Net 1 UEPS Technologies Inc. Reports First Quarter 2013 Results
- Performed payments to approximately 9.5 million grant recipients nationally; - Revenue of $111.7 million, increased 30% in constant currency; and - Fundamental EPS of $0.25 including $15.8 million of direct implementation costs, decreased 32% in constant currency.
(firmenpresse) - JOHANNESBURG, SOUTH AFRICA -- (Marketwire) -- 11/08/12 -- Net 1 UEPS Technologies Inc. (NASDAQ: UEPS)(JSE: NT1) today announced results for the first quarter fiscal 2013.
Summary Financial Metrics
(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 Q1 2013 and Q1 2012 results
Comments and Outlook
"I am delighted with the progress we have made in the implementation of our SASSA contract and specifically with the efficiency, reliability and security of our platform," said Dr. Serge Belamant, Chairman and Chief Executive Officer of Net1. "In addition, together with our Board we have now developed an extensive strategic plan that will drive growth and profitability for the group over the next three years. We have identified four key pillars of the strategy, namely (i) South Africa; (ii) NUETS, UEGS and UEPS/EMV; (iii) Mobile Solutions; and (iv) KSNET. We expect to provide more details on this strategy over the next few months," he concluded.
"We expect our quarterly performance to remain lumpy during the SASSA contract implementation period. In the first quarter of fiscal 2013, we decided to expense the cost of the smart cards issued to grant recipients, rather than to capitalize as under our previous contract," said Herman Kotze, Chief Financial Officer of Net1. "Although the estimated number of cards to be issued remains 10 million, the number of beneficiaries that SASSA has now asked us to enroll has increased substantially to 21.6 million, which is approximately 40% higher than SASSA's previous estimate. Therefore, in fiscal year 2013, we now expect fundamental earnings per share to be at least $1.25, which includes approximately $0.21 per share for the cost of smart cards. Our guidance also assumes a constant currency base of ZAR 7.72/$1 and using our fiscal 2012 share count of 45 million shares. As a result of expensing the smart cards, we have revised our estimated SASSA-related capital expenditures lower to $35 million," he concluded.
Progress of second phase of our SASSA contract implementation
We commenced the second phase of the enrollment process in early July 2012 and plan to be substantially complete by March 2013, in accordance with the enrollment plan agreed with SASSA. Under our agreement with SASSA, we have to enroll both the grant recipients, as well as the grant beneficiaries. While the number of grant recipients on a national basis has consistently been quantified by SASSA at 9.4 million individuals, the number of beneficiaries is continually being revised by SASSA on an ongoing basis from an initial estimate of approximately 15.5 million, to the current estimate of approximately 21.6 million.
As of September 30, 2012, we had enrolled approximately 1.7 million grant recipients and 1.3 million beneficiaries associated with these recipients in accordance with our second phase enrollment schedule, and issued them our UEPS/EMV smart card.
During the first quarter of fiscal 2013 we incurred direct implementation expenses of approximately $14.1 million (ZAR 116.6 million) including staff, travel, premises hire for enrollment and stationery costs. In line with industry practice, we no longer amortize the cost of the smart cards over the contract period and expense the cost of the card when issued on enrollment. As a result of our decision to fully expense the UEPS/EMV smart cards when they are issued, we expensed $1.7 million (ZAR 14.0 million) related to the cost of the UEPS/EMV smart cards issued during the quarter, which is not included in the $14.1 million above. We also incurred approximately $3.3 million in capital expenditures, primarily to acquire payment vehicles. Since inception of the implementation we have incurred cumulative capital expenditures of $24.5 million. We anticipate cumulative capital expenditures related to the ramp of our national contract to be in the $35 million range. We have lowered our expected capital expenditure range related to the implementation of our SASSA contract given the decision to expense the cost of smart cards rather than capitalize those costs.
Results of Operations by Segment and Liquidity
Our frequently asked questions and operating metrics will be updated and posted on our website ().
South African transaction-based activities
Segment revenue was $61.4 million in Q1 2013, up 23% compared with Q1 2012 in USD and up 43% on a constant currency basis. In ZAR, the increases in segment revenue were primarily due to higher revenues earned under our new SASSA contract and higher prepaid airtime sales, offset by lower volumes at EasyPay and MediKredit. Segment operating income margin was 10% and 40%, respectively, and declined primarily due to SASSA implementation costs and higher low-margin prepaid airtime sales. Excluding amortization of acquisition-related intangibles, Q1 2013 segment operating income margin was 13%, compared to 43% during Q1 2012.
International transaction-based activities
KSNET continues to contribute the majority of our revenues in this operating segment. Segment revenue was $31.6 million in Q1 2013, up 5% compared with Q1 2012 in USD and 22% on a constant currency basis. Operating margin for the segment is lower than most of our South African transaction-based businesses and was negatively impacted by adverse currency movement between the Korean won and the US dollar, additional start-up expenditures related to our XeoHealth launch in the United States, MVC activities at Net1 UTA and on-going losses at Net1 Virtual Card, but these expenses were partially offset by increased revenue contributions from KSNET and NUETS' initiative in Iraq. Excluding the amortization of intangibles but including the start-up costs referenced above, Q1 2013 operating income margin was 9% compared to 13% during Q1 2012.
Smart card accounts
Segment revenue was $8.4 million in Q1 2013, up 1% compared with Q1 2012 in USD and 18% on a constant currency basis. Q1 2013 segment operating income margin was 29%, compared to 45% during Q1 2012. We have reduced our pricing for smart card accounts after taking into consideration the lower price and higher volumes of the new SASSA contract.
Financial services
UEPS-based lending contributes the majority of the revenue and operating income in this operating segment. Segment revenue was $1.4 million in Q1 2013, down 34% compared with Q1 2012 in USD and 22% lower on a constant currency basis, principally due to a decrease in lending activities. Q1 2013 segment operating income margin was 79% compared with 67% during Q1 2012 primarily as a result of an improved margin in our UEPS-based lending book resulting from a better loss experience, offset by start-up expenditures related to Smart Life and other financial services offerings.
Hardware, software and related technology sales
Segment revenue was $8.9 million in Q1 2013, down 5% compared with Q1 2012 in USD but up 10% on a constant currency basis. In constant currency, the increase in revenue and operating income resulted primarily from an increase in royalty fees, offset by a lower contribution from all other contributors to hardware and software sales. Excluding amortization of all intangibles, segment operating income margin was 22% compared to 21% during Q1 2012.
Cash flow and liquidity
At September 30, 2012, we had cash and cash equivalents of $58 million, up from $39 million at June 30, 2012. The increase in our cash balances from June 30, 2012, was primarily from cash generated from operations, offset by implementation costs and capital expenditures incurred to implement our SASSA contract and the cash portion of the purchase price of the acquisition of Pbel, a software development firm focused on mobile phones and kiosks, for $1.9 million. For Q1 2013, net cash generated by operating activities was $25.7 million compared with $27.2 million in Q1 2012.
Excluding the impact of interest received, interest paid under our Korean debt and taxes paid, the decrease in cash provided by operating activities resulted from significant implementation costs related to our SASSA contract, partially offset by cash generated from operations. Capital expenditures for Q1 2013 and 2012 were $6.5 million and $4.5 million, respectively, and have increased primarily due to acquisition of payment vehicles and other equipment for our new SASSA contract and payment processing terminals in Korea.
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 amortization of KSNET debt facility fees, transaction-related costs and the profit on liquidation of SmartSwitch Nigeria. 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, net of related tax effects, 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 Q1 2013 results on November 9, 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, . 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 November 30, 2012.
About Net1 ()
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.
Attachment A
Operating segment revenue, operating income and operating margin:
Three months ended September 30, 2012 and 2011 and June 30, 2012
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, 2012 and 2011
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, 2012 and 2011
Contacts:
Net 1 UEPS Technologies Inc.
Dhruv Chopra
Vice President of Investor Relations
+1-212-626-6675
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Datum: 08.11.2012 - 21:05 Uhr
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