EX-99.2 3 exhibit99-2.htm PRESS RELEASE, DATED AUGUST 25, 2011 Net 1 UEPS Technologies, Inc. - Exhibit 99.2 - Filed by newsfilecorp.com

Exhibit 99.2

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

JOHANNESBURG, August 25, 2011 – 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,  
                % change     % change  
    2011     2010     in USD     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,  
                % change     % change  
    2011     2010     in USD     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 Kotzé, 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.

Investor Relations Contact:
Dhruv Chopra
Vice President of Investor Relations
Phone: +1-212-626-6675
Email: dchopra@net1.com

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 – constant  
                          Change - actual     exchange rate(1)  
                          Q4 ‘11     Q4 ‘11     Q4 ‘11     Q4 ‘11  
                        vs     vs     vs     vs  
Key segmental data, in ’000, except margins   Q4 ‘11       Q4 ‘10       Q3 ‘11     Q4‘10     Q3 ‘11     Q4 ‘10     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 –  
                        constant  
                  Change -     exchange  
                  actual     rate(1)  
                  F2011     F2011  
                vs     vs  
Key segmental data, in ’000, except margins   F2011       F2010     F2010     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     EPS (LPS),     Net     EPS(LPS),  
    Income (loss)     basic     Income (loss)     basic  
    (USD’000)     (USD)     (ZAR’000)     (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     EPS,     Net     EPS,  
    income     basic     income     basic  
    (USD’000)     (USD)     (ZAR’000)     (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