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Net 1 UEPS Technologies, Inc. Announces Second Quarter Results
JOHANNESBURG, South Africa, Feb. 7 /PRNewswire-FirstCall/ -- Net 1 UEPS Technologies, Inc. ("Net1" or the "Company") (NASDAQ: UEPS) today announced results for the second quarter of fiscal 2007. Results
Three months ended December 31, 2006 and 2005
GAAP and GAAP Fundamental
GAAP Fundamental Fundamental Variance Variance
Q2 2007 Q2 2007 (1) Q2 2006 % %
Net income
(US$'000) 12,823 15,393 13,932 (8)% 10 %
Earnings per
share, basic
(US cents) 22.5 27.0 24.6 (9)% 10 %
Revenue
(US$'000) 49,571 49,571 47,429 5 % 5 %
(1) -- Fundamental net income and earnings per share is GAAP net income and earnings per share excluding the effects related to the amortization of acquisition-related intangible assets, net of deferred taxes, non-tax deductible expenses related to the transaction that the Company ultimately decided not to pursue discussed below 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 and six months ended December 31, 2006, 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 at the end of this press release. In addition, results for the three and six months ended December 31, 2005, were favourably impacted by hardware sales to Nedbank Limited of $3.4 million (ZAR 22.6 million) and $5.6 million (ZAR 36.5 million), respectively. GAAP and GAAP Fundamental
GAAP Fundamental Fundamental Variance Variance
Q2 2007 Q2 2007 Q2 2006 % %
Net income
(ZAR'000) 93,852 112,663 91,649 2 % 23 %
Earnings per
share, basic
(ZAR cents) 164.9 197.9 161.8 2 % 22 %
Revenue
(ZAR'000) 362,800 362,800 312,000 16 % 16 %
Six months ended December 31, 2006 and 2005
GAAP and GAAP Fundamental
GAAP Fundamental Fundamental Variance Variance
YTD 2007 YTD 2007 YTD 2006 % %
Net income
(US$'000) 27,895 31,388 27,111 3 % 16 %
Earnings per
share, basic
(US cents) 49.0 55.1 48.1 2 % 15 %
Revenue
(US$'000) 102,497 102,497 93,316 10 % 10 %
GAAP and GAAP Fundamental
GAAP Fundamental Fundamental Variance Variance
YTD 2007 YTD 2007 YTD 2006 % %
Net income
(ZAR'000) 202,655 228,013 177,313 14 % 29 %
Earnings per
share, basic
(ZAR cents) 356.0 400.5 314.6 13 % 27 %
Revenue
(ZAR'000) 744,600 744,600 610,300 22 % 22 %
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 results for the three and six months ended December 31, 2006 also include expenses relating to a potential acquisition that the Company ultimately determined not to pursue. The Company's net income and earnings per common share and linked unit for the three and six months ended December 31, 2006 includes the expenses related to this potential acquisition, amortization of Prism and EasyPay intangibles acquired as well as the stock-based compensation charge related to options granted to Prism employees and other employees. Attachment C presents a reconciliation between GAAP net income and earnings per common share and linked unit and measures of fundamental net income and fundamental earnings per common share and linked unit. Management believes that these adjustments to net income and earnings per common share and linked unit enhance the Company's evaluation of its performance. Therefore, the Company excludes these items from GAAP net income and earnings per common share and linked unit in calculating 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. Second Quarter Highlights
-- $185.2 million in transactions were processed through the Company's
merchant acquiring system in the second quarter of fiscal 2007,
compared to $118.4 million in the second quarter of fiscal 2006.
During the three months ended December 31, 2006, 2,788,529 grants were
paid through the Company's terminal base, compared to 1,496,384 during
the three months ended December 31, 2005;
-- 4,145 terminals were in use at 2,443 participating UEPS retail
locations as of December 31, 2006, compared with 3,929 terminals in use
at 2,366 locations as of December 31, 2005. These numbers were
comparable to June 30, 2006. The number of transactions processed per
terminal increased from 379 during the three months ended December 31,
2005, to 671 during the three months ended December 31, 2006;
-- UEPS transaction-based activities effected 11.3 million payments during
the second quarter of fiscal 2007, a 9% increase over the number of
payments effected during the second quarter of fiscal 2006;
-- A total of 3,790,813 UEPS smart card-based accounts were active at
December 31, 2006, compared to 3,497,664 active accounts at December
31, 2005;
-- Prism acquired the remaining 25.1% of the issued and outstanding
ordinary share capital of EasyPay effective October 1, 2006 for
approximately $8.8 million; and
-- EasyPay processed 117,626,419 transactions and generated an average fee
per transaction of $0.03.
Comments and Outlook
"I am very pleased with our performance for the second quarter and our recent successes which resulted in the finalization of our banking license, the signing of VTU contracts in Colombia and Vietnam and the 15 month extension of all our pension and welfare contracts," said Dr. Serge Belamant, Chairman and CEO of Net1. "I am especially pleased with the momentum we have gained in our international development with national tender submissions in both Nigeria and Ghana and new initiatives in Iraq and Indonesia. The need for our merchant acquiring system continues to be apparent with more than 20% growth in the number of beneficiaries serviced through this system since the November pay cycle. The refocusing of our Prism activities is starting to show potential in both the SIM and the bill payments markets. I therefore see no reason at this stage to review our earnings guidance for 2007," he concluded. Conference call Net1 will host a conference call to review second quarter results on February 8, 2007 at 9:30 a.m EST. To participate in the call, dial 1-800-860-2442 (U.S. only), 1-866-519-5086 (Canada only), 0-800-917-7042 (U.K. only) or 0-800-200-648 (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 March 1, 2007. As disclosed in previous press announcements we plan to provide additional information on SmartSwitch Nigeria Limited and the banking license announcement and our wage strategy. 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.
Unaudited Condensed Consolidated Statements of Operations
Three months ended Six months ended
December 31, December 31,
2006 2005 2006 2005
(In thousands, (In thousands,
except per share data) except per share data)
REVENUE $ 49,571 $ 47,429 $ 102,497 $ 93,316
EXPENSE
COST OF GOODS SOLD, IT
PROCESSING, SERVICING AND
SUPPORT 10,926 12,908 24,245 24,727
GENERAL AND ADMINISTRATION 15,690 11,956 29,175 22,612
DEPRECIATION AND AMORTIZATION 2,813 1,365 5,760 2,903
COSTS RELATED TO PUBLIC
OFFERING AND NASDAQ LISTING - 27 - 1,504
OPERATING INCOME 20,142 21,173 43,317 41,570
INTEREST INCOME, net 1,186 1,343 2,058 2,246
INCOME BEFORE INCOME TAXES 21,328 22,516 45,375 43,816
INCOME TAX EXPENSE 8,690 8,577 17,530 16,988
NET INCOME FROM CONTINUING
OPERATIONS BEFORE MINORITY
INTEREST AND EARNINGS FROM
EQUITY ACCOUNTED INVESTMENTS 12,638 13,939 27,845 26,828
MINORITY INTEREST - - 205 -
EARNINGS FROM EQUITY ACCOUNTED
INVESTMENTS 185 (7) 255 283
NET INCOME $ 12,823 $ 13,932 $ 27,895 $ 27,111
Net income per share
Basic earnings, in cents -
common stock and linked units 22.5 24.6 49.0 48.1
Diluted earnings, in cents -
common stock and linked units 22.3 24.2 48.5 47.4
NET 1 UEPS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
Unaudited A
December 31, June 30,
2006 2006
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 127,902 $ 189,735
Pre-funded social welfare grants
receivable 34,110 17,223
Accounts receivable, net of allowances
of - December: $542; June: $159 15,927 21,219
Finance loans receivable, net of
allowances of - December: $4,232;
June: $3,448 7,596 6,713
Deferred expenditure on smart cards 470 656
Inventory 5,814 1,935
Deferred income taxes 8,335 3,237
Total current assets 200,154 240,718
LONG TERM RECEIVABLE 967 946
PROPERTY, PLANT AND EQUIPMENT, NET OF
ACCUMULATED
DEPRECIATION OF - December: $25,754;
June: $16,543 8,135 3,757
EQUITY ACCOUNTED INVESTMENTS 5,412 4,986
GOODWILL 86,134 13,923
INTANGIBLE ASSETS, NET OF ACCUMULATED
AMORTIZATION OF - December: $10,350;
June: $6,549 35,124 5,649
TOTAL ASSETS 335,926 269,979
LIABILITIES
CURRENT LIABILITIES
Bank overdraft - 20
Accounts payable 3,076 2,073
Other payables 42,411 28,575
Income taxes payable 10,654 12,455
Total current liabilities 56,141 43,123
DEFFERRED INCOME TAXES 32,771 17,846
INTEREST BEARING LIABILITIES 3,586 -
TOTAL LIABILITIES 92,498 60,969
SHAREHOLDERS' EQUITY
COMMON STOCK
Authorized: 83,333,333 with $0.001 par
value; Issued and outstanding shares -
December: 50,483,228; June: 49,596,879 51 50
SPECIAL CONVERTIBLE PREFERRED STOCK
Authorized: 50,000,000 with $0.001 par
value; Issued and outstanding shares -
December: 6,445,416; June: 7,315,099 6 7
B CLASS PREFERENCE SHARES
Authorized: 330,000,000 with $0.001 par
value; Issued and outstanding shares
(net of shares held by the Company) -
December: 47,492,563;
June: 53,900,752 8 9
ADDITIONAL PAID-IN-CAPITAL 106,339 105,792
TREASURY SHARES ISSUED: December: 147,973;
June: 147,973 (3,958) (3,958)
ACCUMULATED OTHER COMPREHENSIVE INCOME (3,786) (9,763)
RETAINED EARNINGS 144,768 116,873
TOTAL SHAREHOLDERS' EQUITY 243,428 209,010
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 335,926 $ 269,979
(A) -- amounts derived from audited financial statements
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Three months ended Six months ended
December 31, December 31,
2006 2005 2006 2005
(In thousands) (In thousands)
Cash flows from operating
activities
Net income $ 12,823 $ 13,932 $ 27,895 $ 27,111
Depreciation and
amortization 2,813 1,365 5,760 2,903
Earnings from equity
accounted investments (185) 7 (255) (283)
Fair value adjustment
related to financial
liabilities 153 3 153 6
Fair value of FAS 133
derivative adjustments 75 (94) 77 53
(Profit) Loss on disposal
of property, plant and
equipment (33) 2 (67) 9
Minority interest - - 205 -
Stock compensation charge 524 - 496 -
Decrease(Increase) in
accounts receivable, pre-
funded social welfare
grants receivable and
finance loans receivable 6,477 23,847 (2,552) 16,194
Decrease in deferred
expenditure on smart cards 151 641 194 1,660
Increase in inventory (174) (1,333) (2,753) (1,270)
Decrease in accounts
payable and other payables (3,655) (6,363) (10,946) (3,237)
Decrease in taxes payable (512) (1,599) (3,378) (5,186)
(Decrease) Increase in
deferred taxes (1,947) 2,593 153 4,264
Net cash provided by
operating activities 16,510 33,001 14,982 42,224
Cash flows from investing
activities
Capital expenditures (860) (346) (1,703) (888)
Proceeds from disposal of
property, plant and
equipment 28 80 146 84
Acquisition of Prism
Holdings Limited, net of
cash acquired (224) - (82,330) -
Acquisition of equity
interest in and advance of
loans to equity accounted
investment - - - (1,851)
Net cash used in
investing activities (1,056) (266) (83,887) (2,655)
Cash flows from financing
activities
Proceeds from issue of
share capital, net of
share issue expenses - - 50 32,219
Proceeds from bank
overdrafts 43,410 - 61,583 -
Repayment of bank overdraft (45,216) - (62,272) -
Proceeds from interest
bearing liabilities 3,513 - 3,513 -
Net cash provided by
financing activities 1,707 - 2,874 32,219
Effect of exchange rate
changes on cash 8,608 (1,034) 4,198 4,365
Net increase (decrease) in
cash and cash equivalents 25,769 31,701 (61,833) 76,153
Cash and cash equivalents -
beginning of period 102,133 152,201 189,735 107,749
Cash and cash equivalents -
end of period $127,902 $183,902 $127,902 $183,902
Net 1 UEPS Technologies, Inc.
Attachment A
Key metrics and statistics at and for the three months ended December 31, 2006 and 2005: Three months ended December 31, 2006 and 2005
Three
months Year
Three months ended ended ended
December 31, Change Sep 30, June 30,
Constant
2006 2005 Exchange 2006 2006
US$ US$ Actual Rate(1) US$ US$
Key statement of
operations data, in
'000, except EPS
Revenue $49,571 $47,429 5 % 16 % $52,926 $196,098
Operating income 20,142 21,173 (5)% 6 % 23,175 89,613
Income tax expense 8,690 8,577 1 % 13 % 8,840 36,653
Net income $12,823 $13,932 (8)% 2 % $15,072 $59,232
Earnings per share,
Basic (cents) 22.5 24.6 (9)% 2 % 26.5 105.8
Diluted (cents) 22.3 24.2 (8)% 3 % 26.2 103.3
Fundamental earnings
per share,
Basic (cents) 27.0 24.6 10 % 22 % 28.1 105.8
Key segmental data, in
'000, except margins
Revenue:
Transaction-based
activities $29,973 $27,255 10 % 22 % $32,237 $117,186
Smart card
accounts 8,487 8,744 (3)% 8 % 8,580 36,220
Financial services 2,793 3,982 (30)% (22)% 2,985 16,129
Hardware, software
and related
technology sales 8,318 7,448 12 % 24 % 9,124 26,563
Total consolidated
revenue $49,571 $47,429 5 % 16 % $52,926 $196,098
Consolidated
operating income
(loss):
Transaction-based
activities $17,502 $13,517 29 % 44 % $18,428 60,653
Smart card accounts 3,858 3,974 (3)% 8 % 3,900 16,464
Financial services 768 1,828 (58)% (53)% 1,060 6,929
Hardware, software
and related
technology sales 581 3,874 (85)% (83)% 1,049 16,721
Corporate/
Eliminations (2,567) (2,020) 27 % 41 % (1,262) (11,154)
Total operating
income $20,142 $21,173 (5)% 6 % $23,175 $89,613
Operating income margin (%)
Transaction-based
activities 58 % 50 % 57 % 52 %
Smart card accounts 45 % 45 % 45 % 45 %
Financial services 27 % 46 % 36 % 43 %
Hardware, software
and related
technology sales 7 % 52 % 11 % 63 %
Overall operating
margin 41 % 45 % 44 % 46 %
Dec 31, Jun 30,
2006 2006
Key balance sheet
data, in '000
Cash and cash
equivalents $127,902 $189,735 (33)%
Total current
assets 200,154 240,718 (17)%
Total assets 335,926 269,979 24 %
Total current
liabilities 56,141 43,123 30 %
Total shareholders'
equity $243,428 $209,010 16 %
(1) -- This information shows what the change in these items would have
been if the USD/ ZAR exchange rate that prevailed during the second
quarter of fiscal 2007 also prevailed during the second quarter of
fiscal 2006.
Three months ended December 31, 2006 and 2005 (continued)
Three
months
Three months ended ended Year ended
December 31, Change Sep 30, June 30,
2006 2005 2006 2006
Additional
information:
Transaction-based
activities:
Total number of
grants paid:
KwaZulu-Natal 5,022,500 4,444,129 13 % 4,915,405 18,117,676
Limpopo 2,905,861 2,753,537 6 % 2,892,620 11,154,040
North West 827,058 787,009 5 % 820,955 3,181,242
Northern Cape 416,702 396,750 5 % 413,243 1,585,846
Eastern Cape 2,144,919 2,034,904 5 % 2,127,992 8,204,977
11,317,040 10,416,329 9 % 11,170,215 42,243,781
Average revenue ZAR ZAR ZAR ZAR
per grant paid:
KwaZulu-Natal 20.18 20.67 (2)% 20.35 20.14
Limpopo 15.98 15.59 3 % 16.00 15.59
North West 19.71 17.21 15 % 17.94 18.10
Northern Cape 18.67 18.89 (1)% 18.69 19.30
Eastern Cape 11.81 12.07 (2)% 11.86 12.04
UEPS merchant
acquiring system:
Terminals
installed at
period end 4,145 3,929 5 % 4,169 4,038
Number of
participating
retail locations
at period end 2,443 2,366 3 % 2,468 2,381
Value of
transactions
processed through
POS devices
during the
quarter (in $
'000) 185,190 118,396 56 % 202,299 189,649
Value of
transactions
processed through
POS devices
during the
completed pay
cycles for the
quarter (in $
'000) 188,074 127,765 47 % 189,139 187,769
Average number of
grants processed
per terminal
during the
quarter 671 379 77 % 725 643
Average number of
grants processed
per terminal
during the
completed pay
cycles for the
quarter 683 470 45 % 678 639
EasyPay
transaction fees:
Number of
transactions
processed 117,626,419 100,831,659
Average fee
per transaction
(in ZAR) 0.21 0.21
Three months ended December 31, 2006 and 2005 (continued)
Three Year
Three months months ended
ended Change ended June
December 31, Sep 30, 30,
2006 2005 2006 2006
Smart card accounts:
Total number of smart
card accounts 3,790,813 3,497,664 8 % 3,738,975 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 - 3,400 nm - 13,300
Smartswitch Namibia
hardware and software
(before consolidation
adjustments) - 1,500 nm - 3,900
Smartswitch Botswana
hardware and software
(before consolidation
adjustments) - - nm 2,000 -
Financial services:
(US$ '000)
Traditional
microlending:
Finance loans
receivable - gross 7,399 8,318 (11)% 6,650 7,169
Allowance for
doubtful finance
loans receivable (4,232) (3,672) 15 % 3,551 (3,448)
Finance loans
receivable - net 3,167 4,646 (32)% 3,099 3,721
UEPS-based lending:
Finance loans
receivable -net and
gross (i.e., no
provisions) 4,429 5,732 (23)% 2,899 2,992
Earnings (Loss) from
equity accounted
investments: (US$ '000)
SmartSwitch Namibia:
Equity owned 50 % 50 % 50 % 50 %
Beginning of period (659) - (516) -
Equity accounted
(loss)(1) (38) - (206) (586)
Foreign currency
adjustment (67) - 63 70
End of period of
period (764) - (659) (516)
SmartSwitch Botswana:
Equity owned 50 % 50 % 50 % 50 %
Beginning of period (495) - - -
Equity accounted
(loss) (1) (35) - (520) -
Foreign currency
adjustment (46) - 25 -
End of period of
period (576) - (495) -
nm - Statistic not meaningful
(1) - includes the elimination of unrealized net income
Key metrics and statistics at and for the six months ended December 31, 2006 and 2005: Six months ended December 31, 2006 and 2005
Year
Six months ended
ended June
December 31, Change 30,
Constant
2006 2005 Exchange 2006
US$ US$ Actual Rate(1) US$
Key statement of
operations data, in
'000, except EPS
Revenue $102,497 $93,316 10 % 22 % $196,098
Operating income 43,317 41,570 4 % 16 % 89,613
Income tax expense 17,530 16,988 3 % 15 % 36,653
Net income $27,895 $27,111 3 % 14 % $59,232
Earnings per share,
Basic (cents) 49.0 48.1 2 % 13 % 105.8
Diluted (cents) 48.5 47.4 2 % 14 % 103.3
Fundamental earnings
per share,
Basic (cents) 55.1 48.1 15 % 27 % 105.8
Key segmental data, in
'000, except margins
Revenue:
Transaction-based
activities $62,210 $55,073 13 % 25 % $117,186
Smart card accounts 17,067 17,296 (1)% 10 % 36,220
Financial services 5,778 8,256 (30)% -22 % 16,129
Hardware, software
and related
technology sales 17,442 12,691 37 % 53 % 26,563
Total
consolidated
revenue $102, 497 $93,316 10 % 22 % $196,098
Consolidated operating
income (loss):
Transaction-based
activities $35,930 $27,649 30 % 44 % 60,653
Smart card accounts 7,758 7,861 (1)% 10 % 16,464
Financial services 1,828 3,672 (50)% (45)% 6,929
Hardware, software and
related technology
sales 1,630 7,941 (79)% (77)% 16,721
Corporate/
Eliminations (3,829) (5,553) (31)% (23)% (11,154)
Total operating income $43,317 $41,570 4 % 16 % $89,613
Operating income margin (%)
Transaction-based
activities 58 % 50 % 52 %
Smart card accounts 45 % 45 % 45 %
Financial services 32 % 44 % 43 %
Hardware, software and
related technology
sales 9 % 63 % 63 %
Overall operating margin 42 % 45 % 46 %
Dec 31, Jun 30,
2006 2006
Key balance sheet
data, in '000
Cash and cash
equivalents $127,902 $189,735 (33) %
Total current assets 200,154 240,718 (17) %
Total assets 335,926 269,979 24 %
Total current
liabilities 56,141 43,123 30 %
Total shareholders'
equity $243,428 $209,010 16 %
(1) -- This information shows what the change in these items
would have been if the USD/ ZAR exchange rate that prevailed
during the first half of fiscal 2007 also prevailed during the
first half of fiscal 2006.
Six months ended December 31, 2006 and 2005 (continued)
Six months ended Change Year ended
December 31, June 30,
2006 2005 2006
Additional information:
Transaction-based
activities:
Total number of
grants paid:
KwaZulu-Natal 9,937,905 8,752,494 14 % 18,117,676
Limpopo 5,798,481 5,447,705 6 % 11,154,040
North West 1,648,013 1,563,972 5 % 3,181,242
Northern Cape 829,945 786,325 6 % 1,585,846
Eastern Cape 4,272,911 4,005,075 7 % 8,204,977
22,487,255 20,555,571 9 % 42,243,781
Average revenue per
grant paid: ZAR ZAR ZAR
KwaZulu-Natal 20.29 19.95 2 % 20.14
Limpopo 15.99 15.46 3 % 15.59
North West 18.85 16.9 12 % 18.10
Northern Cape 18.73 18.96 (1)% 19.30
Eastern Cape 11.83 12.13 (2)% 12.04
UEPS merchant acquiring
system:
Terminals installed 4,038
at period end 4,145 3,929 5 %
Number of
participating retail
locations at period
end 2,443 2,366 3 % 2,381
Value of transactions
processed through POS
devices during the
quarter (in $ '000) 185,190 118,396 56 % 189,649
Value of transactions
processed through
POS devices during
the completed pay
cycles for the
quarter (in $ '000) 188,074 127,765 47 % 187,769
Average number of
grants processed per
terminal during the
quarter 671 379 77 % 643
Average number of
grants processed per
terminal during the
completed pay cycles
for the quarter 683 470 45 % 639
EasyPay transaction
fees:
Number of
transactions
processed 218,458,078
Average fee per
transaction
(in ZAR) 0.21
Six months ended December 31, 2006 and 2005 (continued)
Six months ended Change Year ended
December 31, June 30,
2006 2005 2006
Smart card accounts:
Total number of
smart card accounts 3,790,813 3,497,664 8 % 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 - 5,600 nm 13,300
Smartswitch Namibia
hardware and software
(before consolidation
adjustments) - 2,700 nm 3,900
Smartswitch Botswana
hardware and software
(before consolidation
adjustments) 2,000 - nm -
Financial services:
(US$ '000)
Traditional
microlending: Finance
loans receivable -
gross 7,399 8,318 (11)% 7,169
Allowance for
doubtful finance
loans receivable (4,232) (3,672) 15 % (3,448)
Finance loans
receivable - net 3,167 4,646 (32)% 3,721
UEPS-based lending:
Finance loans
receivable -net and
gross (i.e., no
provisions) 4,429 5,732 (23)% 2,992
Earnings (Loss) from
equity accounted
investments: (US$ '000)
SmartSwitch Namibia:
Equity owned 50 % 50 % 50 %
Beginning of period (516) - -
Equity accounted
(loss)(1) (244) - (586)
Foreign currency
adjustment (4) - 70
End of period of
period (764) - (516)
SmartSwitch Botswana:
Equity owned 50 % 50 % 50 %
Beginning of period - - -
Equity accounted - -
(loss) (1) (555) - -
Foreign currency
adjustment (21) - -
End of period of - -
period (576) - -
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 December 31, 2006 and 2005 excluding the results of Prism Holdings Limited: Three months ended December 31, 2006 and 2005
Three Year
Three months months ended
ended ended June
December 31, Change Sep 30, 30,
Constant
2006(1) 2005 Exchange 2006 2006
US$ US$ Actual Rate(2) US$ US$
Key statement of
operations data, in
'000, except EPS
Revenue $40,435 $45,887 (12)% (2)% $45,126 $196,098
Operating income 19,431 20,397 (5)% 6 % 24,017 89,613
Net income(3) $12,802 $13,179 (3)% 8 % $16,295 $59,232
Earnings per share,
Basic(3) 22.50 24.6 (9)% 2 % 28.6 105.8
Key segmental data,
in'000, except margins
Revenue:
Transaction-based
activities $26,506 $27,818 (5)% 6 % $29,214 $117,186
Smart card accounts 8,487 8,552 (1)% 10 % 8,580 36,220
Financial services 2,793 4,274 (35)% (27)% 2,985 16,129
Hardware, software and
related technology
sales 2,649 5,243 (49)% (44)% 4,347 26,563
Total consolidated
revenue $40,435 $45,887 (12)% (2)% $45,126 $196,098
Consolidated operating
income (loss):
Transaction-based
activities $16,153 $14,132 14 % 27 % $17,629 60,653
Smart card accounts 3,858 3,887 (1)% 10 % 3,901 16,464
Financial services 768 1,844 (58)% (54)% 1,060 6,929
Hardware, software and
related technology
sales 902 4,067 (78)% (75)% 2,387 16,721
Corporate/
Eliminations (2,250) (3,533) (36)% (29)% (960) (11,154)
Total operating
income $19,431 $20,397 (5)% 6 %$24,017 $89,613
Operating income
margin (%)
Transaction-based
activities 61 % 51 % 60 % 52 %
Smart card accounts 45 % 45 % 45 % 45 %
Financial services 27 % 43 % 36 % 43 %
Hardware, software and
related technology
sales 34 % 78 % 55 % 63 %
Overall operating
margin 48 % 44 % 53 % 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 second quarter of fiscal 2007 also prevailed during
the second quarter of fiscal 2006.
Three months ended December 31, 2006 and 2005 (continued)
(3) -- Net income and earnings per share - basic for the three
months ended December 31, 2006 are non-GAAP measures as they
exclude the results of Prism for the three months ended
December 31, 2006, 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 $1,183, or
2.0 cents is required to be added to the non-GAAP net income
and earnings per shares - basic measures and the amortization
expense of $858, or 1.5 cents, and the stock-based
compensation charge of $304, or 0.5 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
$12,823, or 22.5 cents.
The Company believes it meaningful to present this information
until the Prism integration is complete and the Company's
shareholders are able to better understand the implications of
the Prism acquisition on the Company's results.
Key metrics and statistics for the six months ended December 31, 2006 and 2005 excluding the results of Prism Holdings Limited: Six months ended December 31, 2006 and 2005
Six months ended Year ended
December 31, Change June 30,
Constant
2006(1) 2005 Exchange 2006
US$ US$ Actual Rate(2) US$
Key statement of
operations data, in
'000, except EPS
Revenue $85,561 $93,316 (8)% 2 % $196,098
Operating income 43,570 41,570 5 % 16 % 89,613
Net income(3) $29,219 $27,111 8 % 20 % $59,232
Earnings per share,
Basic(3) 51.3 48.1 7 % 18 % 105.8
Key segmental data,
in'000, except margins
Revenue:
Transaction-based
activities $55,72 $55,073 1 % 12 % $117,186
Smart card accounts 17,067 17,296 (1)% 10 % 36,220
Financial services 5,778 8,256 (30)% (22)% 16,129
Hardware, software and
related technology
sales 6,996 12,691 (45)% (39)% 26,563
Total consolidated
revenue $85,561 $93,316 (8)% 2 % $196,098
Consolidated operating
income (loss):
Transaction-based
activities $33,782 $27,649 22 % 36 % 60,653
Smart card accounts 7,759 7,861 (1)% 10 % 16,464
Financial services 1,828 3,672 (50)% (45)% 6,929
Hardware, software
and related
technology sales 3,289 7,941 (59)% (54)% 16,721
Corporate/
Eliminations (3,088) (5,553) (44)% (38)% (11,154)
Total operating
income $43,570 $41,570 5% 16% $89,613
Operating income
margin (%)
Transaction-based
activities 61 % 50 % 52 %
Smart card accounts 45 % 45 % 45 %
Financial services 32 % 44 % 43 %
Hardware, software and
related technology sales 47 % 63 % 63 %
Overall operating
margin 51 % 45 % 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 first half of fiscal 2007 also prevailed during the
first half of fiscal 2006.
Six months ended December 31, 2006 and 2005 (continued)
(3) - Net income and earnings per share - basic for the six
months ended December 31, 2006 are non-GAAP measures as they
exclude the results of Prism for the six months ended December
31, 2006, 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 $761, or
1.3 cents is required to be added to the non-GAAP net income
and earnings per shares - basic measures and the amortization
expense of $1,659, or 2.9 cents, and the stock-based
compensation charge of $426, or 0.7 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
$27,895, or 49.0 cents.
The Company believes it meaningful to present this information
until the Prism integration is complete and the Company's
shareholders are able to better understand the implications of
the Prism acquisition on the Company's results.
Net 1 UEPS Technologies, Inc.
Attachment C
Reconciliation of GAAP results to fundamental results:
Three months ended December 31, 2006 and 2005
Three months ended December 31,
Expenses
Amortization associated
of Prism and Stock- with
EasyPay based acquisition 2006
2006 intangible charge not Funda- 2005
GAAP assets(1) (2) pursued(3) mental GAAP
Net income (US$'000) 12,823 858 524 1,188 15,393 13,932
Earnings per share,
basic (US$ cents) 22.5 27.0 24.6
Net income (ZAR'000) 93,852 6,280 3,835 8,696 112,663 91,649
Earnings per share,
basic (ZAR cents) 164.9 197.9 161.8
(1) Amortization of Prism and EasyPay Intangibles, net of deferred tax
benefit:
$'000 ZAR '000
Customer
relationships 359 2,630
Software and
unpatented technology 93 679
Trademarks 908 6,642
Deferred tax benefit (502) (3,671)
858 6,280
(2) Includes stock-based compensation charge related to options granted to
employees of Prism and under the Net 1 UEPS Technologies, Inc. 2004
Stock Incentive Plan.
(3) Represents expenses associated with a potential acquisition that Net1
ultimately decided not to pursue during the three months ended
December 31, 2006.
Six months ended December 31, 2006 and 2005
Six months ended December 31,
Expenses
Amortization associated
of Prism and Stock- with
EasyPay based acquisition 2006
2006 intangible charge not Funda- 2005
GAAP assets(1) (2) pursued(3) mental GAAP
Net income (US$'000) 27,895 1,659 646 1,188 31,388 27,111
Earnings per share,
basic (US$ cents) 49.0 55.1 48.1
Net income
(ZAR'000) 202,654 12,044 4,690 8,625 228,013 177,313
Earnings per share,
basic (ZAR cents) 356.0 400.5 314.6
(1) Amortization of Prism and EasyPay Intangibles, net of deferred tax
benefit:
$'000 ZAR '000
Customer
relationships 658 4,780
Software and
unpatented
technology 178 1,294
Trademarks 1,792 13,018
Deferred tax benefit (969) (7,043)
1,659 12,049
(2) Includes stock-based compensation charge related to options granted to
employees of Prism and under the 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.
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