JOHANNESBURG, South Africa, Net 1 UEPS Technologies, Inc.(Nasdaq: UEPS; JSE: NT1) today released preliminary unaudited results for the fourth quarter and full year fiscal 2019.
Preliminary Q4 2019 Highlights :
Revenue of $71.2 million, GAAP EPS of $(2.63) and Fundamental EPS of $(2.45); Fundamental EPS of $(2.45) includes $125.4 million, or $2.21 per share of non-cash fair value loss adjustments for Cell C, net of tax, and $13.7 million, or $0.24 per share for impairments of the Cedar Cellular note and goodwill; Total revenue from continuing operations in constant currency grew 3.5% compared to Q3 2019, while adjusted EBITDA loss improved from ($9.4) million in Q3 2019 to a loss of $(0.7) million in Q4 2019; South African operations achieved EBITDA breakeven in July 2019; active EPE accounts remained stable at 1.1 million; and KSNET revenue grew 11% compared to Q3 2019 in constant currency, while EBITDA margin improved 200 basis points; “We are pleased to report that we have stabilized our business in South Africa, and we are focused on returning to growth and profitability in fiscal 2020.Going forward, we are returning to our roots of providing innovative and affordable financial technology and services offerings to the unbanked and underbanked, as well as leveraging our deep expertise in cryptography and secure transactions to introduce new and relevant products,” said Herman Kotzé, CEO.“We also continue to review our portfolio of investments for those that do not fit our strategic focus or give us a path to control, and will accordingly be evaluated for monetization.Building on our disposal of DNI which started in Q3 2019, the Company has now received multiple indicative offers for KSNET in Korea, and we have engaged FT Partners to assist the Board to determine the appropriate course of action.
With the challenges of the last year and the required repositioning behind us, we are well positioned to unlock shareholder value and improve capital allocation going forward.”
“As we look to fiscal 2020, our progress should be benchmarked to our Q4 2019 results rather than year-over-year comparisons given the contract termination and business disposals over the course of fiscal 2019.In fiscal 2020, we expect to generate adjusted EBITDA of at least $16 million using a constant currency base of ZAR 14.27/$1, driven by growth in South Korea and South Africa, and reduced losses in our IPG business,” said Alex Smith, CFO.
“We are working closely with Cell C and its stakeholders to improve its short-term liquidity challenges, conclude its recapitalization and as a result, create a long-term sustainable business.Our other equity investments continued to perform in line, or ahead of expectations during the quarter.”
Preliminary Summary Financial Metrics
Three months ended June 30, 2019 2018
As
restated (1) % change
in USD % change
in ZAR (All figures in USD ‘000s except per share data) Revenue 71,181 149,194 (52%) (40%) GAAP operating (loss) income (15,607) 10,072 nm nm Adjusted (negative) EBITDA (2) (749) 24,301 nm nm GAAP (loss) earnings per share ($) (2.63) 0.05 nm nm Continuing (2.63) 0.10 nm nm Discontinued – (0.05) nm nm Fundamental (loss) earnings per share ($) (2) (2.45) 0.22 nm nm Fully-diluted shares outstanding (‘000’s) 56,804 56,816 (0%) Average period USD/ ZAR exchange rate 14.29 11.45 25% Non-cash adjustments included (before tax impact): 140,827 12,834 997% Allowance for doubtful finance loans receivables 1,148 1,798 (36%) Change in fair value of equity securities 125,360 5,370 2,234% Loss on disposal of DNI 631 – nm Loss on acquisition of DNI – 4,614 nm Impairment loss 6,249 1,052 494% Impairment of Cedar Cell note 7,439 – nm
Fiscal year ended June 30,
2019 2018
As
restated (1) % change
in USD % change
in ZAR (All figures in USD ‘000s except per share data) Revenue 380,699 612,889 (38%) (30%) GAAP operating (loss) income (79,469) 58,949 nm nm Adjusted (negative) EBITDA (2) (12,621) 127,155 nm nm GAAP (loss) earnings per share ($) (4.82) 1.13 nm nm Continuing (4.80) 1.09 nm nm Discontinued (0.02) 0.04 nm nm Fundamental (loss) earnings per share ($) (2) (3.93) 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 and fundamental (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 preliminary Q4 2019 and Q4 2018 results
Decline in revenue: Our revenues declined 41% in ZAR primarily due to the expiration of our SASSA contract, 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, 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; and Adverse foreign exchange movements: The U.S.
dollar appreciated 24% against the ZAR and 10% against the KRW during Q4 2019, which adversely impacted our reported results.Preliminary 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 decreased primarily due to a reversal of stock compensation charge of $1.8 million related to stock options and restricted stock forfeited, partially offset by higher non-employee director expenses, transaction-related expenditures and external service provider fees.
Cash flow and liquidity
At June 30, 2019, our cash and cash equivalents were $46.5 million and comprised of KRW-denominated balances of KRW 30.1 billion ($26.1 million), ZAR-denominated balances of ZAR 189.9 million ($13.5 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 $1.9 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.
Operating metrics and supplemental presentation for Q4 2019 Results
A supplemental presentation and operating metrics for preliminary Q4 2019 will be posted to the Investor Relations page of our website, ir.net1.com, prior to our earnings call on Friday, September 27, 2019.
Conference Call
We will host a conference call to review these results on September 27, 2019, at 8:00 a.m.Eastern Time.To participate in the call, dial 1-508-924-4326 (US and Canada), 0333-300-1418 (U.K.only) or 080-020-0648 (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 October 20, 2019.
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 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 that involve known and unknown risks and uncertainties, including statements concerning our preliminary financial results for our fourth quarter and full year ended June 30, 2019.The preliminary financial results for our fourth quarter and full year 2019 included in this press release represent the most current information available to management.Our actual results, when disclosed in our Form 10-K, may differ from these preliminary results as a result of the completion of our financial closing procedures, final adjustments, completion of the review by our independent registered public accounting firm and other developments that may arise between now and the disclosure of the final results.A discussion of various factors that may cause our preliminary actual results, levels of activity, performance or achievements to differ materially from those expressed in such 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: [email protected]
Media Relations Contact:
Bridget von Holdt
Business Director – BCW
Phone: +27-82-610-0650
Email: [email protected]
NET 1 UEPS TECHNOLOGIES, INC.Preliminary Unaudited Consolidated Statements of Operations Unaudited Unaudited 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 $ 71,181 $ 149,194 $ 380,699 $ 612,889 EXPENSE Cost of goods sold, IT processing, servicing and support 41,668 78,030 215,348 304,536 Selling, general and administration 32,050 51,586 187,726 193,003 Depreciation and amortization 6,821 8,454 37,349 35,484 Impairment loss 6,249 1,052 19,745 20,917 OPERATING (LOSS) INCOME (15,607 ) 10,072 (79,469 ) 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, net of impairment (6,150 ) 2,982 (5,564 ) 17,885 Interest income 1,289 2,982 7,229 17,885 Impairment of Cedar Cellular note (7,439 ) – (12,793 ) – INTEREST EXPENSE 1,694 2,069 10,724 8,941 (LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE (149,442 ) 5,615 (268,987 ) 100,366 INCOME TAX (BENEFIT) EXPENSE 2,023 8,840 3,725 48,597 NET (LOSS) INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS (151,465 ) (3,225 ) (272,712 ) 51,769 EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS 1,820 4,208 1,482 11,597 NET (LOSS) INCOME (149,645 ) 983 (271,230 ) 63,366 Continuing (149,645 ) 3,794 (273,920 ) 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 $ (149,655 ) 2,766 (273,579 ) 64,246 Continuing (149,655 ) 5,577 (272,568 ) 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 (2.63 ) 0.05 (4.82 ) 1.13 Continuing (2.63 ) 0.10 (4.80 ) 1.09 Discontinued – (0.05 ) (0.02 ) 0.04 Diluted (loss) earnings attributable to Net1 shareholders (2.63 ) 0.05 (4.82 ) 1.13 Continuing (2.63 ) 0.10 (4.80 ) 1.09 Discontinued – (0.05 ) (0.02 ) 0.04 (R) Certain amounts have been restated to correct an insignificant misstatement.
NET 1 UEPS TECHNOLOGIES, INC.Preliminary Unaudited Consolidated Balance Sheets Unaudited Unaudited (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 32,410 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 140,628 133,486 Settlement obligations 63,479 149,047 Total current liabilities 204,107 282,533 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 211,796 372,745 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 562,615 836,194 TOTAL NET1 EQUITY 353,468 640,986 NON-CONTROLLING INTEREST – 95,911 TOTAL EQUITY 353,468 736,897 TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY $ 672,936 $ 1,217,314 (R) Certain amounts have been restated to correct an insignificant misstatement.
NET 1 UEPS TECHNOLOGIES, INC.Preliminary Unaudited Condensed Consolidated Statements of Cash Flows 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 $ (149,645 ) $ 983 $ (271,230 ) $ 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 ) 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.
(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 the Company’s 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
Preliminary 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 (1,736) (12,228) (1,898) (86%) (9%) (82%) (8%) Consolidated revenue 71,181 149,194 86,484 (52%) (18%) (40%) (17%) Continuing 71,181 149,194 68,642 (52%) 4% (40%) 5% Discontinued $- $0 $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 (4,593) (10,039) (13,865) (54%) (67%) (43%) (67%) Continuing (4,593) (5,425) (6,399) (15%) (28%) 6% (28%) Discontinued – (4,614) (7,466) nm nm nm nm Consolidated operating (loss) income (15,607) 10,072 (21,683) nm (28%) nm (27%) Continuing (15,607) 14,686 (22,355) nm (30%) nm (30%) 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 (21.9%) 6.8% (25.1%) Continuing (21.9%) 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 (9,791) (57,091) (83%) (81%) Consolidated revenue 380,699 612,889 (38%) (30%) Continuing 324,362 612,889 (47%) (41%) Discontinued $56,337 $ – 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 (36,777) (26,741) 38% 55% Continuing (24,058) (22,127) 9% 22% Discontinued (12,719) (4,614) 176% 210% Consolidated operating (loss) income (79,469) 58,949 nm nm Continuing (91,150) 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 (20.9%) 9.6% Continuing (28.1%) 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 preliminary 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 (15,607 ) 10,072 (79,469 ) 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 (2,537 ) 19,578 (22,375 ) 115,350 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 preliminary 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 (149,655 ) 2,766 (2.63 ) 0.05 (2,138,315 ) 31,660 (37.64 ) 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 (139,089 ) 12,584 (2.45 ) 0.22 (1,987,268 ) 156,960 (34.98 ) 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 (273,579 ) 64,246 (4.82 ) 1.13 (3,903,834 ) 815,610 (68.78 ) 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 (2,736 ) – (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 (222,866 ) 113,720 (3.93 ) 2.00 (3,180,914 ) 1,448,425 (56.04 ) 25.50
Net 1 UEPS Technologies, Inc.
Attachment C
Reconciliation of preliminary 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) (149,655 ) 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) (142,828 ) 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 (2.51 ) 0.15 Diluted, in USD (2.51 ) 0.15 Fiscal year ended June 30, 2019 and 2018
2019 2018 Net (loss) income (USD’000) (273,579 ) 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) (248,413 ) 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 (4.38 ) 1.57 Diluted, in USD (4.38 ) 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..
