expense, and partially offset by the decrease in IPG revenues. Operating income margin for Q4 2019 and 2018, and Q3 2019 was 6.1%, 4.8%, and 5.6% respectively.

Financial inclusion and applied technologies

Segment revenue was $17.4 million in Q4 2019, down 59% compared with Q4 2018 in constant currency and Q3 2019 revenue (excluding DNI) of $18.8 million. Segment revenue decreased primarily due to fewer prepaid airtime and value-added services sales, lower lending and insurance revenue, and a decrease in inter-segment revenues. Operating income was significantly lower than Q4 2018, primarily due to lower revenue generation and higher expenses incurred to maintain and expand our financial service infrastructure. Operating (loss) income for this operating segment for Q4 2019 includes a goodwill impairment of $6.2 million. Operating (loss) income margin for Q4 2019 and 2018 was (61.2%) and 25.5%, respectively. Excluding the goodwill impairment, segment operating loss and margin for Q4 2019 were ($4.5) million and (26.0%), respectively, and excluding DNI and retrenchment costs, segment operating loss and margin for Q3, 2019 were ($3.3) million and (17.8%), respectively.

Corporate/eliminations

Our corporate expenses increased primarily due to the accrual of $14.3 million related to the September 2019 Supreme Court ruling, higher non-employee director expenses, transaction-related expenditures and external service provider fees, partially offset by a reversal of stock compensation charge of $1.8 million related to stock options and restricted stock forfeited.

Cash flow, liquidity and consideration of going concern

At June 30, 2019, our cash and cash equivalents were $46.1 million and comprised of KRW-denominated balances of KRW 30.1 billion ($26.1 million), ZAR-denominated balances of ZAR 184.3 million ($13.1 million), U.S. dollar-denominated balances of $2.4 million, and other currency deposits, primarily Botswana pula, of $4.5 million, all amounts translated at exchange rates applicable as of June 30, 2019. The decrease in our unrestricted cash balances from June 30, 2018, was primarily due to significantly weaker trading activities, scheduled debt repayments, dividend payments to non-controlling interests and capital expenditures, which was partially offset by cash dividends received from DNI and a decrease in our South African lending book.

Excluding the impact of interest received, interest paid under our South Africa debt and taxes, the decrease in cash provided is primarily due to significantly weaker trading activity during fiscal 2019 compared to 2018. Capital expenditures for Q4 2019 and 2018 were $2.1 million and $1.8 million, respectively, and primarily relate to the acquisition of additional ATMs in South Africa. We made an unscheduled South African debt facility payment of $1.0 million (ZAR 15 million) and settled our outstanding South African long-term borrowings in full.

Use of Non-GAAP Measures

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

EBITDA and adjusted EBITDA

(Loss) Earnings before interest, tax, depreciation and amortization (“EBITDA”) is GAAP operating (loss) income adjusted for depreciation and amortization and, if applicable, impairment losses. Adjusted EBITDA is EBITDA adjusted for costs related to acquisitions and transactions consummated or ultimately not pursued, retrenchment costs incurred, and in fiscal 2019, the accrual of $34.0 million related to the September 2019 Supreme Court ruling, and in fiscal 2018, the non-cash re-measurement loss related to the acquisition of DNI, an allowance for doubtful Mastertrading working capital finance loans receivable, a refund of indirect taxes in Korea, and (loss) profits realized on the sale of a business.

Fundamental net (loss) income and fundamental (loss) earnings per share

Fundamental net (loss) income and (loss) earnings per share is GAAP net (loss) income and (loss) earnings per share adjusted for the amortization of acquisition-related intangible assets (net of deferred taxes), the amortization of intangible assets (net of deferred taxes) related to equity-accounted investments, stock-based compensation charges and reversals, the amortization of South African and South Korean debt facility fees and unusual non-recurring items, including impairment losses, costs related to acquisitions and transactions consummated or ultimately not pursued.

Fundamental net (loss) income and (loss) earnings per share for fiscal 2019 also includes an adjustment for the loss incurred on the disposal of DNI, retrenchment costs incurred, accretion of interest related to the DNI contingent consideration, and for the non-controlling interest portion of the amortization of intangible assets (net of deferred taxes). Fundamental net income and earnings per share for fiscal 2018 also includes adjustments for an allowance for doubtful working capital finance receivables, the non-cash re-measurement loss related to the acquisition of DNI, refund of indirect taxes in Korea, the impact of changes in tax laws in the U.S and a gain realized on the sale of XeoHealth.

We provide earnings guidance only on a non-GAAP basis and do not provide a reconciliation of forward-looking fundamental (loss) earnings per share guidance to the most directly comparable GAAP financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, the amounts of which, based on past experience, could be material.

Management believes that the EBITDA, adjusted EBITDA, fundamental net (loss) income and (loss) 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 operating income and EBITDA and adjusted EBITDA; and GAAP net (loss) income and (loss) earnings per share and fundamental net (loss) income and (loss) earnings per share.

Headline (loss) earnings per share (“H(L)EPS”)

The inclusion of H(L)EPS in this press release is a requirement of our listing on the JSE. H(L)EPS basic and diluted is calculated using net (loss) income which has been determined based on GAAP. Accordingly, this may differ to the headline (loss) 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.

H(L)EPS basic and diluted is calculated as GAAP net (loss) income adjusted for the impairment loss and (profit) loss on sale of property, plant and equipment and the re-measurement loss on the acquisition of DNI. Attachment C presents the reconciliation between our net (loss) income used to calculate (loss) earnings per share basic and diluted and HE(L)PS basic and diluted and the calculation of the denominator for headline diluted (loss) earnings per share.

About Net1

Net1 is a leading provider of transaction processing services, financial inclusion products and services and secure payment technology. Net1 operates market-leading payment processors in South Africa and the Republic of Korea. Net1 offers debit, credit and prepaid processing and issuing services for all major payment networks. In South Africa, Net1 provides innovative low-cost financial inclusion products, including banking, lending and insurance and through DNI is a leading distributor of mobile subscriber starter packs for Cell C, a South African mobile network operator. Net1 leverages its strategic equity investments in Finbond and Bank Frick (both regulated banks), and Cell C to introduce products to new customers and geographies.

Net1 has a primary listing on NASDAQ (NasdaqGS: UEPS) and a secondary listing on the Johannesburg Stock Exchange (JSE: NT1). Visit www.net1.com for additional information about Net1.

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
Group Vice President, Investor Relations
Phone: +1 917-767-6722
Email: dchopra@net1.com

Media Relations Contact:
Bridget von Holdt
Business Director – BCW
Phone: +27-82-610-0650
Email: bridget.vonholdt@bm-africa.com


NET 1 UEPS TECHNOLOGIES, INC.
Consolidated Statements of Operations





Unaudited

(1)

Three months ended

Year ended


June 30,


June 30,


2019


2018 (As restated)^(R)


2019



2018 (As restated)^(R)














(In thousands, except per share data)

(In thousands, except per share data)











REVENUE
$
51,472

$
149,194


$
360,990


$
612,889












EXPENSE





















Cost of goods sold, IT processing, servicing and support

41,668


78,030



215,348



304,536












Selling, general and administration

46,380


51,586



202,056



193,003












Depreciation and amortization

6,821


8,454



37,349



35,484












Impairment loss

6,249


1,052



19,745



20,917












OPERATING (LOSS) INCOME

(49,646
)

10,072



(113,508
)


58,949












CHANGE IN FAIR VALUE OF EQUITY SECURITIES

(125,360
)

(5,370
)


(167,459
)


32,473












LOSS ON DISPOSAL OF DNI

631


-



5,771



-












INTEREST INCOME

1,289


2,982



7,229



17,885












INTEREST EXPENSE

1,694


2,069



10,724



8,941












IMPAIRMENT OF CEDAR CELLULAR NOTE

7,439


-



12,793



-












(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE

(183,481
)

5,615



(303,026
)


100,366












INCOME TAX (BENEFIT) EXPENSE

2,023


8,840



3,725



48,597












NET (LOSS) INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS

(185,504
)

(3,225
)


(306,751
)


51,769












EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS

1,820


4,208



1,482



11,597












NET (LOSS) INCOME

(183,684
)

983



(305,269
)


63,366

Continuing

(183,684
)

3,794



(307,959
)


60,975

Discontinued

-


(2,811
)


2,690



2,391












LESS (ADD) NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST

10


(1,783
)


2,349



(880
)
Continuing

10


(1,783
)


(1,352
)


(880
)
Discontinued

-


-



3,701



-












NET (LOSS) INCOME ATTRIBUTABLE TO NET1
$
(183,694
)

2,766



(307,618
)


64,246

Continuing

(183,694
)

5,577



(306,607
)


61,855

Discontinued

-

$
(2,811
)

$
(1,011
)

$
2,391












Net (loss) income per share, in U.S. dollars










Basic (loss) earnings attributable to Net1 shareholders

(3.23
)

0.05



(5.42
)


1.13

Continuing

(3.23
)

0.10



(5.40
)


1.09

Discontinued

-


(0.05
)


(0.02
)


0.04

Diluted (loss) earnings attributable to Net1 shareholders

(3.23
)

0.05



(5.42
)


1.13

Continuing

(3.23
)

0.10



(5.40
)


1.09

Discontinued

-


(0.05
)


(0.02
)


0.04












(R) Certain amounts have been restated to correct an insignificant misstatement.
(1) Derived from audited consolidated financial statements.


NET 1 UEPS TECHNOLOGIES, INC.
Consolidated Balance Sheets

(A)

(A) ^(R)

June 30,

June 30,

2019

2018





(In thousands, except share data)
ASSETS
CURRENT ASSETS





Cash and cash equivalents
$
46,065


$
87,075

Restricted cash

75,446



-

Pre-funded social welfare grants receivable

-



2,965

Accounts receivable, net of allowance of – 2019: $1,241; 2018: $1,101 and other receivables

72,494



93,448

Finance loans receivable, net of allowance of – 2019: $9,291; 2018: $16,403

30,631



61,463

Inventory

7,535



10,361

Current assets of discontinued operation

-



22,482

Total current assets before settlement assets

232,171



277,794

Settlement assets

63,479



149,047

Total current assets

295,650



426,841

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – 2019: $117,866; 2018: $126,026

18,554



25,737

EQUITY-ACCOUNTED INVESTMENTS

151,116



86,016

GOODWILL

149,387



169,079

INTANGIBLE ASSETS, net of accumulated amortization of – 2019: $127,100; 2018: $121,466

11,889



27,129

DEFERRED INCOME TAXES

2,151



4,776

OTHER LONG-TERM ASSETS, including reinsurance assets

44,189



235,032

LONG-TERM ASSETS OF DISCONTINUED OPERATION

-



242,704

TOTAL ASSETS

672,936



1,217,314







LIABILITIES
CURRENT LIABILITIES





Short-term credit facilities for ATM funding

75,446



-

Short-term credit facilities

9,544



-

Accounts payable

17,005



21,106

Other payables

66,449



41,645

Current portion of long-term borrowings

-



44,079

Income taxes payable

6,223



5,742

Current liabilities of discontinued operation

-



20,914

Total current liabilities before settlement obligations

174,667



133,486

Settlement obligations

63,479



149,047

Total current liabilities

238,146



282,533

DEFERRED INCOME TAXES

4,682



16,067

LONG-TERM BORROWINGS

-



5,469

OTHER LONG-TERM LIABILITIES, including insurance policy liabilities

3,007



30,289

LONG-TERM LIABILITIES OF DISCONTINUED OPERATION

-



38,387

TOTAL LIABILITIES

245,835



372,745

COMMITMENTS AND CONTINGENCIES











REDEEMABLE COMMON STOCK

107,672



107,672







EQUITY
COMMON STOCK





Authorized: 200,000,000 with $0.001 par value;





Issued and outstanding shares, net of treasury - 2019: 56,568,425; 2018: 56,685,925

80



80

PREFERRED STOCK





Authorized shares: 50,000,000 with $0.001 par value;





Issued and outstanding shares, net of treasury: June: -; June: -

-



-

ADDITIONAL PAID-IN-CAPITAL

276,997



276,201

TREASURY SHARES, AT COST: 2019: 24,891,292; 2018: 24,891,292

(286,951
)


(286,951
)
ACCUMULATED OTHER COMPREHENSIVE LOSS

(199,273
)


(184,538
)
RETAINED EARNINGS

528,576



836,194

TOTAL NET1 EQUITY

319,429



640,986

NON-CONTROLLING INTEREST

-



95,911

TOTAL EQUITY

319,429



736,897







TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY
$
672,936


$
1,217,314







(R) Certain amounts have been restated to correct an insignificant misstatement.
(A) Derived from audited consolidated financial statements.


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











Unaudited

(A)

Three months ended

Year ended


June 30,


June 30,


2019


2018^(R)(as restated)


2019


2018^(R)(as restated)













(In thousands)

(In thousands)










Cash flows from operating activities









Net (loss) income
$
(183,684
)
$
983


$
(305,269
)
$
63,366

Depreciation and amortization

6,821


8,454



37,349


35,484

Impairment loss

6,249


1,052



19,745


20,917

Allowance for doubtful accounts receivable charged

1,148


1,798



32,786


13,358

Earnings from equity-accounted investments

(1,820
)

(4,208
)


(1,482
)

(11,597
)
Interest on Cedar Cellular note

(447
)

(626
)


(2,397
)

(1,395
)
Impairment of Cedar Cellular note

7,439


-



12,793


-

Change in fair value of equity securities

125,360


5,370



167,459


(32,473
)
SASSA implementation costs to be refunded

34,039


-



34,039


-

Fair value adjustments and foreign currency re-measurements

(18
)

623



73


414

Interest payable

(57
)

118



237


(146
)
Facility fee amortized

115


122



321


589

Loss (Profit) on disposal of business

631


-



5,771


(463
)
Loss on fair value of DNI

-


4,614



-


4,614

(Profit) Loss on disposal of property, plant and equipment

(73
)

(31
)


(486
)

40

Stock compensation charge, net of forfeitures

(1,279
)

597



393


2,607

Dividends received from equity accounted investments

864


-



1,318


4,111

Decrease (Increase) in accounts and finance loans receivable, and pre-funded grants receivable

5,130


20,170



11,663


17,732

Decrease (Increase) in inventory

430


255



4,042


(2,521
)
(Decrease) Increase in accounts payable and other payables

(3,199
)

4,820



(14,538
)

10,595

Increase (Decrease) in taxes payable

1,286


(6,954
)


3,428


1,137

(Decrease) Increase in deferred taxes

(482
)

(2,316
)


(11,705
)

5,936

Net cash (used in) provided by operating activities

(1,547
)

34,841



(4,460
)

132,305











Cash flows from investing activities









Capital expenditures

(2,136
)

(1,848
)


(9,416
)

(9,649
)
Proceeds from disposal of property, plant and equipment

264


83



1,045


658

Acquisition of intangible assets

-


-



(1,384
)

-

Investment in equity of equity-accounted investments

-


(1,000
)


(2,989
)

(133,335
)
Disposal of DNI

-


-



(2,114
)

-

Investment in MobiKwik

-


-



(1,056
)

-

Repayment of loans by equity-accounted investments

1,029


9,180



1,029


9,180

Proceeds on return of investment

-


-



284


-

Investment in Cell C

-


-



-


(151,003
)
Loans to equity-accounted investments

-


-



-


(10,635
)
Acquisition of held to maturity investment

-


-



-


(9,000
)
Acquisitions, net of cash acquired



(6,202
)


-


(6,202
)
Other investing activities, net

-


(207
)


-


(61
)
Net change in settlement assets

2,198


210,405



79,077


490,795

Net cash provided by investing activities

1,355


210,411



64,476


180,748











Cash flows from financing activities









Proceeds from bank overdraft

238,229


2,528



822,754


44,900

Repayment of bank overdraft

(238,146
)

(5,932
)


(740,969
)

(62,925
)
Repayment of long-term borrowings

(1,047
)

(16,095
)


(37,357
)

(77,062
)
Long-term borrowings utilized

-


-



14,613


113,157

Dividends paid to non-controlling interest

(19
)

-



(4,104
)

-

Payment of guarantee fee

-


-



(394
)

(754
)
Acquisition of non-controlling interests

(180
)

-



(180
)

-

Net change in settlement obligations

(2,198
)

(210,405
)


(79,077
)

(490,795
)
Net cash used in financing activities

(3,361
)

(229,904
)


(24,714
)

(473,479
)










Effect of exchange rate changes on cash

2,126


(12,466
)


(3,845
)

(7,977
)
Net (decrease) increase in cash, cash equivalents and restricted cash

(1,427
)

2,882



31,457


(168,403
)
Cash, cash equivalents and restricted cash – beginning

122,938


87,172



90,054


258,457

Cash, cash equivalents and restricted cash – end of period ⁽¹⁾
$
121,511

$
90,054


$
121,511

$
90,054











Cash, cash equivalents and restricted cash – end of year for the year ended June 30, 2018, includes $2,979 related to DNI.
(R) Certain amounts have been restated to correct an insignificant misstatement.
(A) Derived from audited consolidated financial statements.
(1) Cash, cash equivalents and restricted cash as of June 30, 2019, includes restricted cash of approximately $75.4 million related to cash withdrawn from our various debt facilities to fund ATMs. This cash may only be used to fund ATMs and is considered restricted as to use and therefore is classified as restricted cash.

Net 1 UEPS Technologies, Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended June 30, 2019 and 2018 and March 31, 2019







Change - actual

Change – constant exchange rate⁽¹⁾
Key segmental data, in ’000, except margins
Q4 ‘19

Q4 ‘18

Q3 ‘19

Q4 ‘19 vs Q4‘18

Q4 ‘19 vs Q3 ‘19

Q4 ‘19 vs Q4‘18

Q4 ‘19 vs Q3 ‘19
Revenue:























South African transaction processing
$18,945


$63,954


$17,374


(70
%)

9
%

(63
%)

10
%
International transaction processing

36,399



43,580



34,358


(16
%)

6
%

4
%

7
%
Financial inclusion and applied technologies

17,573



53,888



36,650


(67
%)

(52
%)

(59
%)

(52
%)
Continuing

17,573



53,888



18,808


(67
%)

(7
%)

(59
%)

(6
%)
Discontinued

-



-



17,842


nm


nm


nm


nm

Subtotal: Operating segments

72,917



161,422



88,382


(55
%)

(17
%)

(44
%)

(17
%)
Intersegment eliminations and revenue refund

(21,445
)


(12,228
)


(1,898
)

75
%

1,030
%

119
%

1,039
%
Consolidated revenue

51,472



149,194



86,484


(65
%)

(40
%)

(57
%)

(40
%)
Continuing

51,472



149,194



68,642


(65
%)

(25
%)

(57
%)

(24
%)
Discontinued

$-



$-


$17,842


nm


nm


nm


nm














Operating (loss) income:









South African transaction processing
($2,474
)

$4,275


($12,954
)

nm


(81
%)

nm


(81
%)
International transaction processing

2,209



2,089



1,909


6
%

16
%

32
%

17
%
Financial inclusion and applied technologies

(10,749
)


13,747



3,227


nm


nm


nm


nm

Continuing

(10,749
)


13,747



(4,911
)

nm


119
%

nm


121
%
Discontinued

-



-



8,138


nm


nm


nm


nm

Subtotal: Operating segments

(11,014
)


20,111



(7,818
)

nm


41
%

nm


42
%
Corporate/Eliminations

(38,632
)


(10,039
)


(13,865
)

285
%

179
%

380
%

181
%
Continuing

(38,632
)


(5,425
)


(6,399
)

612
%

504
%

789
%

509
%
Discontinued

-



(4,614
)


(7,466
)

nm


nm


nm


nm

Consolidated operating (loss) income

(49,646
)


10,072



(21,683
)

nm


129
%

nm


131
%
Continuing

(49,646
)


14,686



(22,355
)

nm


122
%

nm


124
%
Discontinued

$-


($4,614
)

$672


nm


nm


nm


nm














Operating (loss) income margin (%)









South African transaction processing

(13.1
%)


6.7
%


(74.6
%)





International transaction processing

6.1
%


4.8
%


5.6
%





Financial inclusion and applied technologies

(61.2
%)


25.5
%


8.8
%





Continuing

(61.2
%)


25.5
%


(26.1
%)





Discontinued

nm



nm



45.6
%





Consolidated operating margin

(96.5
%)


6.8
%


(25.1
%)





Continuing

(96.5
%)


9.8
%


(32.6
%)





Discontinued

nm



nm



3.8
%


















(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during Q4 2019 also prevailed during Q4 2018 and Q3 2019.

Fiscal year ended June 30, 2019 and 2018






Change - actual

Change – constant exchange rate⁽¹⁾
Key segmental data, in ’000, except margins
F2019

F2018

F2019 vs F2018

F2019 vs F2018
Revenue:








South African transaction processing
$96,038


$268,047


(64
%)

(60
%)
International transaction processing

148,268



180,027


(18
%)

(7
%)
Financial inclusion and applied technologies

146,184



221,906


(34
%)

(26
%)
Continuing

89,847



221,906


(60
%)

(54
%)
Discontinued

56,337



-


nm


nm

Subtotal: Operating segments

390,490



669,980


(42
%)

(34
%)
Intersegment eliminations and revenue refund

(29,500
)


(57,091
)

(48
%)

(42
%)
Consolidated revenue

360,990



612,889


(41
%)

(34
%)
Continuing

304,653



612,889


(50
%)

(44
%)
Discontinued
$56,337


$0


nm


nm








Operating (loss) income:






South African transaction processing
($30,771
)

$42,796


nm


nm

International transaction processing

2,837



(12,478
)

nm


nm

Financial inclusion and applied technologies

(14,758
)


55,372


nm


nm

Continuing

(39,158
)


55,372


nm


nm

Discontinued

24,400



-


nm


nm

Subtotal: Operating segments

(42,692
)


85,690


nm


nm

Corporate/Eliminations

(70,816
)


(26,741
)

165
%

198
%
Continuing

(58,097
)


(22,127
)

163
%

195
%
Discontinued

(12,719
)


(4,614
)

176
%

210
%
Consolidated operating (loss) income

(113,508
)


58,949


nm


nm

Continuing

(125,189
)


63,563


nm


nm

Discontinued
$11,681


($4,614
)

nm


nm








Operating (loss) income margin (%)






South African transaction processing

(32.0
%)


16.0
%



International transaction processing

1.9
%


(6.9
%)



Financial inclusion and applied technologies

(10.1
%)


25.0
%



Continuing

(43.6
%)


25.0
%



Discontinued

43.3
%


nm




Consolidated operating margin

(31.4
%)


9.6
%



Continuing

(41.1
%)


9.6
%



Discontinued

20.7
%


nm











(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during fiscal 2019 also prevailed during fiscal 2018.

(Loss) Earnings from equity-accounted investments:

The table below presents the relative earnings (loss) from our equity-accounted investments:


Q4 2019

Q4 2018^(R)

% change

F2019

F2018^(R)

% change
Bank Frick
$353


($1,581
)

nm


($1,542
)

($606
)

154
%
Share of net income

493



(1,033
)

nm



1,109



201


452
%
Amortization of intangible assets, net of deferred tax

(140
)


(144
)

(3
%)


(567
)


(403
)

41
%
Other

-



(404
)

nm



(2,084
)


(404
)

416
%
DNI⁽¹⁾

865



1,803


(52
%)


865



7,005


(88
%)
Share of net income

1,380



2,642


(48
%)


1,380



9,510


(85
%)
Amortization of intangible assets, net of deferred tax

(515
)


(839
)

(39
%)


(515
)


(2,505
)

(79
%)
Finbond⁽²⁾

953



4,093


(77
%)


2,828



5,194


(46
%)
Other

(351
)


(107
)

nm



(669
)


4


nm

Earnings from equity-accounted investments
$1,820


$4,208


(57
%)

$1,482


$11,597


(87
%)

(R) Finbond results have been restated to correct a misstatement.
(1) DNI was included as an equity-accounted investment from August 1, 2017 until June 30, 2018, the date upon which we obtained control and commenced consolidation of DNI, and then again from March 31, 2019. DNI is included in our Financial inclusion and applied technologies operating segment from the acquisition date.
(2) Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first quarter and its annual results during our fourth quarter and we record those results in our results during those quarters.

Net 1 UEPS Technologies, Inc.

Attachment B

Reconciliation of GAAP operating (loss) income to negative EBITDA and adjusted negative EBITDA:

Three months and year ended June 30, 2019 and 2018


Three months ended June 30,

Year ended June 30,

2019

2018

2019

2018











Operating (loss) income - GAAP
(49,646
)

10,072

(113,508
)

58,949







Depreciation and amortization
6,821


8,454

37,349


35,484

Impairment loss
6,249


1,052

19,745


20,917

(Negative) EBITDA
(36,576
)

19,578

(56,414
)

115,350

Impact of accrual of implementation costs to be refunded to SASSA
34,039


-

34,039


-

Retrenchment costs
1,026


-

6,269


-

Transaction costs
762


109

3,485


2,396

Refund of Korean indirect taxes
-


-

-


(2,545
)
Loss resulting from acquisition of DNI
-


4,614

-


4,614

Non-recurring Mastertrading allowance for doubtful accounts
-


-

-


7,803

(Loss) Profit on disposal of subsidiary
-


-

-


(463
)
Adjusted (negative) EBITDA
(749
)

24,301

(12,621
)

127,155

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

Three months ended June 30, 2019 and 2018


Net (loss) income (USD’000)

(L)EPS, basic (USD)

Net (loss) income (ZAR’000)

(L)EPS, basic (ZAR)

2019

2018

2019

2018

2019

2018

2019

2018




























GAAP
(183,694
)

2,766

(3.23
)

0.05

(2,624,695
)

31,660

(46.21
)

0.55












Impairment loss
6,249


1,052




89,288


14,442



Loss on disposal of DNI
631


-




9,016


-



Intangible asset amortization, net
2,785


2,261




39,807


25,883



Retrenchment costs, net
739


-




10,621


-



Stock-based compensation charge
(1,370
)

597




(19,575
)

6,833



Transaction costs
762


189




10,888


2,163



Intangible asset amortization, net related to equity accounted investments
655


983




9,359


11,251



Facility fees for debt
115


122




1,643


1,396



Loss on resulting from acquisition of DNI
-


4,614





63,332



Fundamental
(173,128
)

12,584

(3.05
)

0.22

(2,473,648
)

156,960

(43.55
)

2.76

Fiscal year ended June 30, 2019 and 2018


Net (loss) income (USD’000)

(L)EPS, basic (USD)

Net (loss) income (ZAR’000)

(L)EPS, basic (ZAR)

2019

2018

2019

2018

2019

2018

2019

2018






















GAAP
(307,618
)

64,246


(5.42
)

1.13

(4,389,554
)

815,610


(77.34
)

14.36










Intangible asset amortization, net
16,290


9,385





232,452


119,126




Impairment loss
19,745


20,917





281,751


265,543




Loss on disposal of DNI
5,771


-





82,349


-




Retrenchment costs, net
4,514


-





63,708


-




Intangible asset amortization, net related to non-controlling interest
(2,737
)

-





(39,054
)

-




Transaction costs
3,485


2,239





49,727


28,424




Accreted interest on DNI contingent consideration
1,848






26,360





Stock-based compensation charge
393


2,607





5,608


33,096




Intangible asset amortization, net related to equity accounted investments
1,082


2,908





15,439


36,917




Facility fees for debt
321


589





4,580


7,477




Non-recurring Mastertrading allowance for doubtful accounts
-


7,803





-


99,060




Loss resulting from acquisition of DNI
-


4,614





-


63,332




Refund related to litigation finalized in Korea, net
-


(1,985
)




-


(25,200
)



Change in US tax rate
-


860





-


10,918




Profit on disposal of subsidiary
-


(463
)




-


(5,878
)



Fundamental
(256,906
)

113,720


(4.53
)

2.00

(3,666,634
)

1,448,425


(64.60
)

25.50

Net 1 UEPS Technologies, Inc.

Attachment C

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

Three months ended June 30, 2019 and 2018


2019

2018




Net (loss) income (USD’000)
(183,694
)

2,766

Adjustments:



Impairment loss
6,249


1,052

Loss resulting from acquisition of DNI
631


-

Loss on acquisition of DNI


4,614

Profit on sale of property, plant and equipment
(73
)

(31
)
Tax effects on above
20


9





Net (loss) income used to calculate headline earnings (USD’000)
(176,867
)

8,410





Weighted average number of shares used to calculate net income per share basic (loss) earnings and headline (loss) earnings per share basic (loss) earnings (‘000)
56,804


56,773





Weighted average number of shares used to calculate net income per share diluted (loss) earnings and headline (loss) earnings per share diluted (loss) earnings (‘000)
56,804


56,816





Headline (loss) earnings per share:



Basic, in USD
(3.11
)

0.15

Diluted, in USD
(3.11
)

0.15

Fiscal year ended June 30, 2019 and 2018


2019

2018




Net (loss) income (USD’000)
(307,618
)

64,246

Adjustments:



Impairment loss
19,745


20,917

Loss (Profit) on sale of business
5,771


(463
)
Loss resulting from acquisition of DNI
-


4,614

Profit on sale of property, plant and equipment
(486
)

40

Tax effects on above
136


(11
)




Net (loss) income used to calculate headline earnings (USD’000)
(282,452
)

89,343





Weighted average number of shares used to calculate net income per share basic (loss) earnings and headline (loss) earnings per share basic (loss) earnings (‘000)
56,760


56,807





Weighted average number of shares used to calculate net income per share diluted (loss) earnings and headline (loss) earnings per share diluted (loss) earnings (‘000)
56,778


56,858





Headline (loss) earnings per share:



Basic, in USD
(4.98
)

1.57

Diluted, in USD
(4.97
)

1.57

Calculation of the denominator for headline diluted (loss) earnings per share


Q4 ‘19

Q4 ‘18

F2019

F2018








Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP
56,804

56,773

56,760

56,807
Effect of dilutive securities under GAAP
-

43

18

51
Denominator for headline diluted (loss) earnings per share
56,804

56,816

56,778

56,858

Weighted average number of shares used to calculate headline (loss) 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 (loss) earnings per share diluted because we do not use the two-class method to calculate headline (loss) earnings per share diluted.

Company Name:	Net 1 UEPS Technologies Inc.
Stock Symbol:	UEPS
Market:	NASDAQ
Website:	net1.com

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