EX-99.1 2 exhibit99-1.htm EXHIBIT 99.1 Net 1 UEPS Technologies, Inc. - Exhibit 99.1 - Filed by newsfilecorp.com

Exhibit 99.1

Net 1 UEPS Technologies, Inc. Reports First Quarter 2017 Results

JOHANNESBURG, November 3, 2016 – Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today released results for Q1 2017.

• Q1 2017 Revenue of $155.6 million, an increase of 10% in constant currency;
   
• Q1 2017 FEPS of $0.48, which includes a 15% adverse impact related to higher share count.

Summary Financial Metrics

    Three months ended September 30,  
                % change     % change  
    2016     2015     in USD     in ZAR  
(All figures in USD ‘000s except per share data)                        
Revenue   155,633     154,473     1%     10%  
GAAP net income   24,632     23,020     7%     16%  
Fundamental net income (1)   25,753     26,458     (3% )   4%  
GAAP earnings per share ($)   0.46     0.49     (7% )   1%  
Fundamental earnings per share ($) (1)   0.48     0.56     (14% )   (9% )
Fully-diluted shares outstanding (‘000’s)   53,923     47,080     15%        
Average period USD/ ZAR exchange rate   14.10     12.96     9%        

(1) Fundamental net income and earnings per share are non-GAAP measures and are described below under “Use of Non-GAAP Measures—Fundamental net income and fundamental earnings per share.” See Attachment B for a reconciliation of GAAP net income to fundamental net income and earnings per share.

Factors impacting comparability of our Q1 2017 and Q1 2016 results

  • Unfavorable impact from the strengthening of the U.S. dollar against ZAR: The U.S. dollar appreciated by 9% against the ZAR during Q1 2017, which negatively impacted our reported results;
  • Impact of fiscal 2016 share issuances, net of buybacks on FEPS: During the latter half of fiscal 2016, we issued approximately 10 million shares to the IFC Investors. The impact of these and other issuances during fiscal 2016, net of approximately 2.4 million shares repurchased during fiscal 2016, has increased the weighted average number of shares used to calculate FEPS in fiscal 2017. During Q1 2017, we repurchased a further 3.1 million shares;
  • Growth in lending and insurance businesses: We continued to experience volume growth and operating efficiencies in our lending and insurance businesses during Q1 2017, which has resulted in an improved contribution to our financial inclusion revenue and operating income;
  • Impact of changes in specific regulations in South Korea governing fees charged on card transactions: Recently introduced regulations governing the fees that may be charged on card transactions have adversely impacted our revenues and operating income in South Korea;
  • Lower prepaid sales resulting from improved security features to our Manje products: The introduction of our new biometric-linking feature was implemented this quarter and adversely impacted the number of transacting users purchasing prepaid products through our mobile channel; and
  • Ongoing contributions from EPE offering: Our EPE offering contributed to an increase in revenue and operating income as more we expanded our customer base utilizing our ATM infrastructure.

"We are off to a good financial start for fiscal 2017 and have been very focused on driving a number of initiatives," said Serge Belamant, Chairman and CEO of Net1. "We believe that our recent reorganization, which focuses certain executives on specific tasks, our acquisition strategy that grows and diversifies our international revenue base and also provides us access to new and skilled management teams, our diversification efforts in South Africa that will reduce concentration risk and increase the group's revenue and profitability, and our cooperation with Blue Label, should result in meaningful earnings growth, which in turn should enhance shareholder value," he concluded.

"There are a number of variables that will have an impact on our fiscal 2017 results," said Herman Kotze, Chief Financial Officer of Net1. "These include the status of our SASSA contract and the financial impact of the Blue Label transaction when completed. Blue Label's financial results will in turn be dependent on the financial contribution from its acquisition of 45% of Cell C when completed. We will provide updates on these significant variables and the impact on our guidance when we have more visibility. We currently anticipate our fundamental earnings per share for fiscal 2017 to be at least $1.65. In formulating our guidance, we continue to assume that our existing contract with SASSA remains in effect for the full year on the existing terms and conditions, a constant currency base of ZAR 14.38/$1, an updated share count of 56 million shares, and a tax rate between 33%-35%," he concluded.

Corporate Actions:

Sale of common stock

On October 6, 2016, we entered into stock purchase agreements with two investors under which we agreed to sell each of the investors 2.5 million shares of the our common stock at a price of $9.00 per share, for aggregate gross proceeds to us of $45.0 million. Closing of the transactions is scheduled to occur on or about November 9, 2016.

Strategic investment in Blue Label Telecoms

On October 4, 2016, we entered into a Share Subscription Agreement (the “Blue Label Subscription Agreement”) with Blue Label Telecoms Limited, a JSE-listed company which is a leading provider of prepaid electricity and airtime in South Africa. Pursuant to the Blue Label Subscription Agreement, we will purchase approximately 117.9 million ordinary shares of Blue Label at a price of ZAR 16.96 per share, for an aggregate purchase price of ZAR 2.0 billion ($144.3 million, translated at exchange rates applicable as of September 30, 2016) in cash. We expect that the proceeds from the investment in Blue Label will be used to partially fund Blue Label’s acquisition of a 45% shareholding in Cell C (Proprietary) Limited, a leading mobile provider in South Africa. Closing of the Company’s investment in Blue Label is subject to closing conditions and is expected to occur simultaneously with the closing of Blue Label’s Cell C investment.

We expect to fund the transaction through a combination of cash on hand, a portion of a ZAR 1.4 billion loan facility to be provided to us from FirstRand Bank Limited (acting through its Rand Merchant Bank division), or RMB, as described below and the sale of common stock referred to above.

RMB Loan Facilities

On October 20, 2016, we entered into loan facility with RMB, pursuant to which, among other things, we may borrow up to an aggregate of ZAR 1.4 billion ($101.0 million, translated at exchange rates applicable as of September 30, 2016) to finance a portion of our working capital requirements and a portion of our proposed investment in Blue Label. The amounts available under these loans and an escrow deposit of ZAR 600 million ($43.3 million, translated at exchange rates applicable as of September 30, 2016) made by us serve as security for a guarantee issued by RMB in favor or Blue Label. Interest on the loan facility is payable monthly based on the Johannesburg Interbank Agreed Rate, or JIBAR, in effect from time to time plus an average margin of 2.25% . The JIBAR rate was 7.1% on October 20, 2016.

Principal repayments on the loan facility are due in eight equal quarterly installments, beginning on January 31, 2017, and all of the facility matures on October 20, 2018. The loan facility is secured by a pledge of our entire equity interest in Blue Label. The loan facility contains customary covenants that require us to maintain a specified total net leverage ratio and restrict the ability of most of our South African subsidiaries from making certain distributions with respect to their capital stock, prepay other debt, encumber their assets, incur additional indebtedness, make investment above specified levels, engage in certain business combinations and engage in other corporate activities.

Results of Operations by Segment and Liquidity

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

South African transaction processing

Segment revenue was $57.6 million in Q1 2017, up 3% compared with Q1 2016 in USD, and up 13% on a constant currency basis. In ZAR, the increase in segment revenue and operating income was primarily due to higher EPE transaction revenue as a result of increased usage of our ATMs, more low-margin transaction fees generated from card holders using the South African National Payment System, increased inter-segment transaction processing activities, and a modest increase in the number of social welfare grants distributed. Our operating income margin for each of Q1 2017 and 2016 was 24%, respectively. Our Q1 2017 margin includes higher EPE revenue as a result of increased ATM transactions, an increase in inter-segment transaction processing activities, an increase in the number of beneficiaries paid in Q1 2017 and a modest increase in the margin of transaction fees generated from cardholders using the South African National Payment System, which was partially offset by annual salary increases granted to our South African employees.

International transaction processing

Segment revenue was $46.2 million in Q1 2017, up 12% compared with Q1 2016 in USD, and up 22% on a constant currency basis. Segment revenue increased during Q1 2017, primarily due to the inclusion of T24 and Masterpayment; however, this growth was partially offset by a lower contribution from KSNET due to the regulatory changes governing the fees that may be charged on card transactions. Operating income during Q1 2017 was lower due a decrease in revenue and an increase in depreciation expenses at KSNET, and ongoing ZAZOO start-up costs in the UK and India, which was partially offset by a positive contribution by T24 and XeoHealth. Operating income margin for Q1 2017 and 2016 was 13% and 16%, respectively. Masterpayment has commenced implementing its expansion plan and we expect to incur additional expenses in the second quarter of fiscal 2017 as it enters new markets.

Financial inclusion and applied technologies

Segment revenue was $63.5 million in Q1 2017, down 6% compared with Q1 2016 in USD and up 3% on a constant currency basis. In ZAR, Financial inclusion and applied technologies revenue and operating income increased primarily due to from increased volumes and improved operating efficiencies in our lending and insurance businesses, and, in ZAR, an increase in inter-segment revenues, more ad hoc terminal and card sales, which was offset by fewer prepaid airtime and other value-added services sales. These sales were specifically impacted this quarter by the introduction of our new biometric-linking feature which adversely impacted the number of transacting users purchasing prepaid products through our mobile channel. Operating income margin for the Financial inclusion and applied technologies segment was 24% and 25%, during Q1 2017 and 2016, respectively, and has decreased primarily due to the increase in branch infrastructure and staff compliment, which was partially offset by improved revenues from our lending and insurance businesses and an increase in inter-segment revenues.

Corporate/eliminations

Our corporate expenses have decreased primarily due to reversal of stock-based compensation charges, the impact of the stronger U.S. dollar on goods and services procured in other currencies, primarily the ZAR, and lower amortization costs, partially offset by modest increases in U.S. dollar denominated goods and services purchased from third parties and directors’ fees.

Cash flow and liquidity

At September 30, 2016, our cash balances were $205.3 million, which comprised mainly ZAR-denominated balances of ZAR 1.2 billion ($87.1 million), U.S. dollar-denominated balances of $73.2 million, KRW-denominated balances of KRW 35.8 billion ($32.5 million) and other currency deposits, primarily euros, of $12.5 million. The decrease in our cash balances from June 30, 2016, was primarily due to repurchase of shares of our common stock, unscheduled repayments of our Korean debt, the investment in MobiKwik and capital expenditures, which was partially offset by the expansion of most of our core businesses, and the weakening of the U.S. dollar against our primary functional currencies.

Excluding the impact of interest received, interest paid under our Korean debt and taxes, the increase in cash from operating activities resulted from improved trading activity during fiscal 2017. Capital expenditures for Q1 2017 and 2016 were $3.4 million and $10.7 million, respectively, and have decreased primarily due to the acquisition of fewer payment processing terminals in South Korea. During Q1 2017, we paid $15.3 million for the issued and outstanding shares of MobiKwik. During the Q1 2017, we paid approximately $31.6 million to repurchase 3,137,609 shares of our common stock and also paid $0.5 million, on July 1, 2016, related to settlement of amounts outstanding related to the repurchases at the end of June 2016. We also made a $26.7 million unscheduled repayment of our Korean debt, utilized approximately $0.5 million of our Korean facility to pay a portion of our quarterly interest due. In addition, we paid a dividend of approximately $0.6 million to certain of our non-controlling interests.

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

Fundamental net income and earnings per share is GAAP net income and earnings per share adjusted for (1) the amortization of acquisition-related intangible assets (net of deferred taxes), (2) stock-based compensation charges and (3) unusual non-recurring items, including the amortization of KSNET debt facility fees and US government investigations-related and US lawsuit expenses as well as, in fiscal 2017, costs related transaction and acquisition consummated or ultimately not pursued, and in fiscal 2016, US government investigations-related and US lawsuit expenses. Management believes that the fundamental net income and earnings per share metric enhances its own evaluation, as well as an investor’s understanding, of our financial performance. Attachment B presents the reconciliation between GAAP 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 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 adjusted for the profit on sale of property, plant and equipment. Attachment C presents the reconciliation between our net income used to calculate earnings per share basic and diluted and HEPS basic and diluted and the calculation of the denominator for headline diluted earnings per share.

Conference Call

We will host a conference call to review Q1 2017 results on November 4, 2016, at 8:00 Eastern Time. To participate in the call, dial 1-855-481-5362 (US and Canada), 0808-162-4061 (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 the Net1 homepage, www.net1.com. Please click on the webcast link at least ten minutes prior to the call. A webcast of the call will be available for replay on the Net1 website through November 27, 2016.

About Net1 (www.net1.com)

Net1 is a leading provider of alternative payment systems that leverage its Universal Electronic Payment System (“UEPS”) or utilize its proprietary mobile technologies. The Company operates market-leading payment processors in South Africa and the Republic of Korea. Through Transact24, Net1 offers debit, credit and prepaid processing and issuing services for Visa, MasterCard and ChinaUnionPay in China and other territories across Asia-Pacific, Europe and Africa, and the United States. Through Masterpayment, Net1 provides payment processing and enables working capital financing in Europe.

UEPS permits the Company 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. Net1’s UEPS/EMV solution is interoperable with global EMV standards that seamlessly enable access to all the UEPS functionality in a traditional EMV environment. In addition to payments, UEPS can be used for banking, healthcare management, payroll, remittances, voting and identification.

Net1’s mobile technologies include its proprietary mobile payments solution - MVC, which offers secure mobile-based payments, as well as mobile banking and prepaid value-added services in developed and emerging countries. The Company intends to deploy its varied mobile solutions through its ZAZOO business unit, which is an aggregation of innovative technology companies and is based in the United Kingdom.

Net1 has a primary listing on the NASDAQ and a secondary listing on the Johannesburg Stock Exchange.

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
Head of Investor Relations
Phone: +1 917-767-6722
Email: dchopra@net1.com

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations

    Three months ended  
    September 30,  
    2016     2015  
    (In thousands, except per share data)  
             
REVENUE $  155,633   $  154,473  
             
EXPENSE            
             
         Cost of goods sold, IT processing, servicing and support   74,780     77,382  
             
         Selling, general and administration   38,468     35,761  
             
         Depreciation and amortization   10,204     10,115  
             
OPERATING INCOME   32,181     31,215  
             
INTEREST INCOME   4,304     4,275  
             
INTEREST EXPENSE   796     974  
             
INCOME BEFORE INCOME TAX EXPENSE   35,689     34,516  
             
INCOME TAX EXPENSE   11,103     10,897  
             
NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   24,586     23,619  
             
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   659     188  
             
NET INCOME   25,245     23,807  
             
LESS NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST   613     787  
             
NET INCOME ATTRIBUTABLE TO NET1 $  24,632   $  23,020  
             
Net income per share, in U.S. dollars            
         Basic earnings attributable to Net1 shareholders $ 0.46   $ 0.49  
         Diluted earnings attributable to Net1 shareholders $ 0.46   $ 0.49  

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets

    Unaudited     (A)  
    September 30,     June 30,  
    2016     2016  
    (In thousands, except share data)  
ASSETS    
CURRENT ASSETS            
     Cash and cash equivalents $  205,329   $  223,644  
     Pre-funded social welfare grants receivable   1,738     1,580  
     Accounts receivable, net of allowances of – September: $1,453; June: $1,669   108,088     107,805  
     Finance loans receivable, net of allowances of – September: $3,919; June: $4,494   38,941     37,009  
     Inventory   10,694     10,004  
     Deferred income taxes   7,484     6,956  
             Total current assets before settlement assets   372,274     386,998  
                     Settlement assets   593,503     536,725  
                             Total current assets   965,777     923,723  
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – September: $112,336; June: $99,969   53,338     54,977  
EQUITY-ACCOUNTED INVESTMENTS   25,560     25,645  
GOODWILL   187,875     179,478  
INTANGIBLE ASSETS, net of accumulated amortization of – September: $97,139; June: $91,208   47,611     48,556  
OTHER LONG-TERM ASSETS, including reinsurance assets   45,089     31,121  
     TOTAL ASSETS   1,325,250     1,263,500  
             
LIABILITIES    
CURRENT LIABILITIES            
     Short-term credit facilities   -     -  
     Accounts payable   13,956     14,097  
     Other payables   42,535     37,479  
     Current portion of long-term borrowings   9,078     8,675  
     Income taxes payable   16,572     5,235  
             Total current liabilities before settlement obligations   82,141     65,486  
Settlement obligations   593,503     536,725  
Total current liabilities   675,644     602,211  
DEFERRED INCOME TAXES   11,397     12,559  
LONG-TERM BORROWINGS   18,156     43,134  
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities   2,793     2,376  
     TOTAL LIABILITIES   707,990     660,280  
COMMITMENTS AND CONTINGENCIES            
EQUITY    
     COMMON STOCK            
                 Authorized: 200,000,000 with $0.001 par value; 
                 Issued and outstanding shares, net of treasury - 
                 September: 52,521,345; June: 55,271,954 		  74     74  
     PREFERRED STOCK            
                 Authorized shares: 50,000,000 with $0.001 par value; 
                 Issued and outstanding shares, net of treasury: September: -; June: - 		  -     -  
     ADDITIONAL PAID-IN-CAPITAL   222,637     223,978  
     TREASURY SHARES, AT COST: September: 23,621,541; June: 20,483,932   (273,238 )   (241,627 )
     ACCUMULATED OTHER COMPREHENSIVE LOSS   (167,842 )   (189,700 )
     RETAINED EARNINGS   724,954     700,322  
             TOTAL NET1 EQUITY   506,585     493,047  
             REDEEMABLE COMMON STOCK   107,672     107,672  
             NON-CONTROLLING INTEREST   3,003     2,501  
                     TOTAL EQUITY   617,260     603,220  
             
                             TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $  1,325,250   $  1,263,500  

(A) – Derived from audited financial statements

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows

    Three months ended  
    September 30,  
    2016     2015  
    (In thousands)  
Cash flows from operating activities            
Net income $  25,245   $  23,807  
Depreciation and amortization   10,204     10,115  
Earnings from equity-accounted investments   (659 )   (188 )
Fair value adjustments   (83 )   1,433  
Interest payable   32     709  
Loss (Profit) on disposal of property, plant and equipment   66     (95 )
Stock-based compensation (reversal) charge, net   (1,324 )   726  
Facility fee amortized   36     34  
Decrease (Increase) in accounts receivable, pre-funded social welfare grants receivable            
and finance loans receivable   7,766     (17,278 )
Increase in inventory   (104 )   (931 )
Increase in accounts payable and other payables   3,040     2,972  
Increase in taxes payable   10,956     7,824  
Decrease in deferred taxes   (1,632 )   (1,026 )
   Net cash provided by operating activities   53,543     28,102  
Cash flows from investing activities            
Capital expenditures   (3,423 )   (10,698 )
Proceeds from disposal of property, plant and equipment   69     348  
Investment in MobiKwik   (15,347 )   -  
Dividends received from equity accounted investments   370     -  
Net change in settlement assets (A)   (37,394 )   (23,496 )
   Net cash used in by investing activities   (55,725 )   (33,846 )
Cash flows from financing activities            
Acquisition of treasury stock   (32,081 )   -  
Repayment of long-term borrowings   (26,669 )   -  
Dividends paid to non-controlling interest   (555 )   -  
Long-term borrowings utilized   247     720  
Proceeds from issue of common stock   -     3,762  
Net change in settlement obligations (A)   37,394     23,496  
   Net cash (used in) provided by financing activities   (21,664 )   27,978  
Effect of exchange rate changes on cash   5,531     (14,207 )
Net (decrease) increase in cash and cash equivalents   (18,315 )   8,027  
Cash and cash equivalents – beginning of period   223,644     117,583  
Cash and cash equivalents – end of period $  205,329   $  125,610  

(A) - Net change in settlement assets and net change in settlement assets included in the unaudited condensed consolidated statement of cash flows for the three months ended September 30, 2015, have been increased by $1.9 million as a result of the restatement described in Note 2—Significant accounting policies—settlement assets and settlement obligations to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2016.

Net 1 UEPS Technologies, Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended September 30, 2016 and 2015 and June 30, 2016

                                  Change – constant  
                      Change - actual     exchange rate(1)  
                      Q1 ‘17     Q1 ‘17     Q1 ‘17     Q1 ‘17  
                      vs     vs     vs     vs  
Key segmental data, in $ ’000,   Q1 ‘17     Q1 ‘16     Q4 ‘16     Q1‘16     Q4 ‘16     Q1‘16     Q4 ‘16  
Revenue:                                          
South African transaction processing $ 57,568   $ 55,639   $ 53,577     3%     7%     13%     1%  
International transaction processing   46,190     41,229     47,154     12%     (2% )   22%     (8% )
Financial inclusion and applied                                          
technologies   63,542     67,360     62,071     (6% )   2%     3%     (4% )
         Subtotal: Operating segments   167,300     164,228     162,802     2%     3%     11%     (3% )
         Intersegment eliminations   (11,667 )   (9,755 )   (11,543 )   20%     1%     30%     (5% )
Consolidated revenue $ 155,633   $ 154,473   $ 151,259     1%     3%     10%     (3% )
                                           
Operating income (loss):                                          
South African transaction processing $ 13,548   $ 13,511   $ 12,662     0%     7%     9%     0%  
International transaction processing   5,817     6,543     7,793     (11% )   (25% )   (3% )   (30% )
Financial inclusion and applied                                          
technologies   15,183     16,554     13,457     (8% )   13%     (0% )   6%  
         Subtotal: Operating segments   34,548     36,608     33,912     (6% )   2%     3%     (4% )
         Corporate/Eliminations   (2,367 )   (5,393 )   (1,729 )   (56% )   37%     (52% )   29%  
                 Consolidated operating income $ 32,181   $ 31,215   $ 32,183     3%     (0% )   12%     (6% )
                                           
Operating income margin (%)                                          
South African transaction processing   24%     24%     24%                          
International transaction processing   13%     16%     17%                          
Financial inclusion and applied                                          
technologies   24%     25%     22%                          
         Consolidated operating margin   21%     20%     21%                          

(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the Q1 2017 also prevailed during Q1 2016 and Q4 2016.

Net 1 UEPS Technologies, Inc.

Attachment B

Reconciliation of GAAP net income and earnings per share, basic, to fundamental net income and earnings per share, basic:

Three months ended September 30, 2016 and 2015

                EPS,                 EPS,  
    Net income     basic     Net income     basic  
    (USD’000)     (USD)     (ZAR’000)     (ZAR)  
    2016     2015     2016     2015      2016     2015     2016     2015  
                                                 
GAAP   24,632     23,020     0.46     0.49     347,430     298,300     6.45     6.36  
                                                 
     Intangible asset amortization, net .   2,167     2,554                 30,567     39,886              
     Stock-based compensation 
     (reversal) charge 		  (1,324 )   726             (18,675 )   9,408          
     Transaction costs   242     -                 3,413     -              
     Facility fees for KSNET debt   36     34                 508     441              
     US government investigations- 
     related and US lawsuit expenses 		  -     124             -     1,607          
              Fundamental   25,753     26,458     0.48     0.56     363,243     349,642     6.75     7.45  

Net 1 UEPS Technologies, Inc.

Attachment C

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

Three months ended September 30, 2016 and 2015

    2016     2015  
             
Net income (USD’000)   24,632     23,020  
Adjustments:            
     Loss (Profit) on sale of property, plant and equipment   66     (95 )
     Tax effects on above   (18 )   27  
             
Net income used to calculate headline earnings (USD’000)   24,680     22,952  
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings (‘000)   53,832     46,620  
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings (‘000)   53,923     47,080  
Headline earnings per share:            
     Basic, in USD   0.46     0.49  
     Diluted, in USD   0.46     0.49  

Calculation of the denominator for headline diluted earnings per share

    Q1 ‘17     Q1 ‘16  
             
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP   53,832     46,620  
     Effect of dilutive securities under GAAP   91     460  
         Denominator for headline diluted earnings per share   53,923     47,080  

Weighted average number of shares used to calculate headline earnings per share diluted represent the denominator for basic weighted-average common shares outstanding and unvested restricted shares expected to vest plus the effect of dilutive securities under GAAP. We use this number of fully-diluted shares outstanding to calculate headline earnings per share diluted because we do not use the two-class method to calculate headline earnings per share diluted.