Net1 Reports Second Quarter 2012 Results

February 09, 2012 4:05 PM EST | Source: Lesaka Technologies, Inc.

Johannesburg, South Africa--(Newsfile Corp. - February 9, 2012) - Net 1 UEPS Technologies, Inc. (NASDAQ: UEPS; JSE: NT1) today announced results for the second quarter of fiscal 2012.

  • Revenue of $92.1 million, an increase of 3% in US dollars and 22% in constant currency
  • GAAP earnings per share of $0.56, an increase of 154% in US dollars and 199% in constant currency
  • Fundamental earnings per share of $0.39, an increase of 2% in US dollars and 20% in constant currency

Summary Financial Metrics

    Three months ended December 31,  
                % change     % change  
    2011     2010     in USD     in ZAR  
(All figures in USD ‘000s except per share data)                        
Revenue   92,058     89,011     3%     22%  
GAAP net income   25,094     9,948     152%     197%  
Fundamental net income (1)   17,677     17,511     1%     19%  
GAAP earnings per share ($)   0.56     0.22     154%     199%  
Fundamental earnings per share ($) (1)   0.39     0.39     2%     20%  
Fully-diluted shares outstanding (‘000’s)   44,967     45,494     (1 )%      
Average period USD/ ZAR exchange rate   8.18     6.94     18%        

    Six months ended December 31,  
                % change     % change  
    2011     2010     in USD     in ZAR  
(All figures in USD ‘000s except per share data)                        
Revenue   191,984     153,294     25%     37%  
GAAP net income   44,862     17,377     158%     183%  
Fundamental net income (1)   39,309     34,034     15%     25%  
GAAP earnings per share ($)   1.00     0.38     162%     186%  
Fundamental earnings per share ($) (1)   0.87     0.75     16%     26%  
Fully-diluted shares outstanding (‘000’s)   45,026     45,455     (1 )%      
Average period USD/ ZAR exchange rate   7.82     7.14     10%        

(1) Fundamental net income and earnings per share is a non-GAAP measure and is 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 2Q 2012 and 2Q 2011 results

  • Unfavorable impact from the strengthening of the US dollar: The US dollar appreciated by 18% against the ZAR during 2Q2012 which negatively impacted our reported results;
  • Net taxation benefit related to the replacement of STC with a dividends withholding tax in South Africa: As a result of a recent change in South African tax law that will replace STC with a dividends withholding tax, our tax expense decreased by $11.8 million, as we recorded a $20.0 million deferred tax benefit which was offset by an $8.2 million foreign tax credit valuation allowance;
  • Inclusion of revenue contribution from KSNET at lower operating margin (before acquired intangible asset amortization) than our legacy business: The inclusion of KSNET for a full fiscal quarter contributed to an increase in revenues for the 2Q 2012; however, because KSNET has an operating margin (before acquired intangible asset amortization) that is lower than our legacy businesses, it reduced our overall operating margin. KSNET also contributed to the increase in selling, general and administration and depreciation and amortization expenses;
  • Lower revenues from hardware, software and related technology sales segment: Hardware, software and related technology sales were adversely impacted by lower revenues from all major segment contributors;
  • Lower intangible asset amortization related to acquisition: Additional intangible asset amortization related to the acquisitions of KSNET and Eason was more than offset by the full impairment of Net1 UTA’s intangibles in 2011;
  • Lower interest income and increased interest expense resulting from KSNET acquisition: We paid the KSNET purchase price with a combination of cash and long-term debt, which reduced interest income and increased interest expense; and
  • Fiscal 2011 unrealized foreign exchange gain and transaction-related expenses: During the 2Q2011, we recognized, in selling, general and administration expense, an unrealized foreign exchange gain of $2.7 million and incurred transaction-related expenses of $1.8 million, primarily for the acquisition of KSNET.

Comments and Outlook

“Our 2Q 2012 results continued the strong momentum of our businesses from the previous quarter,” said Dr. Serge Belamant, Chairman and Chief Executive Officer of Net1. “I am particularly pleased with SASSA’s decision to award the social grants tender on a national basis to Net1, as well as the conclusion of our BEE transaction, both of which put us in a strong strategic position to drive long-term growth. We are honored and privileged to provide the highest levels of service and convenience at the lowest cost to the South African government as well as its citizens. Our focus over the next several months will be to execute on the expectations laid upon us by providing a comprehensive, seamless and superior service to this important constituency,” he concluded.

“The next twelve months will require substantial investment in capital equipment and establishment costs as we implement the new SASSA contract,” said Herman Kotzé, Chief Financial Officer of Net1. “The substantial increase in the beneficiaries, although at a lower price, should increase our monthly pension and welfare revenue by approximately 45% in ZAR and once we are fully phased in, at the very least maintain our operating income that we generate from our current contract. We currently expect to be fully phased-in by the second quarter of fiscal 2013. We anticipate capital expenditure of $45-$50 million during the next twelve months. The next three quarters are difficult for us to predict at this time, given the timing and magnitude of investments required in any given quarter, however we anticipate still being profitable on a fundamental earnings basis for the second half of fiscal 2012,” he concluded.

Results of Operations by Segment and Liquidity

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

     South African transaction-based activities

Segment revenue was $46.4 million in 2Q 2012, down 1% compared with 2Q 2011 in USD and up 17% on a constant currency basis. In ZAR, the increase in segment revenue was primarily due to modest growth in our pension and welfare business, the acquisition of Eason’s prepaid airtime and electricity business and increased transaction volumes in rural merchant acquiring and MediKredit. Segment operating income margin was 34% compared to 40% a year ago and has declined due to the inclusion of increased low-margin prepaid airtime sales and Eason intangible asset amortization. Excluding amortization of acquisition-related intangibles, 2Q 2012 segment operating income margin was 38%, compared to 43% during 2Q 2011.

     International transaction-based activities

KSNET continues to be the largest contributor to this segment. XeoHealth generated additional implementation revenue during 2Q 2012 and since December 2011, has begun to generate recurring transaction-based revenues. Revenue was $28.8 million in 2Q 2012, up 66% in USD compared with 2Q 2011 and 95% higher on a constant currency basis, primarily as a result of the inclusion of KSNET for a full quarter as well as contributions from XeoHealth. Segment operating income margin remained consistent at 1%. Excluding the amortization of intangibles but including the start-up costs related to Net1 Virtual Card and XeoHealth in the United States and MVC activities at Net1 UTA, operating income margin was unchanged at 12%.

     Smart card accounts

Segment revenue was $7.3 million in 2Q 2012, down 14% compared with 2Q 2011 in USD and up 1% on a constant currency basis. Operating income margin remained consistent at 45%.

     Financial services

UEPS-based lending contributes the majority of the revenue and operating income in this operating segment. We continue to incur start-up expenditures related to our SmartLife business and other financial services offerings. Segment revenue was $1.9 million in 2Q 2012, up 18% compared with 2Q 2011 in USD and 39% higher on a constant currency basis, principally due to an increase in lending activities. 2Q 2012 segment operating income margin was 53% compared with 62% during 2Q 2011 and decreased primarily due to start-up expenditures incurred by SmartLife.

     Hardware, software and related technology sales

Segment revenue was $7.6 million in 2Q 2012, down 49% compared with 2Q 2011 in USD and 40% lower on a constant currency basis. The decrease in revenue and operating income was due to a lower contribution from all contributors to hardware and software sales. Excluding amortization of all intangibles, segment operating margin was 13% compared to 16% during 2Q 2011.

     Cash flow and liquidity

At December 31, 2011, we had cash and cash equivalents of $81 million, down from $95 million at June 30, 2011. The decrease in cash was due to a strengthening in the USD against the ZAR, the repayment of principal under our KSNET debt and the acquisition of SmartLife and the Eason prepaid electricity and airtime business, offset by cash generated from operations and a net settlement received from the former shareholders of KSNET. For 2Q 2012, we utilized net cash of $6.2 million for operating activities, compared to cash flow of $5.0 million in 2Q 2011. Excluding the impact of interest paid under our Korean debt, the decrease in cash provided by operating activities resulted from the timing of receipts of accounts receivable in our South African transaction-based activities operating segment offset by increased profitability. Capital expenditures for 2Q 2012 and 2011 were $5.1 million and $4.0 million, respectively.

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 to 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 effects of a change in South African tax law and the creation of a valuation allowance related to foreign tax credits, amortization of KSNET debt facility fees, transaction-related costs and an unrealized foreign exchange movements. 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 loss (profit) on sale of property, plant and equipment, net of related tax effects, the loss attributable to the sale of 10% of SmartLife and the profit on liquidation of SmartSwitch Nigeria. Attachment C presents the reconciliation between our net income used to calculate earnings per share basic and diluted and HEPS basic and diluted.

Conference Call

We will host a conference call to review 2Q 2012 results on February 10, 2012, 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 March 2, 2012.

About Net1 (www.net1.com)

Net1 is a leading provider of alternative payment systems that leverage its 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.

Net1 operates market-leading payment processors in South Africa, Republic of Korea, Ghana and Iraq. In addition, Net1’s proprietary Mobile Virtual Card technology offers secure mobile payments and banking services in developed and emerging countries while its MediKredit and XeoHealth subsidiaries provide its proprietary 5010 and ICD-10 compliant real-time claims adjudication system.

Net1 has 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.
Unaudited Condensed Consolidated Statements of Operations

    Three months ended     Six months ended  
    December 31,     December 31,  
    2011     2010     2011     2010  
    (In thousands, except per share data)     (In thousands, except per share data)  
REVENUE $  92,058   $  89,011   $  191,984   $  153,294  
EXPENSE                        
     Cost of goods sold, IT processing, servicing and support   34,168     29,182     67,112     47,249  
     Selling, general and administration   28,872     28,763     55,929     59,089  
     Depreciation and amortization   8,790     9,092     17,869     13,996  
OPERATING INCOME   20,228     21,974     51,074     32,960  
INTEREST INCOME   1,820     1,350     3,817     4,434  
INTEREST EXPENSE   2,355     3,430     4,971     3,678  
INCOME BEFORE INCOME TAXES   19,693     19,894     49,920     33,716  
INCOME TAX EXPENSE   (5,378 )   9,836     5,174     16,043  
NET INCOME FROM CONTINUING OPERATIONS BEFORE EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS   25,071     10,058     44,746     17,673  
EARNINGS (LOSS) FROM EQUITY- ACCOUNTED INVESTMENTS   19     (166 )   104     (382 )
NET INCOME   25,090     9,892     44,850     17,291  
                       
ADD NET LOSS ATTRIBUTABLE TO NON- CONTROLLING INTEREST   (4 )   (56 )   (12 )   (86 )
NET INCOME ATTRIBUTABLE TO NET1 $  25,094   $  9,948   $  44,862   $  17,377  
Net income per share, in United States dollars                        
     Basic earnings attributable to Net1 shareholders $ 0.56   $ 0.22   $ 1.00   $ 0.38  
     Diluted earnings attributable to Net1 shareholders $ 0.56   $ 0.22   $ 1.00   $ 0. 38  


 
NET 1 UEPS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets

    Unaudited     (A)  
    December 31,     June 30,  
    2011     2011  
    (In thousands, except share data)  
ASSETS            
CURRENT ASSETS            
               Cash and cash equivalents $  80,864   $  95,263  
               Pre-funded social welfare grants receivable   3,532     4,579  
               Accounts receivable, net of allowances of – December: $798; June: $728   93,197     82,780  
               Finance loans receivable   9,474     8,141  
               Deferred expenditure on smart cards   56     51  
               Inventory   5,082     6,725  
               Deferred income taxes   6,610     15,882  
                  Total current assets before settlement assets   198,815     213,421  
                       Settlement assets   125,582     186,668  
                             Total current assets   324,397     400,089  
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF – December: $70,892; June: $50,007   33,776     35,807  
EQUITY-ACCOUNTED INVESTMENTS   1,545     1,860  
GOODWILL   183,827     209,570  
INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF – December: $42,017; June: $37,118   103,408     119,856  
OTHER LONG-TERM ASSETS, including reinsurance assets   38,288     14,463  
TOTAL ASSETS   685,241     781,645  
LIABILITIES            
CURRENT LIABILITIES            
               Accounts payable   9,535     11,360  
               Other payables   60,311     71,265  
               Current portion of long-term borrowings   18,791     15,062  
               Income taxes payable   3,067     6,709  
                   Total current liabilities before settlement obligations   91,704     104,396  
                       Settlement obligations   125,582     186,668  
                           Total current liabilities   217,286     291,064  
DEFERRED INCOME TAXES   24,748     52,785  
LONG-TERM BORROWINGS   86,708     110,504  
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities   25,519     1,272  
TOTAL LIABILITIES   354,261     455,625  
COMMITMENTS AND CONTINGENCIES         5  
EQUITY            
NET1 EQUITY:            
     COMMON STOCK 
          Authorized: 200,000,000 with $0.001 par value; 
          Issued and outstanding shares, net of treasury - December: 45,002,304; 
          June: 45,152,805
 


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   137,446     136,430  
       TREASURY SHARES, AT COST: December: 13,455,090; June: 13,274,434   (175,823 )   (174,694 )
       ACCUMULATED OTHER COMPREHENSIVE LOSS   (73,834 )   (33,779 )
       RETAINED EARNINGS   439,852     394,990  
                        TOTAL NET1 EQUITY   327,700     323,006  
NON-CONTROLLING INTEREST   3,280     3,014  
TOTAL EQUITY   330,980     326,020  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $  685,241   $  781,645  
               (A) – Derived from audited financial statements            

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

    Three months ended     Six months ended  
    December 31,     December 31,  
    2011     2010     2011     2010  
    (In thousands)     (In thousands)  
Cash flows from operating activities                        
Net income $  25,090   $  9,892   $  44,850   $  17,291  
Depreciation and amortization   8,790     9,092     17,869     13,996  
(Earnings) Loss from equity-accounted investments   (19 )   166     (104 )   382  
Fair value adjustments   (551 )   3,344     (772 )   238  
Interest payable   2,113     67     3,775     140  
Profit on disposal of property, plant and equipment   (26 )   (3 )   (34 )   (8 )
Net loss on sale of 10% of SmartLife   81     -     81     -  
Profit on liquidation of subsidiary   -     -     (3,994 )   -  
Realized loss on sale of SmartLife investments   -     -     25     -  
Stock-based compensation charge   543     1,558     1,039     2,996  
Facility fee amortized   83     1,728     199     1,728  
(Increase) Decrease in accounts receivable, pre- funded social welfare grants receivable and finance loans receivable   (19,044 )   (12,203 )   (15,795 )   (1,248 )
Increase in deferred expenditure on smart cards   (58 )   -     (14 )   -  
Decrease in inventory   920     2,168     601     66  
Decrease in accounts payable and other payables   (2,679 )   (2,248 )   (2,348 )   3,777  
Decrease in taxes payable   (7,355 )   (6,364 )   (10,962 )   (1,230 )
Decrease in deferred taxes   (14,088 )   (12,165 )   (13,396 )   (12,938 )
     Net cash (used in) provided by operating activities   (6,200 )   (4,968 )   21,020     25,190  
Cash flows from investing activities                        
Capital expenditures   (5,120 )   (4,011 )   (9,586 )   (4,779 )
Proceeds from disposal of property, plant and equipment   174     11     268     18  
Acquisition of SmartLife, net of cash acquired   -     -     (1,673 )   -  
Acquisition of prepaid business   (4,481 )   -     (4,481 )   -  
Settlement from former shareholders of KSNET (Acquisition of KSNET, net of cash acquired)   4,945     (230,225 )   4,945     (230,225 )
Advance of loans to equity-accounted investment   -     -     -     (375 )
Repayment of loan by equity-accounted investment   30     34     63     407  
Purchase of investments related to SmartLife   -     -     (2,320 )   -  
Proceeds from maturity of investments related to SmartLife   -     -     2,321     -  
Net change in settlement assets   30,349     (31,641 )   33,796     (47,185 )
     Net cash generated from (used in) investing activities   25,897     (265,832 )   23,333     (282,139 )
Cash flows from financing activities                        
Loan portion related to options   -     -     -     20  
Long-term borrowings obtained   -     116,353     -     116,353  
Repayment of long-term borrowings   (7,185 )   -     (7,185 )   -  
Payment of facility fee   -     (3,088 )   -     (3,088 )
Utilization of short-term borrowings   -     419     -     419  
Proceeds on sale of 10% of SmartLife   107     -     107     -  
Acquisition of remaining 19.9% of Net1 UTA   -     (594 )   -     (594 )
Acquisition of treasury stock   -     -     (1,129 )   -  
Net change in settlement obligations   (30,349 )   31,641     (33,796 )   47,185  
     Net cash (used in) generated from financing activities   (37,427 )   144,731     (42,003 )   160,295  
Effect of exchange rate changes on cash   (3,389 )   (2,709 )-   (16,749 )   14,295-  
Net decrease in cash and cash equivalents   (21,119 )   (128,778 )   (14,399 )   (82,359 )
Cash and cash equivalents – beginning of period   101,983     200,161     95,263     153,742  
Cash and cash equivalents – end of period $  80,864   $  71,383   $  80,864   $  71,383  

 

Net 1 UEPS Technologies, Inc.

Attachment A

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

Three months ended December 31, 2011 and 2010 and September 30, 2011

                          Change – constant
                      Change - actual   exchange rate(1)
                      Q2 ‘12   Q2 ‘12   Q2 ‘12   Q2 ‘12
Key segmental data, in ’000, except margins                     vs   vs   vs   vs
    Q2 ‘12     Q2 ‘11     Q1 ‘12     Q2‘11   Q1 ‘12   Q2 ‘11   Q1 ‘12
   Revenue:                                  
       SA transaction-based activities $ 46,448   $ 46,737   $ 49,902     (1)%   (7)%   17%   7%
      International transaction-based activities   28,835     17,385     30,255     66%   (5)%   95%   10%
       Smart card accounts   7,264     8,434     8,252     (14)%   (12)%   1%   1%
       Financial services   1,944     1,651     2,111     18%   (8)%   39%   6%
       Hardware, software and related technology sales   7,567     14,804     9,406     (49)%   (20)%   (40)%   (7)%
             Total consolidated revenue $ 92,058   $ 89,011   $ 99,926     3%   (8)%   22%   6%
                                   
   Consolidated operating income (loss):                                  
       SA transaction-based activities $ 15,766   $ 18,578   $ 20,183     (15)%   (22)%   0%   (10)%
       International transaction-based activities   241     139     684     73%   (65)%   104%   (59)%
           Operating income excluding amortization   3,369     2,171     3,991     55%   (16)%   83%   (3)%
           Amortization of intangible assets   (3,128 )   (2,032 )   (3,307 )   54%   (5)%   81%   9%
       Smart card accounts   3,302     3,832     3,750     (14)%   (12)%   2%   1%
       Financial services   1,026     1,028     1,411     0%   (27)%   18%   (16)%
       Hardware, software and related technology sales   909     (49 )   1,937     nm   (53)%   nm   (46)%
       Corporate/ Eliminations   (1,016 )   (1,554 )   2,881     (35)%   (135)%   (23)%   (141)%
             Total operating income $ 20,228   $ 21,974   $ 30,846     (8)%   (34)%   8%   (24)%
                                   
   Operating income margin (%)                                  
       SA transaction-based activities   34%     40%     40%                  
       International transaction-based activities   1%     1%     2%                  
       International transaction-based activities excluding amortization   12%     12%     13%                  
       Smart card accounts   45%     45%     45%                  
       Financial services   53%     62%     67%                  
       Hardware, software and related technology sales   12%     0%     21%                  
       Overall operating margin   22%     25%     31%                  

(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during 2Q 2012 also prevailed during 2Q 2011 and 1Q 2012.

Six months ended December 31, 2012 and 2011

                    Change –
                    constant
                Change -   exchange
                actual   rate(1)
                F2012   F2012
Key segmental data, in ’000, except margins               vs   vs
    F2012     F2011     F2011   F2011
   Revenue:                    
       SA transaction-based activities $ 96,350   $ 91,626     5%   15%
       International transaction-based activities   59,090     17,855     100%   100%
       Smart card accounts   15,516     16,404     (5)%   4%
       Financial services   4,055     2,901     40%   53%
       Hardware, software and related technology sales   16,973     24,508     (31)%   (24)%
             Total consolidated revenue $ 191,984   $ 153,294     25%   37%
                     
   Consolidated operating income (loss):                    
       SA transaction-based activities $ 35,949   $ 36,326     (1)%   8%
       International transaction-based activities   925     (569 )   (263)%   (278)%
             Operating income excluding amortization   7,355     1,463     403%   451%
             Amortization of intangible assets   (6,430 )   (2,032 )   216%   247%
       Smart card accounts   7,052     7,454     (5)%   4%
       Financial services   2,437     1,825     34%   46%
       Hardware, software and related technology sales   2,846     (2,388 )   (219)%   (231)%
       Corporate/ Eliminations   1,865     (9,688 )   (119)%   (121)%
             Total operating income $ 51,074   $ 32,960     55%   70%
                     
   Operating income margin (%)                    
       SA transaction-based activities   37%     40%          
       International transaction-based activities   2%     (3)%          
       International transaction-based activities excluding amortization   12%     8%          
       Smart card accounts   45%     45%          
       Financial services   60%     63%          
       Hardware, software and related technology sales   17%     (10)%          
       Overall operating margin   27%     22%          

(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 2012 also prevailed during year to date fiscal 2011.

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 December 31, 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   25,094     9,948     56     22     205,148     69,040     457     152  
                                                 
         Amortization of intangible assets, net of tax   3,656     4,302             29,893     29,857          
         Stock-based compensation charge   543     1,558             4,439     10,813          
         Facility fees for KSNET debt   110     1,728                 899     11,993              
         Change in tax law   (20,031 )   -                 (163,760 )   -              
         Create FTC valuation allowance   8,232     -                 67,298     -              
         Loss on sale of 10% of SmartLife   73     -                 597     -              
         Gain on FEC, net of tax   -     (1,799 )               -     (12,485 )            
         Acquisition-related costs   -     1,774                 -     12,313              
Fundamental   17,677     17,511     39     39     144,514     121,531     322     267  

Six months ended December 31, 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   44,862     17,377     100     38     350,808     124,088     780     273  
                                                 
         Amortization of intangible assets, net of tax   7,196     6,916             56,268     49,393          
          Stock-based compensation charge   1,040     2,996             8,132     21,394          
         Change in tax law   (18,315 )   -                 (150,373 )   -              
         Create FTC valuation allowance   8,232     -                 67,588     -              
         Profit on liquidation of subsidiary   (3,994 )   -             (31,232 )   -          
         Loss on sale of 10% of SmartLife   77     -                 602     -              
         Facility fees for KSNET debt   211     1,728                 1,650     12,340              
         Gain on FEC, net of tax   -     (114 )               -     (813 )            
         Acquisition-related costs   -     5,131                 -     36,640              
Fundamental   39,309     34,034     87     75     303,443     243,042     674     535  

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 December 31, 2011 and 2010

    2011     2010  
             
Net income (USD’000)   25,094     9,948  
Adjustments:            
     Loss on sale of 10% of SmartLife (USD’000)   73     -  
     Profit on sale of property, plant and equipment (USD’000)   (26 )   (3 )
     Tax effects on above (USD’000)   7     1  
             
Net income used to calculate headline earnings (USD’000)   25,148     9,946  
             
Weighted average number of shares used to calculate net income per share
basic earnings and headline earnings per share basic earnings (‘000)
 
44,935
   
45,433
 
             
Weighted average number of shares used to calculate net income per share
diluted earnings and headline earnings per share diluted earnings (‘000)
 
44,967
   
45,494
 
             
Headline earnings per share:            
     Basic earnings – common stock and linked units, in US cents   56     22  
     Diluted earnings – common stock and linked units, in US cents   56     22  
             
Six months ended December 31, 2011 and 2010            
             
    2011     2010  
             
Net income (USD’000)   44,862     17,377  
Adjustments:            
     Profit on liquidation of subsidiary (USD’000)   (3,994 )   -  
     Loss on sale of 10% of SmartLife (USD’000)   77     -  
     Profit on sale of property, plant and equipment (USD’000)   (34 )   (8 )
     Tax effects on above (USD’000)   10     3  
             
Net income used to calculate headline earnings (USD’000)   40,921     17,372  
             
Weighted average number of shares used to calculate net income per share
basic earnings and headline earnings per share basic earnings (‘000)
 
44,995
   
45,409
 
             
Weighted average number of shares used to calculate net income per share
diluted earnings and headline earnings per share diluted earnings (‘000)
 
45,026
   
45,455
 
             
Headline earnings per share:            
     Basic earnings – common stock and linked units, in US cents   91     38  
     Diluted earnings – common stock and linked units, in US cents   91     38  
             

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