JOHANNESBURG, South Africa, Aug. 29 /PRNewswire-FirstCall/ -- Net 1 UEPS Technologies, Inc. ("Net1" or the "Company") today announced results for the fourth quarter and year ended June 30, 2007.
Results Three months ended June 30, 2007 and 2006 GAAP and GAAP Fundamental GAAP Fundamental Fundamental Variance Variance Q4 2007 Q4 2007(1) Q4 2006 % % Net income (US$'000) 17,531 19,086 15,545 13% 23% Earnings per share, basic (US cents) 31 33 27 15% 22% Revenue (US$'000) 60,196 60,196 48,198 25% 25% (1) - Fundamental net income and earnings per share is GAAP net income and earnings per share excluding the effects related to a potential acquisition that the Company ultimately determined not to pursue, the amortization of acquisition-related intangible assets, net of deferred taxes, and stock-based compensation charges.
Since the Company's reporting currency is the U.S. dollar ("USD") but its functional currency is the South African rand ("ZAR"), and due to the significant impact of currency fluctuations between the USD and the ZAR on the Company's results of operations, the Company also analyzes its results of operations in ZAR to assist investors in understanding the changes in the underlying trends of its business. During the three months and year ended June 30, 2007, the ZAR was significantly weaker against the USD than during the same periods in the prior year. The impact of these changes on results of operations is shown under the column "Change" in the tables of key metrics included in Attachment A at the end of this press release.
GAAP and GAAP Fundamental GAAP Fundamental Fundamental Variance Variance Q4 2007 Q4 2007 Q4 2006 % % Net income (ZAR'000) 124,793 135,871 100,149 25% 36% Earnings per share, basic (ZAR cents) 219 238 174 26% 37% Revenue (ZAR'000) 428,500 428,500 310,514 38% 38% Year ended June 30, 2007 and 2006 GAAP and GAAP Fundamental GAAP YE Fundamental Fundamental Variance Variance 2007 YE 2007 YE 2006 % % Net income (US$'000) 63,679 69,808 59,232 8% 18% Earnings per share, basic (US cents) 112 123 105 7% 17% Revenue (US$'000) 223,968 223,968 196,098 14% 14% GAAP and GAAP Fundamental GAAP YE Fundamental Fundamental Variance Variance 2007 YE 2007 YE 2006 % % Net income (ZAR'000) 459,126 503,315 379,837 21% 33% Earnings per share, basic (ZAR cents) 806 884 673 20% 31% Revenue (ZAR'000) 1,614,809 1,614,809 1,257,525 28% 28% Use of Non-GAAP measures
On July 3, 2006, the Company acquired Prism Holdings Limited ("Prism") and has combined its results with those of the Company. Effective October 1, 2006, Prism acquired the remaining 25.1% of EasyPay (Pty) Ltd ("EasyPay"). Under United States generally accepted accounting principles ("GAAP"), the Company is required to fair value all intangible assets on the date of acquisition and amortize these intangible assets over their expected useful lives. In addition, under GAAP, the Company is required to measure the fair value of options granted to Prism employees and other employees and recognize a stock- based compensation charge over the requisite service period. The Company's GAAP net income and earnings per common share and linked unit for the three months and year ended June 30, 2007 include this amortization of Prism and EasyPay intangibles acquired and stock-based compensation charge related to these options, as well as expenses relating to an acquisition that the Company ultimately determined not to pursue. The Company excludes these items when calculating fundamental net income and earnings per common share and linked unit because management believes that these adjustments enhance its own evaluation, as well as the investor's understanding, of the Company's performance. Attachment C presents a reconciliation between GAAP and fundamental net income and earnings per common share and linked unit.
Financial results excluding Prism
The Company's consolidated financial results excluding Prism's consolidated financial results are attached as Attachment B.
Fourth Quarter Highlights -- $250.0 million in transactions were processed through the Company's merchant acquiring system in the fourth quarter of fiscal 2007, compared to $189.6 million in the fourth quarter of fiscal 2006. During the three months ended June 30, 2007, 3,460,025 grants were paid through the Company's terminal base, compared to 2,554,616 during the three months ended June 30, 2006; -- 4,357 terminals were in use at 2,598 participating UEPS retail locations as of June 30, 2007, compared with 4,038 terminals in use at 2,381 locations as of June 30, 2006. This increase in the number of terminals and participating UEPS retail locations is largely due to the broadening of the terminal base in the NorthWest province. The number of transactions processed per terminal increased from 643 during the three months ended June 30, 2006, to 811 during the three months ended June 30, 2007; -- UEPS transaction-based activities effected 11.4 million payments during the fourth quarter of fiscal 2007, a 4% increase over the number of payments effected during the fourth quarter of fiscal 2006; -- A total of 3,812,273 UEPS smart card-based accounts were active at June 30, 2007, compared to 3,653,696 active accounts at June 30, 2006; -- EasyPay processed 114,177,612 transactions and generated an average fee per transaction of $0.03; and; -- Award of the National Switch and Smart Card Payment System tender by the Central Bank of Ghana. Comments and Outlook
"Once again, I am pleased with our overall performance, specifically with the quality of our earnings, our growth and our cash conversion rate," said Dr. Serge Belamant, chairman and chief executive officer of Net1. "I am awaiting the outcome of the SASSA tender evaluation with cautious optimism; we have worked very hard and have proposed a national solution that government can rely on to deliver welfare grants in the most secure, efficient and dignified manner. Our track record in the five provinces in which we pay more than four million people monthly is a testament to the quality and industrial strength of our technological and operational abilities. We have also integrated Prism into the greater Net1 family over the last twelve months and the benefits we had anticipated are currently being realized. As a result, I expect our newly patented UEPS mobile payment system to play a material role in the future growth of Net1 as it will allow for the seamless bridging of payments between first and third world economies. Finally, we have appointed a number of sales, support and operational executives to bolster our fast growing international operations. It is also significant that more than 40 IT specialists are now working full time on the enhancement, customization and maintenance of our UEPS flagship which is fast becoming the new standard for payments in the developing world. The future success of Net1 will, in my view, be directly proportional to our international market penetration. Successes such as our Ghanaian tender demonstrate our ability to achieve this goal in the near term. I am confident about the prospects of Net1 over the next years as I believe that we are fast reaching the tipping point where the UEPS is no longer just a nice to have, but the essence of any growing economy," he concluded.
"Our guidance for the 2008 fiscal year is based on the assumption that our current business activities will continue as usual," said Herman Kotze, chief financial officer of Net1. "On this basis, and assuming a constant currency rate, we anticipate our fundamental earnings per share growth rate to exceed 20% for fiscal 2008," he concluded.
Conference call
Net1 will host a conference call to review fourth quarter and annual results on August 30, 2007 at 8:00 a.m. Eastern Daylight Time. To participate in the call, dial 1-866-752-6302 (U.S. only), 1-866-802-2463 (Canada only), 0-800-917-8183 (U.K. only) or 0-800-203-599 (South Africa only) five minutes prior to the start of the call. The passcode is "Net1." The call will also be webcast on the Net1 homepage, http://www.net1ueps.com/. Please click on the webcast link at least 10 minutes prior to the call. A replay of the call may be accessed through the Net1 website through September 20, 2007.
About Net1 (http://www.net1ueps.com/)
Net1 provides its universal electronic payment system, or UEPS, as an alternative payment system for the unbanked and under-banked populations of developing economies. The Company believes that it is the first company worldwide to implement a system that can enable the estimated four billion people who generally have limited or no access to a bank account to enter affordably into electronic transactions with each other, government agencies, employers, merchants and other financial service providers. To accomplish this, the Company has developed and deployed the UEPS. This system uses secure smart cards that operate in real-time but offline, unlike traditional payment systems offered by major banking institutions that require immediate access through a communications network to a centralized computer. This offline capability means that users of Net1's system can enter into transactions at any time with other cardholders in even the most remote areas so long as a portable offline smart card reader is available. In addition to payments and purchases, Net1's system can be used for banking, health care management, international money transfers, voting and identification.
The Company also focuses on the development and provision of secure transaction technology, solutions and services. The Company's core competencies around secure online transaction processing, cryptography and integrated circuit card (chip/smart card) technologies are principally applied to electronic commerce transactions in the telecommunications, banking, retail, petroleum and utilities market sectors. These technologies form the cornerstones of the "trusted transactions" environment of Prism, a South African based subsidiary of the Company, and provide the Company with the building blocks for developing secure end-to-end payment solutions.
This announcement contains forward-looking statements pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, implied or inferred by these forward-looking statements, such as implementation of the Company's Prism strategy, product demand, market and customer acceptance, the effect of economic conditions, competition, pricing, development difficulties, foreign currency risks, costs of capital, the ability to consummate and integrate acquisitions, and other risks detailed in the Company's SEC filings. The Company undertakes no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.
NET 1 UEPS TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS for the years ended June 30, 2007, 2006 and 2005 2007 2006 2005 (In thousands, except per share data) REVENUE $223,968 $196,098 $ 176,290 Sale of goods 27,716 17,867 11,885 Loan-based interest and fees received 11,460 15,017 19,069 Services rendered 184,792 163,214 145,336 EXPENSE Cost of goods sold, IT processing, servicing and support 54,417 50,619 50,682 Selling, general and administration 61,625 48,627 45,897 Depreciation and amortization 11,050 5,710 6,591 Costs related to public offering and Nasdaq listing - 1,529 1,817 OPERATING INCOME 96,876 89,613 71,303 INTEREST INCOME, net 4,401 5,889 2,389 INCOME BEFORE INCOME TAXES 101,277 95,502 73,692 INCOME TAX EXPENSE 37,574 36,653 29,666 NET INCOME BEFORE MINORITY INTEREST AND EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS 63,703 58,849 44,026 MINORITY INTEREST 205 - - EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS 181 383 536 NET INCOME $ 63,679 $ 59,232 $ 44,562 Net income per share Basic earnings - common stock and linked units 1.12 1.05 0.81 Diluted earnings - common stock and linked units 1.11 1.03 0.80 NET 1 UEPS TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS as of June 30, 2007 and 2006 2007 2006 (In thousands, except share data) ASSETS CURRENT ASSETS Cash and cash equivalents $ 171,727 $ 189,735 Pre-funded social welfare grants receivable 26,817 17,223 Accounts receivable, net 30,503 21,219 Finance loans receivable, net 5,755 6,713 Deferred expenditure on smart cards 507 656 Inventory 5,645 1,935 Deferred income taxes 7,028 3,237 Total current assets 247,982 240,718 LONG-TERM RECEIVABLES 54 946 PROPERTY, PLANT AND EQUIPMENT, net 7,582 3,757 EQUITY-ACCOUNTED INVESTMENTS 2,992 4,986 GOODWILL 85,871 13,923 INTANGIBLE ASSETS, net 31,609 5,649 TOTAL ASSETS 376,090 269,979 LIABILITIES CURRENT LIABILITIES Bank overdraft 16 20 Accounts payable 5,879 2,073 Other payables 34,457 28,575 Income taxes payable 14,346 12,455 Total current liabilities 54,698 43,123 DEFERRED INCOME TAXES 36,219 17,846 INTEREST BEARING LIABILITIES - outside shareholders loans 4,100 - COMMITMENTS AND CONTINGENCIES - - TOTAL LIABILITIES 95,017 60,969 SHAREHOLDERS' EQUITY COMMON STOCK Authorized shares: 83,333,333 with $0.001 par value; Issued and outstanding shares: 2007: 51,730,547; 2006: 49,744,852 52 50 SPECIAL CONVERTIBLE PREFERRED STOCK Authorized shares: 50,000,000 with $0.001 par value; Issued and outstanding shares: 2007: 5,656,110; 2006: 7,315,099 5 7 B CLASS PREFERENCE SHARES Authorized shares: 330,000,000 with $0.001 par value; Issued and outstanding shares (net of shares held by the Company): 2007: 41,676,625; 2006: 53,900,752 7 9 ADDITIONAL PAID-IN CAPITAL 112,167 105,792 TREASURY SHARES, AT COST: 2007: 299,821; 2006: 147,973 (7,795) (3,958) ACCUMULATED OTHER COMPREHENSIVE LOSS (3,915) (9,763) RETAINED EARNINGS 180,552 116,873 TOTAL SHAREHOLDERS' EQUITY 281,073 209,010 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 376,090 $ 269,979 NET 1 UEPS TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended June 30, 2007, 2006 and 2005 2007 2006 2005 (In thousands) Cash flows from operating activities Net income $ 63,679 $ 59,232 $ 44,562 Adjustments to reconcile net income to net cash provide by operating activities: Depreciation and amortization 11,050 5,710 6,591 Earnings from equity-accounted investments (181) (383) (536) Fair value adjustment related to financial liabilities 161 6 49 Fair value adjustments of FAS 133 derivative instruments 25 (90) (507) Interest payable 234 - - (Profit) Loss on disposal of property, plant and equipment (286) (210) 14 Loss on disposal of equity-accounted investment - Permit Group 2 (Pty) Ltd 586 - - Profit on disposal of business - (10) - Minority interest 205 - - Stock compensation charge, net of forfeitures 910 150 - Write down of property, plant and equipment - 314 - Other - - (34) Increase in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable (9,469) (13,870) (5,462) Decrease in deferred expenditure on smart cards 155 3,199 1,063 Increase in inventory (2,203) (109) (979) (Decrease) Increase in accounts payable and other payables (1,470) 13,183 (1,850) Increase (Decrease) in taxes payable 268 (471) (10,723) Increase in deferred taxes 1,802 9,126 5,954 Net cash provided by operating activities 65,466 75,777 38,142 Cash flows from investing activities Capital expenditures (3,745) (1,821) (3,436) Proceeds from disposal of property, plant and equipment 685 336 39 Proceeds from disposal of business - 10 - Proceeds from disposal of equity-accounted investment - Permit Group 2 (Pty) Ltd 2,301 - - Long-term receivables and loan to equity- accounted investment repaid 1,622 - - Acquisition of and advance of loans to (360) equity-accounted investments (4,030) - Acquisition of Prism Holdings Limited and remaining 25.1% of EasyPay, net of cash acquired (92,043) - - Net cash used in investing activities (91,540) (5,505) (3,397) Cash flows from financing activities Proceeds from issue of common stock 909 33,661 - Acquisition of treasury stock (1,000) (3,958) - Proceeds from bank overdraft 84,657 20 - Repayment of bank overdraft (84,854) - (19) Proceeds from interest bearing liabilities 3,513 - - Net cash provided by (used in) financing activities 3,225 29,723 (19) Effect of exchange rate changes on cash 4,841 (18,009) (7,259) Net (decrease) increase in cash and cash equivalents (18,008) 81,986 27,467 Cash and cash equivalents - beginning of year 189,735 107,749 80,282 Cash and cash equivalents at end of year $ 171,727 $ 189,735 $ 107,749 Net 1 UEPS Technologies, Inc. Attachment A
Key metrics and statistics at and for the three months ended June 30, 2007 and 2006:
Three months ended June 30, 2007 and 2006 Three months ended Year Three months ended March ended June 30, Change 31, June 30, Constant 2007 2006 Exchange 2007 2006 US$ US$ Actual Rate(1) US$ US$ Key statement of operations data, in '000, except EPS Revenue $60,196 $48,198 25% 38% $61,275 $196,098 Operating income 24,491 23,001 6% 18% 29,068 89,613 Income tax expense 8,647 9,591 (10)% 0% 11,397 36,653 Net income $17,531 $15,545 13% 25% $18,253 $59,232 Earnings per share, Basic (cents) 31 27 15% 27% 32 105.8 Diluted (cents) 31 27 15% 27% 32 103.3 Fundamental earnings per share, Basic (cents) 33 27 22% 35% 34 105.8 Key segmental data, in '000, except margins Revenue: Transaction- based activities $35,834 $30,346 18% 30% $40,962 $117,186 Smart card accounts 8,840 9,354 (5)% 4% 8,655 36,220 Financial services 2,605 3,673 (29)% (22)% 2,858 16,129 Hardware, software and related technology sales 12,917 4,825 168% 196% 8,800 26,563 Total consolidated revenue $60,196 $48,198 25% 38% $61,275 $196,098 Consolidated operating income (loss): Transaction- based activities $17,986 $16,576 9% 20% $24,869 $60,653 Smart card accounts 4,018 4,252 (6)% 4% 3,934 16,464 Financial services 593 1,475 (60)% (56)% 930 6,929 Hardware, software and related technology sales 3,494 3,331 5% 16% 991 16,721 Corporate/ Eliminations (1,600) (2,633) (39)% (33)% (1,656) (11,154) Total operating income $24,491 $23,001 6% 18% $29,068 $89,613 Operating income margin (%) Transaction- based activities 50% 55% 61% 52% Smart card accounts 45% 45% 45% 45% Financial services 23% 40% 33% 43% Hardware, software and related technology sales 27% 69% 11% 63% Overall operating margin 41% 48% 47% 46% June 30, June 30, 2007 2006 Key balance sheet data, in '000 Cash and cash equivalents $171,727 $189,735 (9)% Total current assets 247,982 240,718 3% Total assets 376,090 269,979 39% Total current liabilities 54,698 43,123 27% Total shareholders' equity $281,073 $209,010 34% (1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the fourth quarter of fiscal 2007 also prevailed during the fourth quarter of fiscal 2006. Three months ended June 30, 2007 and 2006 (continued) Three months Three months ended ended Year ended June 30, Change March 31, June 30, 2007 2006 2007 2006 Additional information: Transaction-based activities: Total number of grants paid: KwaZulu-Nata 5,063,452 4,758,244 6% 5,079,328 18,117,676 Limpopo 2,938,435 2,874,214 2% 2,925,621 11,154,040 North West 869,781 815,746 7% 833,683 3,181,242 Northern Cape 421,102 397,809 6% 417,990 1,585,846 Eastern Cape 2,141,921 2,111,103 1% 2,153,674 8,204,977 11,434,691 10,957,116 4% 11,410,296 42,243,781 Average revenue ZAR ZAR ZAR ZAR per grant paid: KwaZulu-Natal 20.49 20.45 0% 19.35 20.14 Limpopo 16.81 16.21 4% 16.19 15.59 North West 22.30 18.08 23% 21.19 18.10 Northern Cape 18.55 20.46 (9)% 18.62 19.30 Eastern Cape 15.02 11.95 26% 12.89 12.04 UEPS merchant acquiring system: Terminals installed at period end 4,357 4,038 8% 4,179 4,038 Number of participating retail locations at period end 2,598 2,381 9% 2,511 2,381 Value of transactions processed through POS devices during the quarter (in ZAR '000) 1,777,436 1,225,168 45% 1,726,532 1,225,168 Value of transactions processed through POS devices during the completed pay cycles for the quarter (in ZAR '000) 1,777,738 1,213,026 47% 1,634,410 1,213,026 Average number of grants processed per terminal during the quarter 811 643 26% 845 643 Average number of grants processed per terminal during the completed pay cycles for the quarter 810 639 27% 807 639 EasyPay transaction fees: Number of transactions processed 114,177,612 - Average fee per transaction (in ZAR) 0.20 Smart card accounts: Total number of smart card accounts 3,812,273 3,653,696 4% 3,803,150 3,653,696 Hardware, software and related technology sales: Ad hoc significant hardware sales (US$ '000) Nedbank POS's, pin pads, smart cards and other hardware 2,348 2,400 10% - 13,300 SmartSwitch Namibia hardware and software (before consolidation adjustments) - - nm - 3,900 SmartSwitch Botswana hardware and software (before consolidation adjustments) - - nm 56 - Financial services: (US$ '000) Traditional microlending: Finance loans receivable - gross 5,263 7,196 (27)% 7,112 7,169 Allowance for doubtful finance loans receivable (2,773) (3,448) (20)% (4,359) (3,448) Finance loans receivable - net 2,490 3,721 (33)% 2,753 3,721 UEPS-based lending: Finance loans receivable - net and gross (i.e., no provisions) 3,265 2,992 9% 3,457 2,992 Earnings (Loss) from equity accounted investments: (US$ '000) SmartSwitch Namibia: Equity owned 50% 50% 50% 50% Beginning of period (810) (543) (764) - Equity accounted earnings (loss) (1) 56 (55) (74) (586) Foreign currency adjustment (12) 82 28 70 End of period (766) (516) (810) (516) SmartSwitch Botswana: Equity owned 50% 50% 50% 50% Beginning of period (602) - (576) - Equity accounted (loss) (1) 90 - (128) - Foreign currency adjustment (105) - 102 - End of period (617) - (602) - nm - Statistic not meaningful (1) - includes the elimination of unrealized net income
Key metrics and statistics at and for the year ended June 30, 2007 and 2006:
Year ended June 30, 2007 and 2006 Year ended June 30, Change Constant 2007 2006 Exchange US$ US$ Actual Rate(1) Key statement of operations data, in '000, except EPS Revenue $223,968 $196,098 14% 28% Operating income 96,876 89,613 8% 22% Income tax expense 37,574 36,653 3% 15% Net income $63,679 $59,232 8% 21% Earnings per share, Basic (cents) 112 105 7% 20% Diluted (cents) 111 103 8% 21% Fundamental earnings per share, Basic (cents) 123 105 17% 32% Key segmental data, in '000, except margins Revenue: Transaction-based activities $139,006 $117,186 19% 33% Smart card accounts 34,562 36,220 (5)% 7% Financial services 11,241 16,129 (30)% (22)% Hardware, software and related technology sales 39,159 26,563 47% 66% Total consolidated revenue $223,968 $196,098 14% 28% Consolidated operating income (loss): Transaction-based activities $78,785 $60,653 30% 46% Smart card accounts 15,710 16,464 (5)% 7% Financial services 3,351 6,929 (52)% (46)% Hardware, software and related technology sales 6,115 16,721 (63)% (59)% Corporate/ Eliminations (7,085) (11,154) (36)% (29)% Total operating income $96,876 $89,613 8% 22% Operating income margin (%) Transaction-based activities 57% 52% Smart card accounts 45% 45% Financial services 30% 43% Hardware, software and related technology sales 16% 63% Overall operating margin 43% 46% Jun 30, Jun 30, 2007 2006 Key balance sheet data, in '000 Cash and cash equivalents $171,727 $189,735 (9)% Total current assets 247,982 240,718 3% Total assets 376,090 269,979 39% Total current liabilities 54,698 43,123 27% Total shareholders' equity $281,073 $209,010 34% (1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the year ended June 30, 2007 also prevailed during the year ended June 30, 2006. Year ended June 30, Change 2007 2006 Additional information: Transaction-based activities: Total number of grants paid: KwaZulu-Natal 20,080,685 18,117,676 11% Limpopo 11,662,537 11,154,040 5% North West 3,351,477 3,181,242 5% Northern Cape 1,669,037 1,585,846 5% Eastern Cape 8,568,506 8,204,977 4% 45,332,242 42,243,781 7% Average revenue per ZAR ZAR grant paid: KwaZulu-Natal 20.04 20.14 0% Limpopo 16.32 15.59 5% North West 20.73 18.10 15% Northern Cape 18.64 19.30 (3)% Eastern Cape 12.90 12.04 7% UEPS merchant acquiring system: Terminals installed at period end 4,357 4,038 8% Number of participating retail locations at period end 2,598 2,381 9% Value of transactions processed through POS devices during the quarter (in ZAR '000) 1,777,436 1,225,168 45% Value of transactions processed through POS devices during the completed pay cycles for the quarter (in ZAR '000) 1,777,738 1,213,026 47% Average number of grants processed per terminal during the quarter 811 643 26% Average number of grants processed per terminal during the completed pay cycles for the quarter 810 639 27% EasyPay transaction fees: Number of transactions 441,439,169 processed Average fee per 0.21 transaction (in ZAR) Smart card accounts: Total number of smart 3,812,273 3,653,696 4% Hardware, software and related technology sales: Ad hoc significant hardware sales (US$ '000) Nedbank POS's, pin pads, smart cards and other hardware 4,400 13,300 (67)% SmartSwitch Namibia hardware and software (before consolidation adjustments) - 3,900 - SmartSwitch Botswana hardware and software (before consolidation adjustments) 2,100 - - Financial services: (US$ '000) Traditional microlending: Finance loans receivable - gross 5,263 7,169 (27)% Allowance for doubtful finance loans receivable (2,773) (3,448) (20)% Finance loans receivable - net 2,490 3,721 (33)% UEPS-based lending: Finance loans receivable - net and gross (i.e., no provisions) 3,265 2,992 9% Earnings (Loss) from equity accounted investments: (US$ '000) SmartSwitch Namibia: Equity owned 50% 50% Beginning of period (516) - Equity accounted (loss)(1) (262) (586) Foreign currency adjustment 12 70 End of period (766) (516) SmartSwitch Botswana: Equity owned 50% 50% Beginning of period - - Equity accounted (loss)(1) (593) - Foreign currency adjustment (24) - End of period (617) - nm - Statistic not meaningful (1) - includes the elimination of unrealized net income Net 1 UEPS Technologies, Inc. Attachment B
Key metrics and statistics for the three months ended June 30, 2007 and 2006 excluding the results of Prism Holdings Limited:
Three months ended June 30, 2007 and 2006 Three months ended Year Three months ended March ended June 30, Change 31, June 30, Constant 2007(1) 2006 Exchange 2007 2006 US$ US$ Actual Rate(2) US$ US$ Key statement of operations data, in '000, except EPS Revenue $46,183 $48,198 (4)% 6% $51,711 $196,098 Operating income 23,171 23,001 1% 11% 28,215 89,613 Net income(3) 16,975 $15,545 9% 21% $18,689 $59,232 Earnings per share, Basic (cents)(3) 30 27 11% 23% 33 106 Key segmental data, in '000, except margins Revenue: Transaction- based activities $32,533 $30,346 7% 18% $37,806 $117,186 Smart card accounts 8,840 9,354 (5)% 4% 8,655 36,220 Financial services 2,605 3,673 (29)% (22)% 2,858 16,129 Hardware, software and related technology sales 2,205 4,825 (54)% (50)% 2,392 l26,563 Total consolidated revenue $46,183 $48,198 (4)% 6% $51,711 $196,098 Consolidated operating income (loss): Transaction-based activities $17,399 $16,576 5% 16% $23,979 $60,653 Smart card accounts 4,018 4,252 (6)% 4% 3,934 16,464 Financial services 593 1,475 (60)% (56)% 930 6,929 Hardware, software and related technology sales 1,419 3,331 (57)% (53)% 626 16,721 Corporate/ Eliminations (258) (2,633) (90)% (89)% (1,254) (11,154) Total operating income $23,171 $23,001 1% 11% $28,215 $89,613 Operating income margin (%) Transaction-based activities 53% 55% 63% 52% Smart card accounts 45% 45% 45% 45% Financial services 23% 40% 33% 43% Hardware, software and related technology sales 64% 69% 26% 63% Overall operating margin 50% 48% 55% 46% (1) - Amounts and percentages in this column exclude the consolidated results of Prism Holdings Limited. (2) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the fourth quarter of fiscal 2007 also prevailed during the fourth quarter of fiscal 2006. (3) - Net income and earnings per share - basic for the three months ended June 30, 2007 are non-GAAP measures as they exclude the results of Prism for the three months ended June 30, 2007, the expense related to the amortization of intangible assets acquired in the Prism acquisition and the stock-based compensation charge related to options granted to Prism employees. Accordingly, Prism's net income of $1,515, or 3.0 cents is required to be added to the non-GAAP net income and earnings per shares -- basic measures and the amortization expense of $890, or 2.0 cents, and the stock-based compensation charge of $69, or 0.0 cents, must be subtracted from the non-GAAP net income and earnings per share - basic measures provided in order to arrive at GAAP net income of $17,531, or 31.0 cents. The Company believes it meaningful to present this information until the Prism integration is complete and the Company's shareholders are able to better understand the implications of the Prism acquisition on the Company's results.
Key metrics and statistics for the year ended June 30, 2007 and 2006 excluding the results of Prism Holdings Limited:
Year ended June 30, 2007 and 2006 Year ended June 30, Change Constant 2007(1) 2006 Exchange US$ US$ Actual Rate(2) Key statement of operations data, in '000, except EPS Revenue $183,455 $196,098 (6)% 5% Operating income 94,955 89,613 6% 19% Net income(3) $64,881 $59,232 10% 23% Earnings per share, Basic (cents)(3) 114 105 9% 22% Key segmental data, in '000, except margins Revenue: Transaction-based activities $126,059 $117,186 8% 21% Smart card accounts 34,562 36,220 (5)% 7% Financial services 11,241 16,129 (30)% (22)% Hardware, software and related technology sales 11,593 26,563 (56)% (51)% Total consolidated revenue $183,455 $196,098 (6)% 5% Consolidated operating income (loss): Transaction-based activities $75,160 $60,653 24% 39% Smart card accounts 15,710 16,464 (5)% 7% Financial services 3,351 6,929 (52)% (46)% Hardware, software and related technology sales 5,334 16,721 (68)% (64)% Corporate/Eliminations (4,600) (11,154) (59)% (54)% Total operating income $94,955 $89,613 6% 19% Operating income margin (%) Transaction-based 60% 52% Smart card accounts 45% 45% Financial services 30% 43% Hardware, software and related technology sales 46% 63% Overall operating margin 52% 46% (1) - Amounts and percentages in this column exclude the consolidated results of Prism Holdings Limited. (2) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the year ended June 30, 2007 also prevailed during the year ended June 30, 2006. (3) - Net income and earnings per share - basic for the year ended June 30, 2007 are non-GAAP measures as they exclude the results of Prism for the year ended June 30, 2007, the expense related to the amortization of intangible assets acquired in the Prism acquisition and the stock-based compensation charge related to options granted to Prism employees. Accordingly, Prism's net income of $2,769, or 5.0 cents is required to be added to the non-GAAP net income and earnings per shares - basic measures and the amortization expense of $3,440, or 6.0 cents, and the stock-based compensation charge of $531, or 1.0 cents, must be subtracted from the non-GAAP net income and earnings per share - basic measures provided in order to arrive at GAAP net income of $63,679, or 112.0 cents. The Company believes it meaningful to present this information until the Prism integration is complete and the Company's shareholders are able to better understand the implications of the Prism acquisition on the Company's results. Net 1 UEPS Technologies, Inc. Attachment C Reconciliation of GAAP results to fundamental results: Three months ended June 30, 2007 and 2006 Three months ended June 30, Amortization Costs of Prism and Stock- associated EasyPay based with 2007 2007 intangible charge acquisition Funda- 2006 GAAP assets(1) (2) not pursued mental GAAP Net income (US$'000) 17,531 890 224 441 19,086 15,545 Earnings per share, basic (US$ cents) 31 33 27 Net income (ZAR'000) 124,793 6,344 1,595 3,139 135,871 100,149 Earnings per 219 238 174 share, basic (ZAR cents) (1) Amortization of Prism and EasyPay Intangibles, net of deferred tax benefit: $'000 ZAR '000 Customer relationships 369 2,630 Software and unpatented technology 95 679 Trademarks 933 6,642 Deferred tax benefit (507) (3,607) 890 6,344
(2) Includes stock-based compensation charge related to options granted to employees of Prism and under the Amended and Restated Net 1 UEPS Technologies, Inc. 2004 Stock Incentive Plan.
Year ended June 30, 2007 and 2006 Year ended June 30, Amortization Costs of Prism and Stock- associated EasyPay based with 2007 2007 intangible charge acquisition Funda- 2006 GAAP assets(1) (2) not pursued(3) mental GAAP Net income (US$'000) 63,679 3,440 1,060 1,629 69,808 59,232 Earnings per share, basic (US$ cents) 112 123 105 Net income 459,126 24,801 7,643 11,745 503,315 379,837 (ZAR'000) Earnings per share, basic (ZAR cents) 806 884 673 (1) Amortization of Prism and EasyPay Intangibles, net of deferred tax benefit: US$ ZAR '000 '000 Customer relationships 1,393 10,040 Software and unpatented technology 368 2,651 Trademarks 3,648 26,303 Deferred tax benefit (1,969) (14,193) 3,440 24,801 (2) Includes stock-based compensation charge related to options granted to employees of Prism and under the Amended and Restated Net 1 UEPS Technologies, Inc. 2004 Stock Incentive Plan. (3) Represents expenses associated with a potential acquisition that Net1 ultimately decided not to pursue during the three months ended December 31, 2006.
