Net 1 UEPS Technologies, Inc. Reports 2011 Fourth Quarter and Full Year Results

News provided by

Net 1 UEPS Technologies, Inc.

Aug 25, 2011, 04:05 ET

JOHANNESBURG, Aug. 25, 2011 /PRNewswire/ -- Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today announced results for the three months ended June 30, 2011 ("4Q 2011") and the full 2011 fiscal year ("F2011"). Revenue for 4Q 2011 was $97.4 million, a year over year increase of 42% in US dollars ("USD") and 28% in constant currency. During 4Q 2011, net income under US generally accepted accounting principles ("GAAP") was $6.8 million versus net loss of $17.0 million for the three months ended June 30, 2010 ("4Q 2010"). GAAP earnings per share for 4Q 2011 was $0.15 versus GAAP loss per share of $0.37 a year ago. Fundamental earnings per share for 4Q 2011 was $0.39 compared to $0.54 for 4Q 2010, representing a decrease of 28% in USD and 35% in constant currency.

Revenue for F2011 was $343.4 million, a year over year increase of 22% in USD and 13% in constant currency compared to fiscal 2010 ("F2010"). During F2011, net income under GAAP was $2.6 million versus net income of $39.0 million for F2010. Earnings per share under GAAP during F2011 was $0.06 versus earnings per share of $0.84 a year ago, a decline of 93% in USD and 94% in constant currency. Fundamental earnings per share for F2011 was $1.53 compared to $2.01 for F2010, representing a decrease of 24% in USD and 30% in constant currency.

Summary Financial Metrics

Three months ended June 30,

2011

2010

% change
in USD

% change
in ZAR

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


Revenue

97,368

68,695

42%

28%





GAAP net income (loss)

6,832

(17,007)

nm

nm





Fundamental net income (1)

17,607

24,683

(29)%

(36)%





GAAP earnings (loss) per share ($)

0.15

(0.37)

nm

nm





Fundamental earnings per share ($) (1)

0.39

0.54

(28)%

(35)%





Fully-diluted shares outstanding ('000's)

45,181

45,560

(1)%





Average period USD/ ZAR exchange rate

6.81

7.56

(10)%



Year ended June 30,

2011

2010

% change
in USD

% change
in ZAR

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


Revenue

343,420

280,364

22%

13%





GAAP net income

2,647

38,990

(93)%

(94)%





Fundamental net income (1)

68,932

92,914

(26)%

(32)%





GAAP earnings per share ($)

0.06

0.84

(93)%

(94)%





Fundamental earnings per share ($) (1)

1.53

2.01

(24)%

(30)%





Fully-diluted shares outstanding ('000's)

45,231

46,435

(3)%





Average period USD/ ZAR exchange rate

7.00

7.61

(8)%

(1) Fundamental net income and earnings per share is GAAP net (loss) income and (loss) earnings per share excluding the amortization of acquisition-related intangible assets, net of deferred taxes, transaction-related costs and stock-based compensation charges. In addition, the calculation of fundamental net income and earnings per share for F2011, and where applicable, 4Q 2011, also excludes an impairment loss, net of deferred taxes, a valuation allowance related to Net1 UTA deferred tax assets, restructuring charges at Net1 UTA, a net gain related to a forward exchange contract related to intercompany dividends and amortization of facility fees related to the incurrence of KSNET acquisition debt.

The following factors impacted the comparability of our 4Q 2011 and 4Q 2010 results:

  • SASSA price and volume reductions: Our current SASSA contract provides for price and volume reductions from our previous contract, which reduced 4Q 2011 revenue and operating income;
  • Valuation allowances related to Net1 UTA deferred tax assets: During 4Q 2011, we created a valuation allowance of $8.9 million related to Net1 UTA deferred tax assets;
  • Favorable impact from the weakness of the US dollar: The US dollar depreciated by 10% against the ZAR during 4Q 2011 versus 4Q 2010 which positively impacted our results;
  • Goodwill impairment during 4Q 2010: During 4Q 2010, we impaired goodwill of $37.4 million related to Net1 UTA which was allocated to our hardware, software and related technology sales segment. The impairment resulted in a net loss for 4Q 2010;
  • Increased revenue from KSNET at lower operating margins, before acquired intangible asset amortization, than our legacy businesses: Our KSNET acquisition contributed to an increase in 4Q 2011 revenue, however, because KSNET has an operating margin, before acquired intangible asset amortization, that is lower than our legacy businesses, it negatively impacted our overall operating margin;
  • Intangible asset amortization related to KSNET acquisition: In 4Q 2011, we recorded additional intangible asset amortization related to the acquisition of KSNET;
  • Lower interest income and increased interest expense resulting from KSNET acquisition: Use of a portion of our cash balances and incurrence of long-term debt to fund the KSNET acquisition reduced our interest income and increased our interest expense for 4Q 2011;
  • Continued contributions from EasyPay: EasyPay experienced an increase in transaction volumes in 4Q 2011 from growth in value-added services and higher than expected activity at retailers;
  • Lower revenues and margins from hardware, software and related technology sales segment: Segment performance was adversely impacted by lower revenues from all contributors to this operating segment;
  • Reversal of stock-based compensation charges: We reversed prior year stock-based compensation charges of $3.5 million, primarily as a result of the forfeiture of a portion of the performance-based restricted stock granted in August 2007;
  • Restructuring charges incurred by Net1 UTA: During 4Q 2011, we incurred restructuring charges related to our Net1 UTA operations of $0.6 million, net of tax benefit; and
  • Transaction-related expenses included in selling, general and administration expense: During 4Q 2011, we incurred non-deductible transaction-related expenses of $0.4 million, primarily for the KSNET acquisition.

Comments and Outlook

"While fiscal 2011 was a challenging year for Net1, it was also transformational with the acquisition of KSNET and the commercialization of some of our newer technologies," said Dr. Serge Belamant, Chairman and Chief Executive Officer of Net1. "We remain committed to SASSA and look forward to the outcome of the current tender process. In the mean time, we will focus on driving incremental long-term growth by building on our existing capabilities at KSNET and EasyPay and scaling up our newer initiatives and technologies," he concluded.

"During fiscal 2012, we anticipate growth at KSNET and EasyPay and some of our other smaller units. However, we expect our pension and welfare business to remain flat and our earnings growth to be weighed down by our meaningful investments in MVC, XeoHealth and EP Kiosk. As a result of these factors and assuming our existing contract with SASSA remains in effect for the full year on the existing terms and conditions, we would expect to generate Fundamental EPS of at least $1.55 on a constant currency basis in fiscal 2012," said Herman Kotze, Chief Financial Officer of Net1.

Results of Operations

Our frequently asked questions and operating metrics will be updated and posted on our website (www.net1.com).

South African transaction-based activities

South African transaction-based activities revenue was $50.3 million in 4Q 2011, consistent when compared with 4Q 2010 in USD and 10% lower on a constant currency basis. In ZAR, the decrease in revenue was primarily due to the lower economics of the current SASSA contract, compared with our previous contract, which was partially offset by increased transaction volumes at EasyPay and the inclusion of FIHRST. Operating income margin of our South African transaction-based activities decreased to 40% from 51% a year ago. The decrease was primarily due to the lower revenues generated under the SASSA contract, additional intangible asset amortization related to the acquisition of MediKredit and FIHRST and lower margins at MediKredit and FIHRST compared with our legacy South African transaction-based activities. Excluding amortization of acquisition-related intangibles, 4Q 2011 segment operating margin was 43% compared with 54% during 4Q 2010.

International transaction-based activities

KSNET is the largest contributor to the international transaction-based activities segment. International transaction-based activities revenue was $27.9 million and segment operating margin was 3% in 4Q 2011. Excluding the amortization of intangibles but including the start up costs related to the launch of Net1 Virtual Card in the United States, segment operating margin was 15%.

Smart card accounts

Smart card account revenue was $8.6 million in 4Q 2011, up 10% compared with 4Q 2010 in USD and 1% lower on a constant currency basis. Operating margin for the segment remained consistent at 45%.

Financial services

Financial services revenue was $2.3 million in 4Q 2011, up 86% compared with 4Q 2010 in USD and 67% higher on a constant currency basis, principally due to an increase in lending activities. Operating margin for this segment remained constant at 79% when compared to 4Q 2010.

Hardware, software and related technology sales

Hardware, software and related technology sales revenue was $8.3 million in 4Q 2011, down 13% compared with 4Q 2010 in USD and 22% lower on a constant currency basis. The decrease in revenue and operating income for 4Q 2011 was primarily due to lower revenues by all major contributors to this operating segment as a result of challenging trading conditions and the ad hoc nature of some of these sales. Excluding amortization of all intangibles and Net 1 UTA's restructuring charges, segment operating margin was (16)% compared to (11)% during 4Q 2010.

Cash flow and liquidity

At June 30, 2011, we had cash and cash equivalents of $95 million, down from $154 million at June 30, 2010. The decrease in cash was due primarily to the use of approximately $124.3 million to fund a portion of the KSNET purchase price and the payment of STC of $14.7 million incurred related to dividends paid from South Africa to the United States connected with the KSNET transaction. For 4Q 2011, we generated net cash flow of $12.8 million for operating activities, compared to $13.8 million in 4Q 2010. The decrease in operating cash flow resulted mainly from the SASSA price and volume reductions which were effective July 1, 2010. Capital expenditures for 4Q 2011 and 2010 were $5.6 million and $0.4 million, respectively. During 4Q 2011, we repurchased $1 million worth of shares under our $100 million authorization.  

Use of Non-GAAP Measures

US securities laws require that when we publish any non-GAAP measures, we disclose the reason for using the non-GAAP measure and provide reconciliation to the directly comparable GAAP measure. The presentation of fundamental net income and fundamental earnings per share and headline earnings per share are non-GAAP measures.

Fundamental net income and fundamental earnings per share

Our GAAP net income (loss) and earnings (loss) per share for 4Q 2011, 4Q 2010, F2011 and F2010 include amortization of intangible assets, transaction-related costs and stock-based compensation. GAAP net income (loss) and earnings (loss) per share for 4Q 2011 and F2011 includes a valuation allowance related to Net1 UTA deferred tax assets, restructuring charges at Net1 UTA and amortization of facility fees related to the debt incurred to fund a portion of the purchase price of KSNET. F2011 also includes an impairment loss, net of deferred taxes and a net gain related to a forward exchange contract related to intercompany dividends. We excludes all of the above-mentioned amounts when calculating fundamental net income and earnings per share, because management believes that these adjustments enhance its own evaluation, as well as an investor's understanding, of our financial performance. Attachment B presents the reconciliation between GAAP and fundamental net income and earnings per share.

Headline earnings per share ("HEPS")

The inclusion of HEPS in this press release is a requirement of our listing on the JSE. HEPS basic and diluted is calculated using net (loss) income which has been determined based on GAAP. Accordingly, this may differ to the headline earnings per share calculation of other companies listed on the JSE as these companies may report their financial results under a different financial reporting framework, including but not limited to, International Financial Reporting Standards. HEPS basic and diluted is calculated as GAAP net income (loss) adjusted for impairment losses, net of taxes, and the loss (profit) on sale of property, plant and equipment, net of related tax effects. Attachment C presents the reconciliation between our net income (loss) used to calculate earnings (loss) per share basic and diluted and HEPS basic and diluted.

Conference Call

We will host a conference call to review 4Q 2011 and F2011 results on August 26, 2011 at 8:00 Eastern Time. To participate in the call, dial 1-800-860-2442 (U.S. only), 1-866-605-3852 (Canada only), 0-800-917-7042 (U.K. only) or 0-800-200-648 (South Africa only) ten minutes prior to the start of the call. Callers should request "Net1 call" upon dial-in. The call will also be webcast on our 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 our website through September 16, 2011.

About Net1 (www.net1.com)

We are a leading provider of alternative payment systems that leverage our Universal Electronic Payment System, or UEPS, to facilitate biometrically secure real-time electronic transaction processing to unbanked and under-banked populations of developing economies around the world in an online or offline environment. In addition to payments, UEPS can be used for banking, healthcare management, payroll, remittances, voting and identification.

We operate market-leading payment processors in South Africa, Republic of Korea, Ghana and Iraq. In addition, our proprietary Mobile Virtual Card technology offers secure mobile payments and banking services in developed and emerging countries.

We have a primary listing on the Nasdaq and a secondary listing on the JSE Limited.

Forward-Looking Statements

This announcement contains forward-looking statements that involve known and unknown risks and uncertainties. A discussion of various factors that cause our actual results, levels of activity, performance or achievements to differ materially from those expressed in such forward-looking statements are included in our filings with the Securities and Exchange Commission. We undertake no obligation to revise any of these statements to reflect future events.

NET 1 UEPS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

for the years ended June 30, 2011, 2010 and 2009












2011

2010

2009


(In thousands, except per share data)










REVENUE

$

343,420

$

280,364

$

246,822

Sale of goods

30,130

36,228

47,003

Loan-based interest and fees received

7,276

4,214

5,659

Services rendered

306,014

239,922

194,160










EXPENSE


















Cost of goods sold, IT processing, servicing and support

109,858

72,973

70,091











Selling, general and administration

119,692

80,854

64,833











Depreciation and amortization

34,671

19,348

17,082










PROFIT ON SALE OF MICROLENDING BUSINESS

-

-

455










IMPAIRMENT LOSSES


41,771

37,378

1,836










OPERATING INCOME

37,428

69,811

93,435










FOREIGN EXCHANGE GAIN RELATED TO SHORT-TERM INVESTMENT


-

-

26,657










INTEREST (EXPENSE) INCOME, net

(1,018)

9,069

10,828










INCOME BEFORE INCOME TAXES

36,410

78,880

130,920










INCOME TAX EXPENSE


33,525

40,822

42,744










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

2,885

38,058

88,176










EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS

(339)

93

(874)










NET INCOME

2,546

38,151

87,302










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

(101)

(839)

701










NET INCOME ATTRIBUTABLE TO NET1

$

2,647

$

38,990

$

86,601









Net income per share




















Basic earnings attributable to Net1 shareholders in $

0.06

0.84

1.53











Diluted earnings attributable to Net1 shareholders in $

0.06

0.84

1.53


NET 1 UEPS TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

as of June 30, 2011 and 2010


2011

2010


(In thousands, except share data)

ASSETS




CURRENT ASSETS





Cash and cash equivalents

$

95,263

$

153,742

Pre-funded social welfare grants receivable


4,579

6,660

Accounts receivable, net


82,780

41,854

Finance loans receivable, net

8,141

4,221

Deferred expenditure on smart cards


51

-

Inventory


6,725

3,622

Deferred income taxes


15,882

16,330

  Total current assets before settlement assets

213,421

226,429

     Settlement assets

186,668

83,661

        Total current assets

400,089

310,090






PROPERTY, PLANT AND EQUIPMENT, net


35,807

7,286

EQUITY-ACCOUNTED INVESTMENTS


1,860

2,598

GOODWILL


209,570

76,346

INTANGIBLE ASSETS, net


119,856

68,347

OTHER LONG-TERM ASSETS, including available for sale securities

14,463

7,423







TOTAL ASSETS

781,645

472,090








LIABILITIES




CURRENT LIABILITIES





Accounts payable


11,360

3,596

Other payables


71,265

50,855

Current portion of long-term borrowings


15,062

-

Income taxes payable

6,709

3,476

  Total current liabilities before settlement obligations

104,396

57,927

     Settlement obligations

186,668

83,661

        Total current liabilities

291,064

141,588







DEFERRED INCOME TAXES


52,785

38,858

LONG-TERM BORROWINGS


110,504

-

OTHER LONG-TERM LIABILITIES, including non-controlling interest loans

1,272

4,343







TOTAL LIABILITIES

455,625

184,789







COMMITMENTS AND CONTINGENCIES














EQUITY




COMMON STOCK







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





Issued and outstanding shares, net of treasury:  2011: 45,152,805;

2010: 45,378,397

59

59







PREFERRED STOCK





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





Issued and outstanding shares, net of treasury:  2011: -; 2010: -

-

-







ADDITIONAL PAID-IN CAPITAL


136,430

133,543







TREASURY SHARES, AT COST: 2011: 13,274,434; 2010: 13,149,042


(174,694)

(173,671)







ACCUMULATED OTHER COMPREHENSIVE LOSS

(33,779)

(66,396)







RETAINED EARNINGS

394,990

392,343







 TOTAL NET1 EQUITY

323,006

285,878







NON-CONTROLLING INTEREST

3,014

1,423







TOTAL EQUITY

326,020

287,301







TOTAL LIABILITIES AND EQUITY

$

781,645

$

472,090









NET 1 UEPS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

for the years ended June 30, 2011, 2010 and 2009


2011

2010

2009


(In thousands)










Cash flows from operating activities







Net income

$

2,546

$

38,151

$

87,302

Adjustments to reconcile net income to net cash provided by operating activities:







Depreciation and amortization

34,671

19,348

17,082

Impairment of intangible asset

41,771

-

-

Impairment of goodwill

-

37,378

1,836

Loss (Earnings) from equity-accounted investments

339

(93)

874

Fair value adjustment

728

78

(4,402)

Interest payable

2,487

301

425

Facility fee amortized

1,958

-

1,100

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

(5)

69

85

Profit on disposal of VinaPay (2011) and Moneyline business (2009)

(14)

-

(455)

Stock compensation charge, net of forfeitures


1,720

5,670

5,026

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

(3,568)

4,666

14,639

Decrease in deferred expenditure on smart cards

-

8

50

Decrease (Increase) in inventory

289

3,867

(81)

Decrease in accounts payable and other payables

(1,041)

(27,138)

(8,788)

Decrease in taxes payable

(1,800)

(7,582)

(3,339)

Decrease in deferred taxes

(13,858)

(6,040)

(4,586)

Net cash provided by operating activities

66,223

68,683

106,768









Cash flows from investing activities







Capital expenditures

(15,053)

(2,730)

(4,770)

Proceeds from disposal of property, plant and equipment

76

106

159

Acquisition of KSNET, net of cash acquired


(230,225)

-

-

Acquisition of MediKredit, FIHRST and RMT, net of cash acquired


-

(10,319)

(1,381)

Acquisition of Net1 UTA, net of cash acquired


-

-

(97,992)

Acquisition of available-for-sale securities

-

-

(3,422)

Proceeds from disposal of VinaPay

150

-

-

Acquisition of and advance of loans to equity-accounted investments


(375)

-

(450)

Repayment of loan by equity-accounted investment

475

-

-

Other investing activities

35

-

-

Net change in settlement assets

(78,768)

(77,243)

-

Net cash used in investing activities

(323,685)

(90,186)

(107,856)









Cash flows from financing activities







Proceeds from issue of common stock

-

720

271

Loan portion related to options

20

-

-

Acquisition of treasury stock


(1,023)

(126,304)

(39,412)

Long-term borrowings obtained


116,353

-

-

Proceeds from short-term loan facility


-

-

110,000

Repayment of short-term loan facility


-

-

(110,000)

Payment of facility fee


(3,088)

-

(1,100)

Repayment of short-term borrowings

(6,705)

-

-

Proceeds from bank overdraft

-

-

2,843

Repayment of bank overdraft

(462)

(137)

(2,850)

Acquisition of remaining 19.9% of Net1 UTA

(594)

-

-

Net change in settlement obligations

78,768

77,243

-

Net cash provided by (used in) financing activities

183,269

(48,478)

(40,248)









Effect of exchange rate changes on cash

15,714

2,937

(10,353)









Net decrease in cash and cash equivalents

(58,479)

(67,044)

(51,689)









Cash and cash equivalents – beginning of year

153,742

220,786

272,475









Cash and cash equivalents at end of year

$

95,263

$

153,742

$

220,786










Net 1 UEPS Technologies, Inc.


Attachment A


Operating segment revenue, operating (loss) income and operating margin:


Three months ended June 30, 2011 and 2010 and March 31, 2011






Change - actual

Change – constant
exchange rate(1)

Key segmental data, in '000, except margins

Q4 '11

Q4 '10

Q3 '11

Q4 '11

vs

Q4'10

Q4 '11

vs

Q3 '11

Q4 '11

vs

Q4 '10

Q4 '11

vs

Q3 '11

Revenue:








SA transaction-based activities

$50,267

$50,115

$47,313

-%

6%

(10)%

4%

International transaction-based activities

27,900

-

24,627

nm

13%

nm

10%

Smart card accounts

8,623

7,804

8,288

10%

4%

(1)%

1%

Financial services

2,274

1,224

2,168

86%

5%

67%

2%

Hardware, software and related technology sales

8,304

9,552

10,362

(13)%

(20)%

(22)%

(22)%

Total consolidated revenue

$97,368

$68,695

$92,758

42%

5%

28%

2%










Consolidated operating income (loss):








SA transaction-based activities

$20,347

$25,798

$18,309

(21)%

11%

(29)%

8%

International transaction-based activities

811

-

780

nm

4%

nm

nm

Operating income excluding amortization

4,257

-

3,904

nm

9%

nm

nm

Amortization of intangible assets

(3,446)

-

(3,124)

nm

10%

nm

nm

Smart card accounts

3,919

3,547

3,767

10%

4%

(1)%

1%

Financial services

1,797

973

1,701

85%

6%

66%

3%

Hardware, software and related technology sales

(2,367)

(40,673)

(44,584)

(94)%

(95)%

(95)%

(95)%

Corporate/ Eliminations

2,086

(2,480)

(2,098)

nm

(199)%

nm

(197)%

Total operating (loss) income

$26,593

$(12,835)

$(22,125)

nm

nm

nm

nm










Operating income margin (%)








SA transaction-based activities

40%

51%

39%



International transaction-based activities

3%

-

3%



International transaction-based activities excluding amortization

15%

-

16%



Smart card accounts

45%

45%

45%



Financial services

79%

79%

78%



Hardware, software and related technology sales

(29)%

(426)%

(430)%



Overall operating margin

27%

(19)%

(24)%













(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 2011 also prevailed during the fourth quarter of fiscal 2010 and the third quarter of fiscal 2011.

Year ended June 30, 2011 and 2010





Change -
actual

Change –
constant
exchange
rate(1)

Key segmental data, in '000, except margins

F2011

F2010

F2011

vs

F2010

F2011

vs

F2010

Revenue:





SA transaction-based activities

$188,590

$191,362

(1)%

(9)%

International transaction-based activities

69,947

-

nm

nm

Smart card accounts

33,315

31,971

4%

(4)%

Financial services

7,313

4,023

82%

67%

Hardware, software and related technology sales

44,255

53,008

(17)%

(23)%

Total consolidated revenue

$343,420

$280,364

22%

13%







Consolidated operating income (loss):





SA transaction-based activities

$74,642

$106,036

(30)%

(35)%

International transaction-based activities

1,707

-

nm

nm

Operating income excluding amortization

10,309

-

nm

nm

Amortization of intangible assets

(8,602)

-

 nm

 nm

Smart card accounts

15,140

14,532

4%

(4)%

Financial services

5,658

2,881

96%

81%

Hardware, software and related technology sales

(49,930)

(42,524)

17%

8%

Corporate/ Eliminations

(9,789)

(11,114)

(12)%

(19)%

Total operating income

$37,428

$69,811

(46)%

(51)%







Operating income margin (%)





SA transaction-based activities

40%

55%


International transaction-based activities

2%

-


International transaction-based activities excluding amortization

15%

-


Smart card accounts

45%

45%


Financial services

77%

72%


Hardware, software and related technology sales

(113)%

(80)%


Overall operating margin

11%

25%









(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during year to date fiscal 2011 also prevailed during year to date fiscal 2010.

Net 1 UEPS Technologies, Inc.


Attachment B


Reconciliation of GAAP net income (loss) to fundamental net income:


Three months ended June 30, 2011 and 2010


Net

Income (loss)  

(USD'000)

EPS (LPS),

basic

(USD)

Net

Income (loss)

(ZAR'000)

EPS(LPS),

basic

(ZAR)

2011

2010

2011

2010

2011

2010

2011

2010










GAAP

6,832

(17,007)

15

(37)

46,517

(128,631)

103

(283)










Amortization of intangible assets(1)

3,646

2,569


24,827

19,433


Customer relationships

2,837

2,520


19,318

19,060


Software and unpatented technology

1,949

932


13,269

7,046


Trademarks

218

89


1,482

679


Database

74

67


507

507


Deferred tax benefit

(1,432)

(1,039)


(9,749)

(7,859)

Stock-based charge(2)

(2,873)

1,416


(19,561)

10,710

Impairment loss, net

-

37,378


-

282,709

Restructuring charges at Net1 UTA

637

-


4,337

-

Facility fees for KSNET debt

118

-


803

-

Valuation allowance related to Net1UTA DTA

8,856

-


60,298

-

Acquisition-related costs.

391

327


2,664

2,473

Fundamental

17,607

24,683

39

54

119,885

186,694

266

411











(1) Amortization of acquisition-related intangibles, net of deferred tax benefit.

(2) Includes stock-based compensation charges related to options and non-vested stock awards.

Year ended June 30, 2011 and 2010


Net

income

(USD'000)

EPS,

basic

(USD)

Net

income

(ZAR'000)

EPS,

basic

(ZAR)

2011

2010

2011

2010

2011

2010

2011

2010










GAAP

2,647

38,990

6

84

18,518

296,686

41

642










Amortization of intangible assets(1)

15,708

10,261


109,898

78,082


Customer relationships

13,397

12,297


93,731

93,575


Software and unpatented technology

7,301

1,351


51,079

10,284


Trademarks

704

357


4,926

2,716


Database

290

133


2,026

1,013


Deferred tax benefit

(5,984)

(3,877)


(41,864)

(29,506)

Stock-based charge(2)

1,717

5,670


12,012

43,145

Gain on FEC, net of tax

(114)

-


(798)

-

Impairment loss, net

31,339

37,378


219,254

284,420

Restructuring charges at Net1 UTA

777

-


5,436

-

Facility fees for KSNET debt

1,953

-


13,664

-

Valuation allowance related to Net1UTA DTA

8,856

-


61,958

-

Acquisition-related costs.

6,049

615


42,319

4,680

Fundamental

68,932

92,914

153

201

482,261

707,013

1,068

1,529











(1) Amortization of acquisition-related intangibles, net of deferred tax benefit.

(2) Includes stock-based compensation charges related to options and non-vested stock awards.

Net 1 UEPS Technologies, Inc.


Attachment C


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


Three months ended June 30, 2011 and 2010

2011

2010




Net income (loss) (USD'000)

6,832

(17,007)

Adjustments:




Impairment loss (USD'000)

-

37,378

(Profit) Loss on sale of property, plant and equipment (USD'000)

5

63

Tax effects on above (USD'000)

(2)

(22)




Net income used to calculate headline earnings (USD'000)

6,835

20,412




Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000)  

45,136

45,378




Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000)  

45,164

45,560




Headline earnings per share:


Basic earnings – common stock and linked units, in US cents

15

45

Diluted earnings – common stock and linked units, in US cents

15

45

Year ended June 30, 2011 and 2010

2011

2010




Net income (USD'000)

2,647

38,990

Adjustments:




Impairment loss (USD'000)

41,771

37,378

(Profit) Loss on sale of property, plant and equipment (USD'000)

(5)

69

Tax effects on above (USD'000)

(10,430)

(24)




Net income used to calculate headline earnings (USD'000)

33,983

76,413




Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000)  

45,175

46,245




Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000)  

45,231

46,435




Headline earnings per share:


Basic earnings – common stock and linked units, in US cents

75

165

Diluted earnings – common stock and linked units, in US cents

75

165

SOURCE Net 1 UEPS Technologies, Inc.

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