Net 1 UEPS Technologies, Inc. Announces First Quarter Results for Fiscal 2006
Johannesburg, South Africa (November 3, 2005) – Net 1 UEPS Technologies, Inc. (“Net1” or the “Company”) (Nasdaq: UEPS) today announced results for the first quarter of fiscal 2006.
Results
The Company reported an increase in net income of 29% to $13.2 million for first quarter 2006, from $10.2 million for first quarter 2005. Earnings per common share and linked unit increased 27% to $0.238 for first quarter 2006, compared to $0.187 for first quarter 2005. Revenue increased 6% from $43.2 million for the first quarter of 2005 to $45.9 million for the first quarter of 2006.
First Quarter Highlights
- $118.6 million in transactions were processed through our merchant acquiring business in the first quarter of fiscal 2006, compared to $3.6 million in the first quarter of fiscal 2005 and $147.3 million during the entire fiscal 2005 year. During September 2005, 566,000 beneficiaries transacted at merchant locations, compared to 450,000 in June 2005 and only 17,000 a year ago, during September 2004;
- During the first quarter fiscal 2006, 724 POS terminals were installed at 423 retail locations, compared with 340 POS terminals installed at 265 retail locations during the first quarter of fiscal 2005;
- UEPS transaction-based activities effected 10.1 million payments during the first quarter of fiscal 2006, a 6.3% increase over the number of payments effected during the first quarter of fiscal 2005;
- A total of 3,398,516 UEPS smart card-based accounts were active at September 30, 2005, compared to 3,372,665 active accounts at September 30, 2004;
- In September, the Company made a 50% investment in equity and loans, totalling $1.9 million in SmartSwitch Namibia, a Namibian company. The Company expects to sell hardware and software to this company totalling approximately $4.6 million over the first three quarters of fiscal 2006;
- In September, the Company received an order to provide Nedbank Limited with an additional 7,280 POS terminals and 9,080 pin-pads. Delivery is expected to commence in the second quarter of fiscal 2006 and be completed in the third quarter of fiscal 2006;
- International initiatives are progressing according to our expectations;
- Paul Edwards and Florian P. Wendelstadt were appointed as two additional independent directors; and
- In August, we completed our public offering and listing on the Nasdaq National Market. In the offering, the selling shareholders sold 10,258,625 shares of the Company’s common stock at a public offering price of $22.00 per share and the underwriters exercised their over-allotment option which resulted in net proceeds to the Company of $31.5 million.
The impact of changes in the exchange rate between the U.S. dollar and the South Africa rand (“ZAR”) on results of operations is shown under the column "Change" in the table of key metrics included at the end of this press release. In addition, during the first quarter, the Company incurred approximately $1,477,000 in expenses related to the public offering and Nasdaq listing.
Comment and Outlook
Serge Belamant, Net1's Chairman and Chief Executive Officer, stated, “The first quarter of fiscal 2006 has set a solid foundation for the rest of the year. With our successful listing on Nasdaq complete, we can now focus on growing our current business and take full advantage of the new opportunities that we have been presented with. The signing of the Namibia contract during the quarter further expands our footprint within the African market place. Based on our results, we are well-positioned to achieve our previously announced earnings per share expectations for the full fiscal year of $0.93 to $0.98 per share, assuming an exchange rate of ZAR6.5: $1”
Conference call
Net1 will host a conference call to review first quarter results on November 4, 2005 at 9:30 a.m EST. To participate in the call, dial 1-800-860-2442 (U.S. only), 1-866-519-5086 (Canada only), 0-800-917-7042 (U.K. only) or 0-800-200-648 (South Africa only) five minutes prior to the start of the call. The passcode is “Net1”. The
call will also be webcast on the Net1 homepage, www.net1ueps.com. Please click on the webcast link at least 10 minutes prior to the call. A replay of the call may be accessed through the Net1 website through November 18, 2005.
About Net1 (www.net1ueps.com)
Net1 provides its universal electronic payment system, or UEPS, as an alternative payment system for the unbanked and under-banked populations of developing economies. The Company believes that it is the first company worldwide to implement a system that can enable the estimated four billion people who generally have limited or no access to a bank account to enter affordably into electronic transactions with each other, government agencies, employers, merchants and other financial service providers. To accomplish this, the Company has developed and deployed the UEPS. This system uses secure smart cards that operate in real-time but offline, unlike traditional payment systems offered by major banking institutions that require immediate access through a communications network to a centralized computer. This offline capability means that users of Net1’s system can enter into transactions at any time with other card holders in even the most remote areas so long as a portable offline smart card reader is available. In addition to payments and purchases, Net1’s system can be used for banking, health care management, international money transfers, voting and identification.
This announcement may contain forward-looking statements pursuant to the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, implied or inferred by these forward-looking statements, such as product demand, market and customer acceptance, the effect of economic conditions, competition, pricing, development difficulties, foreign currency risks, costs of capital, the ability to consummate and integrate acquisitions, and other risks detailed in the Company’s SEC filings. The Company undertakes no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.
Contact William Espley at Net1 Investor Relations at: | |
Telephone: | (604) 484-8750 |
Toll Free: | (866) 412-NET1 (6381) |
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
Three months ended | ||||||
September 30, | ||||||
2005 | 2004 | |||||
(In thousands, except share data) | ||||||
REVENUE | $ | 45,887 | $ | 43,223 | ||
EXPENSE | ||||||
COST OF GOODS SOLD, IT PROCESSING, SERVICING AND SUPPORT | 11,819 | 14,801 | ||||
GENERAL AND ADMINISTRATION | 10,656 | 10,276 | ||||
DEPRECIATION AND AMORTIZATION | 1,538 | 1,575 | ||||
COSTS RELATED TO PUBLIC OFFERING AND NASDAQ LISTING | 1,477 | - | ||||
OPERATING INCOME | 20,397 | 16,571 | ||||
INTEREST INCOME, net | 903 | 655 | ||||
INCOME BEFORE INCOME TAXES | 21,300 | 17,226 | ||||
INCOME TAX EXPENSE | 8,411 | 7,208 | ||||
NET INCOME FROM CONTINUING OPERATIONS BEFORE EARNINGS FROM | ||||||
EQUITY ACCOUNTED INVESTMENT | 12,889 | 10,018 | ||||
EARNINGS FROM EQUITY ACCOUNTED INVESTMENT | 290 | 209 | ||||
NET INCOME | $ | 13,179 | $ | 10,227 | ||
Net income per share | ||||||
Basic earnings, in cents – common stock and linked units | 23.8 | 18.7 | ||||
Diluted earnings, in cents – common stock and linked units | 23.5 | 18.4 |
NET 1 UEPS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
Unaudited | Audited | |||||
September 30, | June 30, | |||||
2005 | 2005 | |||||
(In thousands, except share data) | ||||||
ASSETS | ||||||
CURRENT ASSETS | ||||||
Cash and cash equivalents | $ | 152,201 | $ | 107,749 | ||
Pre-funded social welfare grants receivable | 13,115 | 11,567 | ||||
Accounts receivable | 21,982 | 15,293 | ||||
Finance loans receivable, net of allowances of – September: $4,053; June: $3,636 | 8,465 | 7,760 | ||||
Deferred expenditure on smart cards | 2,118 | 3,014 | ||||
Inventory | 1,987 | 1,927 | ||||
Deferred income taxes | 4,328 | 3,354 | ||||
Total current assets | 204,196 | 150,664 | ||||
LONG TERM RECEIVABLE | 1,100 | 969 | ||||
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED | ||||||
DEPRECIATION OF – September: $22,520; June: $20,624 | 6,037 | 6,216 | ||||
EQUITY ACCOUNTED INVESTMENTS | 3,528 | 1,325 | ||||
GOODWILL | 15,078 | 14,636 | ||||
INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF – | ||||||
September: $5,666; June: $4,919 | 7,608 | 7,944 | ||||
TOTAL ASSETS | 237,547 | 181,754 | ||||
LIABILITIES | ||||||
CURRENT LIABILITIES | ||||||
Accounts payable | 24,610 | 20,315 | ||||
Income taxes payable | 11,052 | 14,038 | ||||
Total current liabilities | 35,662 | 34,353 | ||||
DEFFERRED INCOME TAXES | 13,357 | 10,399 | ||||
TOTAL LIABILITIES | 49,019 | 44,752 | ||||
SHAREHOLDERS’ EQUITY | ||||||
COMMON STOCK | ||||||
Authorized: 83,333,333 with $0.001 par value; | ||||||
Issued and outstanding shares - September: 41,429,199; June: 28,548,269 | 42 | 29 | ||||
SPECIAL CONVERTIBLE PREFERRED STOCK | ||||||
Authorized: 50,000,000 with $0.001 par value; | ||||||
Issued and outstanding shares - September: 15,241,381; June: 26,733,521 | 15 | 27 | ||||
B CLASS PREFERENCE SHARES | ||||||
Authorized: 330,000,000 with $0.001 par value; | ||||||
Issued and outstanding shares (net of shares held by the Company) - September: | ||||||
112,304,927; June: 196,983,841 | 18 | 31 | ||||
ADDITIONAL PAID-IN-CAPITAL | 104,191 | 71,960 | ||||
ACCUMULATED OTHER COMPREHENSIVE INCOME | 13,442 | 7,314 | ||||
RETAINED EARNINGS | 70,820 | 57,641 | ||||
TOTAL SHAREHOLDERS’ EQUITY | 188,528 | 137,002 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 237,547 | $ | 181,754 |
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Three months ended | ||||||
September 30, | ||||||
2005 | 2004 | |||||
(In thousands) | ||||||
Cash flows from operating activities | ||||||
Cash received from customers | $ | 38,229 | $ | 28,627 | ||
Cash paid to suppliers and employees | (20,778 | ) | (22,785 | ) | ||
Cash generated by operations | 17,451 | 5,842 | ||||
Interest received | 2,815 | 3,584 | ||||
Finance costs paid | (1,891 | ) | (2,933 | ) | ||
Income taxes paid | (9,152 | ) | (6,181 | ) | ||
Net cash provided by operating activities | 9,223 | 312 | ||||
Cash flows from investing activities | ||||||
Capital expenditures | (542 | ) | (943 | ) | ||
Proceeds from disposal of property, plant and equipment | 4 | 16 | ||||
Acquisition of equity interest in and advance of loans to equity accounted investment | (1,851 | ) | - | |||
Net cash used in investing activities | (2,389 | ) | (927 | ) | ||
Cash flows from financing activities | ||||||
Proceeds from issue of share capital, net of share issue expenses | 32,219 | - | ||||
Repayment of bank overdrafts | - | (19 | ) | |||
Net cash provided by (used in) financing activities | 32,219 | (19 | ) | |||
Effect of exchange rate changes on cash | 5,399 | (2,046 | ) | |||
Net increase (decrease) in cash and cash equivalents | 44,452 | (2,680 | ) | |||
Cash and cash equivalents – beginning of period | 107,749 | 80,282 | ||||
Cash and cash equivalents at end of period | $ | 152,201 | $ | 77,602 |
Net 1 UEPS Technologies, Inc.
Key metrics and statistics at and for the three months ended September 30, 2005 and 2004:
Three | ||||||||||||||||||
months | ||||||||||||||||||
Three months ended | ended | Year ended | ||||||||||||||||
September 30, | Change | June 30 | June 30 | |||||||||||||||
Constant | ||||||||||||||||||
2005 | 2004 | Exchange | 2005 | 2005 | ||||||||||||||
US$ | US$ | Actual | Rate(1) | US$ | US$ | |||||||||||||
Key statement of operations data, in‘000, | ||||||||||||||||||
except EPS | ||||||||||||||||||
Revenue | $ | 45,887 | $ | 43,223 | 6% | 8% | $ | 41,405 | $ | 176,290 | ||||||||
Operating income | 20,397 | 16,571 | 23% | 25% | 16,326 | 71,303 | ||||||||||||
Income tax expense | 8,411 | 7,208 | 17% | 19% | 7,132 | 29,666 | ||||||||||||
Net income | $ | 13,179 | $ | 10,227 | 29% | 31% | $ | 10,142 | $ | 44,562 | ||||||||
Earnings per share, in cents | ||||||||||||||||||
Basic | 23.8 | 18.7 | 27% | 29% | 18.5 | 81.4 | ||||||||||||
Diluted | 23.5 | 18.4 | 28% | 30% | 18.3 | 79.6 | ||||||||||||
Key segmental data, in ‘000, except margins | ||||||||||||||||||
Revenue: | ||||||||||||||||||
Transaction-based activities | $ | 27,818 | $ | 24,429 | 14% | 16% | $ | 26,115 | $ | 103,653 | ||||||||
Smart card accounts | 8,552 | 8,221 | 4% | 6% | 8,569 | 34,931 | ||||||||||||
Financial services | 4,274 | 5,080 | (16)% | (14)% | 4,573 | 20,215 | ||||||||||||
Hardware, software and related technology | ||||||||||||||||||
sales | 5,243 | 5,493 | (5)% | (3)% | 2,148 | 17,491 | ||||||||||||
Total consolidated revenue | $ | 45,887 | $ | 43,223 | 6% | 8% | $ | 41,405 | $ | 176,290 | ||||||||
Consolidated operating income (loss): | ||||||||||||||||||
Transaction-based activities | $ | 14,132 | $ | 9,682 | 46% | 49% | $ | 12,604 | $ | 44,233 | ||||||||
Smart card accounts | 3,887 | 3,737 | 4% | 6% | 3,895 | 15,878 | ||||||||||||
Financial services | 1,844 | 2,402 | (23)% | (22)% | 1,737 | 9,316 | ||||||||||||
Hardware, software and related technology | 5,689 | |||||||||||||||||
sales | 4,067 | 2,035 | 100% | 104% | (114 | ) | ||||||||||||
Corporate/ Eliminations | (3,533 | ) | (1,285 | ) | 175% | 180% | (1,796 | ) | (3,813 | ) | ||||||||
Total operating income (loss) | $ | 20,397 | $ | 16,571 | 23% | 25% | $ | 16,326 | $ | 71,303 | ||||||||
Operating income margin (%) | ||||||||||||||||||
Transaction-based activities | 51% | 40% | 48% | 43% | ||||||||||||||
Smart card accounts | 45% | 45% | 45% | 45% | ||||||||||||||
Financial services | 43% | 47% | 38% | 46% | ||||||||||||||
Hardware, software and related technology | ||||||||||||||||||
sales | 78% | 37% | (5 | )% | 33% | |||||||||||||
Overall operating margin | 44% | 38% | 39% | 40% | ||||||||||||||
Sept. 30, | June 30, | |||||||||||||||||
2005 | 2005 | |||||||||||||||||
Key balance sheet data, in ‘000 | ||||||||||||||||||
Cash and cash equivalents | $ | 152,201 | $ | 107,749 | 41% | |||||||||||||
Total current assets | 204,196 | 150,664 | 36% | |||||||||||||||
Total assets | 237,547 | 181,754 | 31% | |||||||||||||||
Total current liabilities | 35,662 | 34,353 | 4% | |||||||||||||||
Total shareholders’ equity | $ | 188,528 | $ | 137,002 | 38% |
(1)– This information shows what the change in these items would have been if the U.S. dollar/ ZAR exchange rate that prevailed during the first quarter of fiscal 2006 also prevailed during the first quarter of fiscal 2005.
Three | |||||||||||||||
months | |||||||||||||||
Three months ended | ended | Year ended | |||||||||||||
September 30, | Change | June 30 | June 30 | ||||||||||||
2005 | 2004 | 2005 | 2005 | ||||||||||||
Additional information: | |||||||||||||||
Transaction based activities: | |||||||||||||||
Total number of grants paid: | |||||||||||||||
KwaZulu-Natal | 4,308,365 | 4,009,441 | 7% | 4,280,023 | 16,774,940 | ||||||||||
Limpopo | 2,694,168 | 2,618,226 | 3% | 2,622,807 | 10,635,232 | ||||||||||
North West | 776,963 | 798,887 | (3)% | 787,567 | 3,153,868 | ||||||||||
Northern Cape | 389,575 | 369,639 | 5% | 377,845 | 1,459,264 | ||||||||||
Eastern Cape | 1,970,171 | 1,739,493 | 13% | 1,929,356 | 7,410,272 | ||||||||||
10,139,242 | 9,535,686 | 6% | 9,997,598 | 39,433,576 | |||||||||||
Average revenue per grant paid: | ZAR | ZAR | ZAR | ZAR | |||||||||||
KwaZulu-Natal | 19.21 | 18.51 | 4% | 18.09 | 17.85 | ||||||||||
Limpopo | 15.33 | 15.24 | 1% | 15.62 | 15.34 | ||||||||||
North West | 18.13 | 16.65 | 9% | 16.29 | 16.43 | ||||||||||
Northern Cape | 19.02 | 19.39 | (2)% | 19.18 | 19.41 | ||||||||||
Eastern Cape | 12.19 | 12.49 | (2)% | 12.30 | 12.35 | ||||||||||
UEPS merchant acquiring system: | |||||||||||||||
Terminals installed during the quarter | 724 | 340 | 113% | 829 | 3,235 | ||||||||||
New participating retail locations | 423 | 265 | 60% | 439 | 1,880 | ||||||||||
Value of transactions processed through our | |||||||||||||||
merchant acquiring system (US$ ‘000) | 118,585 | 3,563 | nm | 87, 643 | 147,331 | ||||||||||
Smart card accounts: | |||||||||||||||
Total number of smart card accounts | 3,398,516 | 3,372,665 | 1% | 3,353,603 | 3,353,603 | ||||||||||
Hardware, software and related technology | |||||||||||||||
sales: | |||||||||||||||
Ad hoc significant hardware sales (US$ ‘000) | |||||||||||||||
Nedbank POS’s, pin pads, smart cards and | |||||||||||||||
other hardware | 2,000 | 4,100 | (51)% | - | 10,400 | ||||||||||
Smartswitch Namibia hardware and software | |||||||||||||||
(before consolidation adjustments) | 1,200 | - | nm | - | - | ||||||||||
Financial services: (US$ ‘000) | |||||||||||||||
Traditional based lending: | |||||||||||||||
Finance loans receivable – gross | 8,039 | 12,129 | (34)% | 7,212 | 7,212 | ||||||||||
Allowance for doubtful finance loans | |||||||||||||||
receivable | (4,053 | ) | (8,259 | ) | (51)% | (3,636 | ) | (3,636 | ) | ||||||
Finance loans receivable – net | 3,986 | 3,870 | 3% | 3,576 | 3,576 | ||||||||||
UEPS based lending: | |||||||||||||||
Finance loans receivable –net and gross (i.e., | |||||||||||||||
no provisions) | 4,479 | 5,149 | (13)% | 4,184 | 4,184 |
nm– Statistic not meaningful