NET 1 UEPS TECHNOLOGIES INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 24, 2017

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Exhibit 99.1

Net 1 UEPS Technologies, Inc. Reports Fourth Quarter and Full Year 2017 Results

JOHANNESBURG, August 24, 2017 – Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today released results for the fourth quarter and full-year fiscal 2017.

  •

Q4 2017 Revenue of $155 million, up 3% in USD but 10% lower in constant currency;

   

 

  •

Q4 2017 FEPS of $0.41, which reflects the adverse impact of a higher share count, taxes, and provisions

   

 

  •

Concluded investments in Cell C and DNI for an aggregate purchase price of ZAR 2.95 billion.

Summary Financial Metrics

    Three months ended June 30,  
                % change     % change  
    2017     2016     in USD     in ZAR  
(All figures in USD ‘000s except per share data)                        
Revenue   155,056     151,259     3%     (10% )
GAAP net income   11,289     24,356     (54% )   (59% )
Fundamental net income (1)   23,185     26,299     (12% )   (23% )
GAAP earnings per share ($)   0.20     0.48     (59% )   (64% )
Fundamental earnings per share ($) (1)   0.41     0.51     (20% )   (31% )
Fully-diluted shares outstanding (‘000’s)   57,249     51,224     12%        
Average period USD/ ZAR exchange rate   13.19     15.02     (12% )      

    Year ended June 30,  
                % change     % change  
    2017     2016     in USD     in ZAR  
(All figures in USD ‘000s except per share data)                        
Revenue   610,066     590,749     3%     (2% )
GAAP net income   72,954     82,454     (12% )   (16% )
Fundamental net income (1)   94,721     92,113     3%     (7% )
GAAP earnings per share ($)   1.34     1.72     (22% )   (26% )
Fundamental earnings per share ($) (1)   1.74     1.92     (9% )   (19% )
Fully-diluted shares outstanding (‘000’s)   54,648     48,105     14%     14%  
Average period USD/ ZAR exchange rate   13.62     14.38     (5% )      

(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 Q4 2017 and Q4 2016 results

  •

Earnings and FEPS dilution impact from issue of additional shares of common stock: Our Q4 2017 fundamental earnings per share was impacted by the weighted average issuance of five million shares of our common stock in February 2017 and 10 million shares in Q4 2016;

  •

Separation costs related to former chief executive officer: We paid our former chief executive officer $8 million in cash related to his separation from our company in fiscal 2017. In addition, the vesting of 200,000 shares of restricted stock granted to him in August 2016 was accelerated which resulted in an additional stock-based compensation charge of approximately $1.6 million during fiscal 2017;

  •

Favorable impact from the weakening of the U.S. dollar against South African Rand: The U.S. dollar depreciated by 12% against the ZAR during Q4 2017, which positively impacted our reported results;

  •

Growth in lending and insurance businesses: We continued to achieve volume growth and operating efficiencies in our lending and insurance businesses during Q4 2017, which has resulted in an improved contribution to our financial inclusion revenue and operating income;

  •

Ongoing contributions from EasyPay Everywhere: EPE revenue and operating income growth was driven primarily by ongoing EPE adoption as we further expanded our customer base utilizing our ATM infrastructure;

  •

Masterpayment expansion costs and $3.8 million allowance for credit losses: Masterpayment has incurred additional employment costs as it grows its staff complement to execute its expansion plan into new markets. We have provided an allowance for credit losses of $3.8 million;

  •

Regulatory changes in South Korea governing fees on card transactions: 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 adversely impacted the number of transacting users purchasing prepaid products through our mobile channel;

  •  

Higher transaction-related costs and debt guarantee fee expenses in Q4 2017: We incurred $1.8 million in transaction-related costs pertaining to various acquisition and investment initiatives pursued during 2017 as well as debt guarantee fees that were expensed;

  •  

Q4 2016 gain on change in accounting for Finbond: We recognized a gain of $1.6 million, net of tax, related to the change to the equity method of accounting from available-for-sale method for Finbond.

“The past five months have been among the most eventful and turbulent in the Company’s history, but despite the multiple challenges, we have successfully steadied the ship and put in place the mechanisms and structure to optimize and consolidate our existing businesses where applicable,” said Herman Kotze, CEO of Net1. “We have identified the key opportunities to focus on to create a, sustainable and diversified global financial inclusion solutions company. In fiscal 2018, our focus will be on successfully implementing the identified synergies with Cell C and DNI, expanding our financial inclusion businesses, optimizing our international operations and focusing on key markets and solutions, while actively re-engaging with our shareholders. We also remain fully committed to supporting the South African government to ensure uninterrupted social grant service delivery,” he added.

“We expect the funding of our Cell C and DNI investments to be dilutive to our fiscal 2018 fundamental earnings, partially offset by DNI’s equity accounted earnings, but to be accretive on a combined basis from fiscal 2019. We therefore anticipate our fundamental earnings per share for fiscal 2018 to be at least $1.61. Our guidance assumes that our contract with SASSA remains in effect for the full year on the existing terms and conditions, an updated constant currency base of ZAR 13.62/ $1, a share count of 56.6 million shares, and a tax rate of between 34%-36%,” he concluded.

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 $67.7 million in Q4 2017, up 26% compared with Q4 2016 in USD, and 11% higher 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 Q4 2017 and 2016 was 22% and 24%, respectively, and was lower primarily due to annual salary increases granted to our South African employees, but partially offset by and increase in ATM transactions and inter-segment processing.

International transaction processing

Segment revenue was $45.0 million in Q4 2017, down 5% compared with Q4 2016 in USD, and down 16% on a constant currency basis. Segment revenue decreased primarily due to a lower contribution from KSNET due to the regulatory changes implemented by South Korean Regulators which we expect to anniversary in the first quarter of fiscal 2018. This decrease in revenue was partially offset by higher contribution from both Masterpayment and Transact24 compared with Q4 2016. Operating income from this segment during Q4 2017 was lower due to the lower KSNET revenue at KSNET; losses incurred by Masterpayment as it grows its staff complement to execute its expansion plan into new markets and an allowance for credit losses of $3.8 million; and ongoing ZAZOO start-up costs in the UK and India, which was partially offset by a positive contribution by T24. Operating income margin for Q4 2017 decreased to 4% compared to 17% for Q4 2016.

Financial inclusion and applied technologies

Segment revenue was $56.2 million in Q4 2017, down 9% compared with Q4 2016 in USD and down 20% on a constant currency basis. In ZAR, Financial inclusion and applied technologies revenue decreased primarily due to fewer prepaid airtime and other value added services sales, as well as fewer ad-hoc terminal sales, partially offset by increased volumes in our lending and insurance businesses, and an increase in inter-segment revenues. Operating income margin for the Financial inclusion and applied technologies segment was 26% and 22% during Q4 fiscal 2017 and 2016, respectively, and has increased primarily due to improved revenues from our lending and insurance businesses and an increase in inter-segment revenues and fewer low margin prepaid product sales, offset by fewer ad hoc terminal and annual salary increases granted to our South African employees.

Corporate/eliminations

Corporate expenses increased primarily due to the costs associated with the separation of our former chief executive officer from us which included an $8.0 million separation payment as well as an additional stock-based compensation charge of approximately $1.6 million related to the accelerated vesting of restricted stock. We also incurred higher transaction-related expenditures, higher amortization costs and a modest increase in U.S. dollar denominated goods and services purchased from third parties and directors’ fees. Our fiscal 2016 corporate expenses include the fair value gain on re-measurement of the previously held interest related to the T24 acquisition and the gain resulting from the change in accounting for Finbond.

Cash flow and liquidity

At June 30, 2017, our cash balances were $258.5 million, which comprised U.S. dollar-denominated balances of $60.0 million, ZAR-denominated balances of ZAR 1.8 billion ($141.5 million), KRW-denominated balances of KRW 55.0 billion ($48.1 million) and other currency deposits, primarily euro, of $8.9 million. The increase in our cash balances from June 30, 2016, was primarily due to the sale of five million shares of our common stock and expansion of most of our core businesses, which was partially offset by the repurchase of shares of our common stock; unscheduled repayments of our Korean debt; payment of taxes; the investment in MobiKwik, Malta FS and Pros Software; a loan to Finbond and capital expenditures.

Excluding the impact of taxes, interest received and interest paid under our Korean debt, the decrease in cash from operating activities relates primarily to the growth of Masterpayment’s working capital finance offering and the separation payment made to our former chief executive officer, offset by an increase in cash from operating activities resulted from improved trading activity during fiscal 2017. Capital expenditures for Q4 2017 and 2016 were $2.7 million and $7.1 million, respectively, and have decreased primarily due to the acquisition of fewer payment processing terminals in South Korea. We paid $10.4 million to acquire an additional interest in MobiKwik, with our June 30, 2017, equity interest at 13.50% . We also repurchased 1.32 million shares from our former chief executive officer for $11.5 million, net of the strike paid to exercise certain options. We also made a scheduled $8.8 million Korean debt repayment and paid a $1.5 million dividend to our non-controlling interest shareholders.

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, costs related to the IFC transaction and to acquisitions consummated or ultimately not pursued, and U.S. government investigations-related and US lawsuit expenses. Fiscal 2017 also includes separation costs (net of taxes) paid to our former chief executive officer, a refund (net of taxes) related to Korean industry-wide litigation that has now been finalized and South African debt-related guarantee fees expensed. Fiscal 2016 also includes a fair value gain resulting from the acquisition of Transact24, a gain resulting from the change in accounting for Finbond. 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) loss on sale of property, plant and equipment, and in fiscal 2016, a fair value gain resulting from the acquisition of Transact24 and a gain resulting from the change in accounting for Finbond. 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 Q4 and year end 2017 results on August 25, 2017, 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 September 17, 2017.

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, ChinaUnionPay, Alipay and WeChat 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.
Condensed Consolidated Statements of Operations

    Unaudited     (A)  
    Three months ended     Year ended  
    June 30,     June 30,  
    2017     2016     2017     2016  
    (In thousands, except per share data)     (In thousands, except per share data)  
REVENUE $  155,056   $  151,259   $  610,066   $  590,749  
EXPENSE                        
         Cost of goods sold, IT processing, servicing and support   73,173     70,785     292,383     290,101  
         Selling, general and administration   56,896     37,879     179,262     145,886  
         Depreciation and amortization   10,261     10,412     41,378     40,394  
OPERATING INCOME   14,726     32,183     97,043     114,368  
INTEREST INCOME   6,408     4,008     20,897     15,292  
INTEREST EXPENSE   1,711     543     3,484     3,423  
INCOME BEFORE INCOME TAX EXPENSE   19,423     35,648     114,456     126,237  
INCOME TAX EXPENSE   10,152     10,774     42,472     42,080  
NET INCOME BEFORE EARNINGS FROM
EQUITY-ACCOUNTED INVESTMENTS 		  9,271     24,874     71,984     84,157  
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS   1,886     61     2,664     639  
NET INCOME   11,157     24,935     74,648     84,796  
LESS NET INCOME ATTRIBUTABLE TO
NON-CONTROLLING INTEREST 		  (132 )   579     1,694     2,342  
NET INCOME ATTRIBUTABLE TO NET1 $  11,289   $  24,356   $  72,954   $  82,454  
Net income per share, in United States dollars                        
         Basic earnings attributable to Net1 shareholders $ 0.20   $ 0.48   $ 1.34   $ 1.72  
         Diluted earnings attributable to Net1 shareholders $ 0.20   $ 0.48   $ 1.33   $ 1.71  

(A) – Derived from audited financial statements

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

    (A)     (A)  
    June 30,     June 30,  
    2017     2016  
    (In thousands, except share data)  
ASSETS              
CURRENT ASSETS            
     Cash and cash equivalents $  258,457   $  223,644  
     Pre-funded social welfare grants receivable   2,322     1,580  
     Accounts receivable, net of allowances of – 2017: $1,255; 2016: $1,669   111,429     107,805  
     Finance loans receivable, net of allowances of – 2017: $7,469; 2016: $4,494   80,177     37,009  
     Inventory   8,020     10,004  
     Deferred income taxes   5,330     6,956  
             Total current assets before settlement assets   465,735     386,998  
                     Settlement assets   640,455     536,725  
                             Total current assets   1,106,190     923,723  
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of –
2017: $120,212; 2016: $99,969 		  39,411     54,977  
EQUITY-ACCOUNTED INVESTMENTS   27,862     25,645  
GOODWILL   188,833     179,478  
INTANGIBLE ASSETS, net of accumulated amortization of – 2017: $108,907; 2016: $91,208   38,764     48,556  
OTHER LONG-TERM ASSETS, including reinsurance assets   49,696     31,121  
     TOTAL ASSETS   1,450,756     1,263,500  
             
LIABILITIES              
CURRENT LIABILITIES            
     Short-term facilities   16,579     -  
     Accounts payable   15,136     14,097  
     Other payables   34,799     37,479  
     Current portion of long-term borrowings   8,738     8,675  
     Income taxes payable   5,607     5,235  
             Total current liabilities before settlement obligations   80,859     65,486  

                     Settlement obligations

  640,455     536,725  

                             Total current liabilities

  721,314     602,211  
DEFERRED INCOME TAXES   11,139     12,559  
LONG-TERM BORROWINGS   7,501     43,134  
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities   2,795     2,376  
     TOTAL LIABILITIES   742,749     660,280  
COMMITMENTS AND CONTINGENCIES            
EQUITY              
     COMMON STOCK            
                 Authorized: 200,000,000 with $0.001 par value; 
                 Issued and outstanding shares, net of treasury - 2017: 56,369,737; 2016: 55,271,954 		  80     74  
     PREFERRED STOCK            
                 Authorized shares: 50,000,000 with $0.001 par value; 
                 Issued and outstanding shares, net of treasury: 2017: -; 2016: - 		  -     -  
     ADDITIONAL PAID-IN-CAPITAL   273,733     223,978  
     TREASURY SHARES, AT COST: 2017: 24,891,292; 2016: 20,483,932   (286,951 )   (241,627 )
     ACCUMULATED OTHER COMPREHENSIVE LOSS   (162,569 )   (189,700 )
     RETAINED EARNINGS   773,276     700,322  
             TOTAL NET1 EQUITY   597,569     493,047  
             REDEEMABLE COMMON STOCK   107,672     107,672  
             NON-CONTROLLING INTEREST   2,766     2,501  
                     TOTAL EQUITY   708,007     603,220  
             
                             TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $  1,450,756   $  1,263,500  

(A) – Derived from audited financial statements

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

    Unaudited     (A)  
    Three months ended     Year ended  
    June 30,     June 30,  
    2017     2016     2017     2016  
    (In thousands)     (In thousands)  
Cash flows from operating activities                        
Net Income $  11,157   $  24,935   $  74,648   $  84,796  
     Depreciation and amortization   10,261     10,412     41,378     40,394  
     Earnings from equity-accounted investments   (1,886 )   (61 )   (2,664 )   (639 )
     Fair value adjustment   (239 )   (94 )   (300 )   519  
     Interest payable   (64 )   132     20     1,829  
     Facility fee amortized   1,232     35     1,326     138  
     Gain on release from accumulated other comprehensive income   -     (2,176 )   -     (2,176 )
     Gain on fair value of Transact24   -     -     -     (1,909 )
     Profit on disposal of property, plant and equipment   (68 )   (173 )   (639 )   (286 )
     Stock compensation charge, net of forfeitures   2,050     953     1,982     3,598  
     Dividends received from equity accounted investments   817     -     1,187     -  
     (Increase) Decrease in accounts and finance 
     loans receivable, and pre-funded grants receivable 		  (13,506 )   11,810     (15,767 )   (3,401 )
     Decrease (Increase) in inventory   2,717     1,496     3,025     1,001  
     (Decrease) Increase in accounts payable and other payables   (2,075 )   (9,403 )   (6,461 )   (7,840 )
     Increase in taxes payable   (6,173 )   (2,681 )   (354 )   763  
     Decrease in deferred taxes   1,532     21     (220 )   (235 )
Net cash provided by operating activities   5,755     35,206     97,161     116,552  
Cash flows from investing activities                        
Capital expenditures   (2,697 )   (7,099 )   (11,195 )   (35,797 )
Proceeds from disposal of property, plant and equipment   238     596     1,592     1,349  
Investment in MobiKwik   (10,488 )   -     (25,835 )   -  
Investment in equity and loans in equity-accounted investments   -     -     (12,044 )   -  
Acquisitions, net of cash acquired   -     (14,101 )   (4,651 )   (15,767 )
Acquisition of available for sale securities   -     -     -     (8,900 )
Other investing activities, net   -     -     -     (5 )
Net change in settlement assets   (116,755 )   (161,343 )   (61,938 )   53,364  
Net cash (used in) provided by investing activities   (129,702 )   (181,947 )   (114,071 )   (5,756 )
Cash flows from financing activities                        
Proceeds from issue of common stock   2,250     107,682     47,879     111,444  
Acquisition of treasury stock   (13,713 )   (2,725 )   (45,794 )   (26,637 )
Repayment of long-term borrowings   (8,825 )   (8,716 )   (37,318 )   (8,716 )
Proceeds from bank overdraft   16,176     -     16,176     -  
Dividends paid to non-controlling interest   (1,454 )   -     (2,067 )   -  
Payment of guarantee fee   -     -     (1,145 )   -  
Long-term borrowings obtained   279     -     800     2,107  
Acquisition of interests in non-controlling interests   -     (11,189 )   -     (11,189 )
Net change in settlement obligations   116,755     161,343     61,938     (53,364 )
Net cash provided by financing activities   111,468     246,395     40,469     13,645  
Effect of exchange rate changes on cash   3,229     721     11,254     (18,380 )
Net increase in cash and cash equivalents   (9,250 )   100,375     34,813     106,061  
Cash and cash equivalents – beginning of period   267,707     123,269     223,644     117,583  
Cash and cash equivalents – end of period $  258,457   $  223,644   $  258,457   $  223,644  

(A) – Derived from audited financial statements

Net 1 UEPS Technologies, Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended June 30, 2017 and 2016 and March 31, 2017

                                  Change – constant  
                      Change - actual     exchange rate(1)
                      Q4 ‘17     Q4 ‘17     Q4 ‘17     Q4 ‘17  
Key segmental data, in ’000, except margins   Q4 ‘17     Q4 ‘16     Q3 ‘17     vs
Q4‘16 		    vs
Q3 ‘17 		    vs
Q4‘16 		    vs
Q3 ‘17 		 
Revenue:                                          
South African transaction processing $ 67,747   $ 53,577   $ 63,967     26%     6%     11%     6%  
International transaction processing   45,025     47,154     41,514     (5% )   8%     (16% )   8%  
Financial inclusion and applied technologies   56,220     62,071     56,881     (9% )   (1% )   (20% )   (1% )
         Subtotal: Operating segments   168,992     162,802     162,362     4%     4%     (9% )   4%  
         Intersegment eliminations   (13,936 )   (11,543 )   (14,418 )   21%     (3% )   6%     (4% )
                 Consolidated revenue $ 155,056   $ 151,259   $ 147,944     3%     5%     (10% )   5%  
                                           
Operating income (loss):                                          
South African transaction processing $ 14,858   $ 12,662   $ 15,531     17%     (4% )   3%     (5% )
International transaction processing   2,016     7,793     1,968     (74% )   2%     (77% )   2%  
Financial inclusion and applied technologies   14,431     13,457     14,064     7%     3%     (6% )   2%  
         Subtotal: Operating segments   31,305     33,912     31,563     (8% )   (1% )   (19% )   (1% )
         Corporate/Eliminations   (16,579 )   (1,729 )   (7,016 )   859%     136%     742%     136%  
                 Consolidated operating income $ 14,726   $ 32,183   $ 24,547     (54% )   (40% )   (60% )   (40% )
                                           
Operating income margin (%)                                          
South African transaction processing   22%     24%     24%                          
International transaction processing   4%     17%     5%                          
Financial inclusion and applied technologies   26%     22%     25%                  
         Consolidated operating margin   9%     21%     17%                          

(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the Q4 2017 also prevailed during Q4 2016 and Q3 2017.

Year ended June 30, 2017 and 2016

                      Change –  
                      constant  
                Change -     exchange  
                actual     rate(1)
                F2017     F2017  
                vs     vs  
Key segmental data, in ’000, except margins   F2017     F2016     F2016     F2016  
Revenue:                        
South African transaction processing $ 249,144   $ 212,574     17%     11%  
International transaction processing   176,729     169,807     4%     (1% )
Financial inclusion and applied technologies   235,901     249,403     (5% )   (10% )
         Subtotal: Operating segments   661,774     631,784     5%     (1% )
         Intersegment eliminations   (51,708 )   (41,035 )   26%     19%  
                 Consolidated revenue $ 610,066   $ 590,749     3%     (2% )
                         
Operating income:                        
South African transaction processing $ 59,309   $ 51,386     15%     9%  
International transaction processing   13,705     23,389     (41% )   (45% )
Financial inclusion and applied technologies   57,785     54,999     5%     (1% )
         Subtotal: Operating segments   130,799     129,774     1%     (5% )
         Corporate/Eliminations   (33,756 )   (15,406 )   119%     107%  
                 Consolidated operating income $ 97,043   $ 114,368     (15% )   (20% )
                         
Operating income margin (%)                        
South African transaction processing   24%     24%              
International transaction processing   8%     14%              
Financial inclusion and applied technologies   24%     22%              
         Overall operating margin   16%     19%              

(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during fiscal 2017 also prevailed during fiscal 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 June 30, 2017 and 2016

                EPS,                 EPS,  
    Net income     basic     Net income     basic  
    (USD’000)   (USD)     (ZAR’000)   (ZAR)  
    2017     2016     2017     2016     2017     2016     2017     2016  
                                                 
GAAP   11,289     24,356     0.20     0.48     148,879     365,778     2.60     7.16  
                                                 
     Former CEO separation payment, net of tax   5,200     -             68,578     -          
     Intangible asset amortization, net .   2,776     2,213                 36,620     33,229              
     Stock-based compensation charge   2,050     954                 27,036     14,327              
     South African debt-related 
     guarantee fees expensed 		  1,210     -             15,960     -          
     Transaction costs   586     473                 7,728     7,104              
     US government investigations- 
     related and US lawsuit expenses 		  46     -             607     -          
     Facility fees for KSNET debt   28     35                 369     526              
     Accounting change for Finbond   -     (1,732 )               -     (26,011 )            
Fundamental   23,185     26,299     0.41     0.51     305,777     394,953     5.35     7.73  

Year ended June 30, 2017 and 2016

                EPS,                 EPS,  
    Net income     basic     Net income     basic  
    (USD’000)   (USD)     (ZAR’000)   (ZAR)  
    2017     2016     2017     2016       2017     2016     2017     2016   
                                                 
GAAP   72,954     82,454     1.34     1.72     993,504     1,186,036     18.22     24.78    
                                                 
     Intangible asset amortization, net .   10,491     8,413                 142,857     120,989              
     Former CEO separation payment, net of tax   5,200     -             70,814     14,643            
     Transaction costs   3,347     1,018                 45,580     14,643              
     Stock-based compensation charge   1,982     3,598                 26,991     51,754              
     South African debt-related 
     guarantee fees expensed 		  1,172     -             15,960     51,754            
     Refund related to litigation finalized in Korea, net   (643 )   -             (8,756 )   -            
     US government investigations- 
     related and US lawsuit expenses 		  122     138             1,661     1,985            
     Facility fees for KSNET debt   96     133                 1,307     1,913              
     Gain resulting from acquisition of Transact24   -     (1,909 )           -     (27,459 )          
     Accounting change for Finbond   -     (1,732 )               -     (24,913 )            
Fundamental   94,721     92,113     1.74     1.92     1,289,918     1,391,345     23.65     29.07    

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 June 30, 2017 and 2016

    2017     2016  
             
Net income (USD’000)   11,289     24,356  
Adjustments:            
     Accounting change for Finbond   -     (1,732 )
     Profit on sale of property, plant and equipment   (68 )   (173 )
     Tax effects on above   19     48  
             
Net income used to calculate headline earnings (USD’000)   11,240     22,499  
Weighted average number of shares used to calculate net income per share basic earnings
and headline earnings per share basic earnings (‘000) 		  57,196     51,118  
Weighted average number of shares used to calculate net income per share diluted
earnings and headline earnings per share diluted earnings (‘000) 		  57,249     51,224  
Headline earnings per share:            
     Basic, in USD   0.20     0.44  
     Diluted, in USD   0.20     0.44  

Year ended June 30, 2017 and 2016

    2017     2016  
             
Net income (USD’000)   72,954     82,454  
Adjustments:            
     Gain resulting from acquisition of Transact24   -     (1,909 )
     Accounting change for Finbond   -     (2,176 )
     Profit on sale of property, plant and equipment   (639 )   (286 )
     Tax effects on above   179     524  
             
Net income used to calculate headline earnings (USD’000)   72,494     78,607  
Weighted average number of shares used to calculate net income per share basic earnings
and headline earnings per share basic earnings (‘000) 		  54,539     47,863  
Weighted average number of shares used to calculate net income per share diluted
earnings and headline earnings per share diluted earnings (‘000) 		  54,648     48,105  
Headline earnings per share:            
     Basic, in USD   1.33     1.64  
     Diluted, in USD   1.33     1.63  

Calculation of the denominator for headline diluted earnings per share

    Q4 ‘17     Q4 ‘16     F2017     F2016  
                         
Basic weighted-average common shares outstanding and unvested
restricted shares expected to vest under GAAP 		  57,196     51,118     54,539     47,863  
     Effect of dilutive securities under GAAP   53     106     109     242  
         Denominator for headline diluted earnings per share   57,249     51,224     54,648     48,105  

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.

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NET 1 UEPS TECHNOLOGIES INC Reports