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Net 1 UEPS Technologies, Inc. Reports Third Quarter 2019 Results

JOHANNESBURG, South Africa, May 09, 2019 (GLOBE NEWSWIRE) -- Net 1 UEPS Technologies, Inc. (Nasdaq: UEPS; JSE: NT1) today released results for the third fiscal quarter ended March 31, 2019.

 Q3 2019 Highlights:

  • Revenue of $86.5 million, GAAP EPS of $(0.96) and Fundamental EPS of $(0.62)
  • Fundamental EPS of ($0.62) includes $25.2 million, or $0.44 per share of non-cash fair value loss adjustments for Cell C, net of tax, and the impairment of the Cedar Cell note;
  • Operating loss of $21.7 million, Adjusted EBITDA improved sequentially to a loss of $(1.1) million;
  • Early-settlement of long-term South African debt on May 3, 2019; net cash of $24 million at March 31, 2019;
  • Monetization of DNI commenced with reduction of ownership from 55% to 30.4% since March 2019; DNI given a call option to acquire the remaining 30.4% at an exercise price of $59.3 million prior to December 31, 2019; and
  • Active EPE accounts remained stable at 1.1 million as of March 31, 2019.

“We are pleased that our core South African operations demonstrated far more stability during the third-quarter, allowing us to focus on our extensive cost-containment exercise, a significant reduction of debt and other obligations, and the first steps towards the realization of value of some of our assets,” said Herman Kotzé, CEO. “The retrenchment of thousands of Net1 family members has been one of the most difficult processes we have ever faced and we completed the necessary actions to remain on track to achieve a monthly EBITDA-neutral position for our South African operations by the end of Q4 2019. The Board and management remain squarely focused on reviewing all options available for the Group, and will provide updates when there are tangible actions to report.”

“In Korea, our advisors are actively engaged with management to execute the near-term action items to drive higher growth and profitability, and in parallel, our Board, with financial advisors, is reviewing the strategic alternatives for this business. Cell C is focused on managing its near-term liquidity constraints, closing its transaction with a new minority investor and improving the performance of the business. Our other equity investments continued to perform in line with expectations during the quarter,” continued Kotzé. “With the deleveraging of the balance sheet that has been achieved since our last report, we remain comfortable with our liquidity position for the next 12 months.”

Subsequent Event
On February 28, 2019, we entered into a transaction which reduced our shareholding in DNI from 55% to 38%. The transaction closed on March 31, 2019. On May 3, 2019, we entered into an agreement which further reduced our shareholding in DNI from 38% to 30.4% through the sale of shares in DNI to FirstRand Bank Limited, acting through its Rand Merchant Bank division, for a transaction consideration of ZAR 215.0 million ($14.9 million, translated at exchange rates applicable as of May 3, 2019). The company utilized the sale proceeds and ZAR 15.0 million ($1.0 million, translated at exchange rates applicable as of May 3, 2019) of its cash reserves to early-settle its outstanding long-term borrowings. On May 3, 2019, we also entered into an agreement, in which we granted a call option to DNI to acquire our retained 30.4% interest in DNI. The option expires on December 31, 2019, and may be exercised at any time during this period. The option strike price for our remaining 30.4% interest is ZAR 859.3 million, or $59.3 million, translated at exchange rates applicable as of May 3, 2019, less any special distributions made by DNI.

Summary Financial Metrics

  Three months ended March 31,
  2019          2018
As
restated
(1)
    % change
in USD
  % change
in ZAR

(All figures in USD ‘000s except per share data)                    
Revenue 86,484     162,721     (47 %)   (37 %)
GAAP operating (loss) income (21,683 )   7,564     nm     nm  
Adjusted (negative) EBITDA(2) (1,082 )   34,335     nm     nm  
GAAP (loss) earnings per share ($) (0.96 )   0.57     nm     nm  
Continuing (0.88 )   0.51     nm     nm  
Discontinued (0.08 )   0.06     nm     nm  
Fundamental (loss) earnings per share ($)(2) (0.62 )   0.95     nm     nm  
Fully-diluted shares outstanding (‘000’s) 56,828     56,777     0 %      
Average period USD/ ZAR exchange rate 14.17     11.95     19 %      
Non-cash adjustments included (before tax impact): 39,726     (17,399 )   nm        
Allowance for doubtful finance loans receivables 396     579     (32 %)      
Change in fair value of equity securities 26,263     (37,843 )   nm        
Loss on disposal of DNI 5,140     -     nm        
Impairment loss 5,305     19,865     (73 %)      
Impairment of Cedar Cell note 2,622     -     nm        



  Nine months ended March 31,
  2019         2018
As
restated
(1)
  % change
in USD

  % change
in ZAR
(All figures in USD ‘000s except per share data)                    
Revenue 309,518     463,695   (33 %)   (26 %)
GAAP operating (loss) income (63,862 )   48,877   nm     nm  
Adjusted (negative) EBITDA(2) (11,872 )   102,774   nm     nm  
GAAP (loss) earnings per share ($) (2.18 )   1.08   nm     nm  
Continuing (2.16 )   1.02   nm     nm  
Discontinued (0.02 )   0.06   nm     nm  
Fundamental (loss) earnings per share ($)(2) (1.48 )   1.77   nm     (188 %)
Fully-diluted shares outstanding (‘000’s) 56,819     56,842   (0 %)      
Average period USD/ ZAR exchange rate 14.27     12.89   11 %      
Non-cash adjustments included (before tax impact): 97,727     (6,418 ) nm        
Allowance for doubtful finance loans receivables 31,638     11,560   174 %      
Change in fair value of equity securities 42,099     (37,843 ) nm        
Loss on disposal of DNI 5,140     -   nm        
Impairment loss 13,496     19,865   (32 %)      
Impairment of Cedar Cell note 5,354     -   nm        

(1) As previously reported and more fully described in Note 1 to the consolidated financial statements contained in the Form 10-K/A filed on December 6, 2018, the Company restated its 2018 consolidated financial statements, to correctly classify and record the change in fair value of its investment in Cell C. The financial information for the three and nine months ended March 31, 2018, has been restated with the effect of increasing GAAP net (loss) income by $29,366, and GAAP (loss) net income by $0.52.

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

Factors impacting comparability of our Q3 2019 and Q3 2018 results

  • Decline in revenue: Our revenues declined 37% in ZAR primarily due to the expiration of our SASSA contract, significant decline in EPE account numbers driven by SASSA’s auto-migration of accounts to SAPO, and a reduction in EPE-related financial and value-added services and transaction fees due to a smaller customer base, but partially offset by the inclusion of DNI;
  • Increase in operating losses: Lower revenue, coupled with a high-fixed cost infrastructure and write-downs due to limited recoverability of dues from customers, resulted in an operating loss. During the Q3 2019, we commenced with a restructuring of our South African operations to bring our cost structure in-line with our current customer base, and expect to reach break-even on a cash basis by the end of the Q4 2019. We incurred $4.5 million in retrenchment costs during Q3 2019;
  • Non-cash losses, impairments and fair-value adjustments: We incurred a $5.1 million non-cash loss on disposal of DNI, an impairment loss of $5.3 million related to DNI intangibles, a fair value adjustment loss of $26.3 million for Cell C and a $2.6 million impairment of our Cedar Cell note; and
  • Adverse foreign exchange movements: The U.S. dollar appreciated 19% against the ZAR and 6% against the KRW during Q3 2019, which adversely impacted our reported results.

Results of Operations by Segment and Liquidity

South African transaction processing

Segment revenue was $17.4 million in Q3 2019, down 72% on a constant currency basis compared with Q3 2018. The decrease in segment revenue and operating income was primarily due to the substantial decrease in the number of SASSA grant recipients paid under our SASSA contract as the contract ended at the end of Q1 2019. Our revenue and operating income was also adversely impacted by the significant reduction in the number of SASSA grant recipients with SASSA-branded Grindrod cards linked to Grindrod bank accounts as well as a lower number of EPE accounts. These decreases in revenue and operating income were partially offset by higher transaction revenue as a result of increased usage of our ATMs. Operating income for this operating segment for Q3 2019 included retrenchment costs of $3.0 million (ZAR 41.7 million). Our operating (loss) income margin for Q3 2019 and 2018 was (74.6%) and 17.3%, respectively. Excluding restructuring costs, the operating loss margin for Q3 2019 was (57.5%).

International transaction processing

Segment revenue was $34.4 million in Q3 2019, down 12% compared with Q3 2018 in constant currency. Segment revenue was lower during Q3 2019, primarily due to a contraction in IPG transactions processed, specifically meaningfully lower crypto-exchange and China processing activity, and modestly lower KSNET revenue as a result of lower transaction values processed. Operating income during Q3 2018 was adversely impacted by a $19.9 million impairment loss and positively impacted by an ad hoc refund of indirect taxes of $2.5 million in Korea. Excluding the impact of the impairment loss and the ad hoc tax refund, operating income during Q3 2019 was lower compared to fiscal 2018 due to the decrease in IPG revenues and resulting from these lower revenues, and partially offset by an improved contribution from KSNET, primarily as a result of a lower depreciation expense. Operating income (loss) margin for Q3 2019 and 2018 was 5.6% and (32.2%), respectively. Excluding the goodwill impairment and ad hoc tax refund, segment operating income and margin for fiscal 2018 were $2.4 million and 5.2%, respectively.

Financial inclusion and applied technologies

Segment revenue was $36.7 million in Q3 2019, down 27% compared with Q3 2018 in constant currency. Segment revenue decreased primarily due to fewer prepaid airtime and value-added services sales, lower lending and insurance revenue, and a decrease in inter-segment revenues, partially offset by the inclusion of DNI. Operating income was significantly lower than Q3 2018, primarily due to lower revenue generation and higher expenses incurred to maintain and expand our financial service infrastructure, partially offset by the contribution from DNI. Operating income for this operating segment for Q3 2019 included retrenchment costs of $1.6 million (ZAR 22.1 million). Excluding the retrenchment costs, segment operating income and margin for fiscal 2019 were $4.8 million and 13.2% respectively.

Corporate/eliminations

Our corporate expenses increased primarily due to a $5.3 million impairment loss as well as higher acquired intangible asset amortization, non-employee director expenses, transaction-related expenditures and external service provider fees.

Cash flow and liquidity

At March 31, 2019, our cash and cash equivalents were $48.8 million and comprised ZAR-denominated balances of ZAR 263.0 million ($18.2 million), KRW-denominated balances of KRW 17.2 billion ($15.1 million), U.S. dollar-denominated balances of $10.7 million, and other currency deposits, primarily Botswana pula, of $4.7 million, all amounts translated at exchange rates applicable as of March 31, 2019. The decrease in our unrestricted cash balances from June 30, 2018, was primarily due to significantly weaker trading activities, scheduled debt repayments, dividend payments to non-controlling interests and capital expenditures, which was partially offset by the contribution from the inclusion of DNI, and a decrease in our South African lending book.

Excluding the impact of interest received, interest paid under our South Africa debt and taxes, the decrease in cash provided is primarily due to significantly weaker trading activity during fiscal 2019 compared to 2018. Capital expenditures for Q3 2019 and 2018 were $1.6 million and $4.2 million, respectively, and have decreased primarily due to the acquisition of fewer ATMs in South Africa and computer equipment to maintain our processing activities. We made a scheduled South African debt facility payment of $10.5 million (ZAR 151 million).

Operating metrics and supplemental presentation for Q3 2019 Results

Our updated operating metrics have been posted on our website (www.net1.com). A supplemental presentation for Q3 2019 will be posted to the Investor Relations page of our website – ir.net1.com one hour prior to our earnings call on Friday, May 10, 2019.

Conference Call

We will host a conference call to review these results on May 10, 2019, at 8:00 a.m. Eastern Time. To participate in the call, dial 1-508-924-4326 (US and Canada), 0333-300-1418 (U.K. only) or 080-020-0648 (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 May 30, 2019.

Use of Non-GAAP Measures

US securities laws require that when we publish any non-GAAP measures, we disclose the reason for using these non-GAAP measures and provide reconciliations to the directly comparable GAAP measures. The presentation of negative EBITDA, adjusted negative EBITDA, fundamental net (loss) income and fundamental (loss) earnings per share and headline (loss) earnings per share are non-GAAP measures.

EBITDA and adjusted EBITDA

(Loss) Earnings before interest, tax, depreciation and amortization (“EBITDA”) is GAAP operating (loss) income adjusted for depreciation and amortization and, if applicable, impairment losses. Adjusted EBITDA is EBITDA adjusted for costs related to acquisitions and transactions consummated or ultimately not pursued, retrenchment costs incurred, an allowance for doubtful Mastertrading working capital finance loans receivable, a refund of indirect taxes in Korea, and (loss) profits realized on the sale of a business.

Fundamental net (loss) income and fundamental (loss) earnings per share

Fundamental net (loss) income and (loss) earnings per share is GAAP net (loss) income and (loss) earnings per share adjusted for the amortization of acquisition-related intangible assets (net of deferred taxes), the amortization of intangible assets (net of deferred taxes) related to equity-accounted investments, stock-based compensation charges and reversals, the amortization of South African and South Korean debt facility fees and unusual non-recurring items, including the impairment loss, costs related to acquisitions and transactions consummated or ultimately not pursued.

Fundamental net (loss) income and (loss) earnings per share for fiscal 2019 also includes an adjustment for the loss incurred on the disposal of DNI, retrenchment costs incurred, accretion of interest related to the DNI contingent consideration, and for the non-controlling interest portion of the amortization of intangible assets (net of deferred taxes). Fundamental net income and earnings per share for fiscal 2018 also includes adjustments for an allowance for doubtful working capital finance receivables, refund of indirect taxes in Korea, the impact of changes in tax laws in the U.S and a gain realized on the sale of XeoHealth.

We provide earnings guidance only on a non-GAAP basis and do not provide a reconciliation of forward-looking fundamental (loss) earnings per share guidance to the most directly comparable GAAP financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, the amounts of which, based on past experience, could be material.

Management believes that the EBITDA, adjusted EBITDA, fundamental net (loss) income and (loss) 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 operating income and EBITDA and adjusted EBITDA; and GAAP net (loss) income and (loss) earnings per share and fundamental net (loss) income and (loss) earnings per share.

Headline (loss) earnings per share (“H(L)EPS”)

The inclusion of H(L)EPS in this press release is a requirement of our listing on the JSE. H(L)EPS basic and diluted is calculated using net (loss) income which has been determined based on GAAP. Accordingly, this may differ to the headline (loss) 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.

H(L)EPS basic and diluted is calculated as GAAP net (loss) income adjusted for the impairment loss and (profit) loss on sale of property, plant and equipment. Attachment C presents the reconciliation between our net (loss) income used to calculate (loss) earnings per share basic and diluted and HE(L)PS basic and diluted and the calculation of the denominator for headline diluted (loss) earnings per share.

About Net1

Net1 is a leading provider of transaction processing services, financial inclusion products and services and secure payment technology. Net1 operates market-leading payment processors in South Africa and the Republic of Korea. Net1 offers debit, credit and prepaid processing and issuing services for all major payment networks. In South Africa, Net1 provides innovative low-cost financial inclusion products, including banking, lending and insurance and through DNI is a leading distributor of mobile subscriber starter packs for Cell C, a South African mobile network operator. Net1 leverages its strategic equity investments in Finbond and Bank Frick (both regulated banks), and Cell C to introduce products to new customers and geographies. Net1 has a primary listing on NASDAQ (UEPS) and a secondary listing on the Johannesburg Stock Exchange (JSE:NT1). Visit www.net1.com for additional information about Net1.

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
Group Vice President, Investor Relations
Phone: +1 917-767-6722
Email: dchopra@net1.com 

Media Relations Contact:
Bridget von Holdt
Business Director – BCW
Phone: +27-82-610-0650
Email: bridget.vonholdt@bm-africa.com 

 
 
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
 
  Three months ended   Nine months ended
   March 31,
   March 31,
   2019          2018
(As restated)
   2019        2018
(As restated)
                                 
                     
  (In thousands, except per share data)   (In thousands, except per share data)
                     
REVENUE $   86,484     $   162,721   $   309,518   $   463,695
EXPENSE                    
Cost of goods sold, IT processing, servicing and support     50,179         77,860       173,680       226,506
                                 
Selling, general and administration     42,802         48,091       155,676       141,417
                                 
Depreciation and amortization     9,881         9,341       30,528       27,030
                                 
Impairment loss     5,305         19,865       13,496       19,865
OPERATING (LOSS) INCOME     (21,683 )       7,564       (63,862 )     48,877
                     
CHANGE IN FAIR VALUE OF EQUITY SECURITIES     (26,263 )       37,843       (42,099 )     37,843
                     
LOSS ON DISPOSAL OF DNI     5,140         -       5,140       -
                     
INTEREST INCOME, net of impairment     (959 )       5,154       586       14,903
                     
INTEREST EXPENSE     3,493         2,426       9,030       6,872
                     
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE     (57,538 )       48,135       (119,545 )     94,751
                     
INCOME TAX (BENEFIT) EXPENSE     (2,490 )       19,418       1,702       39,757
                     
NET (LOSS) INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS     (55,048 )       28,717       (121,247 )     54,994
                     
(LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS     (464 )       3,960       (338 )     7,389
                     
NET (LOSS) INCOME     (55,512 )       32,677       (121,585 )     62,383
Continuing     (50,784 )       29,386       (124,275 )     57,181
Discontinued     (4,728 )       3,291       2,690       5,202
                     
(ADD) LESS NET (LOSS) INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST     (728 )       302       2,339       903
Continuing     (485 )       302       (1,362 )     903
Discontinued     (243 )       -       3,701       -
                     
NET (LOSS) INCOME ATTRIBUTABLE TO NET1 $   (54,784 )   $   32,375   $   (123,924 ) $   61,480
Continuing     (50,299 )       29,084       (122,913 )     56,278
Discontinued     (4,485 )       3,291       (1,011 )     5,202
                     
Net (loss) income per share, in U.S. dollars                    
Basic (loss) earnings attributable to Net1 shareholders   $ (0.96 )     $ 0.57     $ (2.18 )   $ 1.08
Continuing   $ (0.88 )     $ 0.51     $ (2.16 )   $ 1.02
Discontinued   $ (0.08 )     $ 0.06     $ (0.02 )   $ 0.06
Diluted (loss) earnings attributable to Net1 shareholders   $ (0.96 )     $ 0.57     $ (2.18 )   $ 1.08
Continuing   $ (0.88 )     $ 0.51     $ (2.16 )   $ 1.02
Discontinued   $ (0.08 )     $ 0.06     $ (0.02 )   $ 0.06
                     
                     



NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets
 
  March 31,   June 30,
  2019
  2018(A)
               
  (In thousands, except share data)
ASSETS
CURRENT ASSETS          
Cash and cash equivalents $ 48,757     $ 87,075  
Restricted cash   74,181       -  
Pre-funded social welfare grants receivable   -       2,965  
Accounts receivable, net and other receivables   80,150       93,448  
Finance loans receivable, net   25,217       61,463  
Inventory   7,861       10,361  
Current assets of discontinued operation   -       22,482  
Total current assets before settlement assets   236,166       277,794  
Settlement assets   66,222       149,047  
Total current assets   302,388       426,841  
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – March: $131,212; June: $126,026   19,889       25,737  
EQUITY-ACCOUNTED INVESTMENTS   167,497       87,992  
GOODWILL   156,499       169,079  
INTANGIBLE ASSETS, net of accumulated amortization of – March: $128,724; June: $121,466   15,719       27,129  
DEFERRED INCOME TAXES   2,862       5,751  
OTHER LONG-TERM ASSETS, including reinsurance assets   174,903       235,032  
LONG-TERM ASSETS OF DISCONTINUED OPERATION   -       241,729  
TOTAL ASSETS   839,757       1,219,290  
           
LIABILITIES
CURRENT LIABILITIES          
Short-term credit facilities for ATM funding   74,181       -  
Short-term credit facilities   8,865       -  
Accounts payable   14,743       21,106  
Other payables   37,936       41,645  
Current portion of long-term borrowings   15,823       44,079  
Income taxes payable   4,958       5,742  
Current liabilities of discontinued operation   -       20,914  
Total current liabilities before settlement obligations   156,506       133,486  
Settlement obligations   66,222       149,047  
Total current liabilities   222,728       282,533  
DEFERRED INCOME TAXES   6,299       17,485  
LONG-TERM BORROWINGS   -       5,469  
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities   2,273       30,289  
LONG-TERM LIABILITIES OF DISCONTINUED OPERATION   -       37,412  
TOTAL LIABILITIES   231,300       373,188  
COMMITMENTS AND CONTINGENCIES          
REDEEMABLE COMMON STOCK   107,672       107,672  
           
EQUITY
COMMON STOCK          
Authorized: 200,000,000 with $0.001 par value;          
Issued and outstanding shares, net of treasury - March: 56,815,925; June: 56,685,925   80       80  
PREFERRED STOCK          
Authorized shares: 50,000,000 with $0.001 par value;          
Issued and outstanding shares, net of treasury: March: -; June: -   -       -  
ADDITIONAL PAID-IN-CAPITAL   277,950       276,201  
TREASURY SHARES, AT COST: March: 24,891,292; June: 24,891,292   (286,951 )     (286,951 )
ACCUMULATED OTHER COMPREHENSIVE LOSS   (204,338 )     (184,436 )
RETAINED EARNINGS   713,701       837,625  
TOTAL NET1 EQUITY   500,442       642,519  
NON-CONTROLLING INTEREST   343       95,911  
TOTAL EQUITY   500,785       738,430  
           
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY $ 839,757     $ 1,219,290  
           
(A) – Derived from audited financial statements filed on Form 10-K/A on December 6, 2018



NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
                       
           
           
      Three months ended     Nine months ended
                             
                             
      March 31,      March 31,
                         
      2019        2018
(as restated)
    2019  
 
    2018
(as restated()
                                       
    (In thousands)   (In thousands)
                         
Cash flows from operating activities                    
Net (loss) income $ (55,512 )   $ 32,677     $ (121,585 ) $ 62,383  
Depreciation and amortization   9,881       9,341       30,528     27,030  
Impairment loss   5,305       19,865       13,496     19,865  
Allowance for doubtful accounts receivable charged   396       579       31,638     11,560  
Loss (Earnings) from equity-accounted investments   464       (3,960 )     338     (7,389 )
Interest on Cedar Cell note, net of impairment   2,044       (587 )     3,404     (769 )
Change in fair value of equity securities   26,263       (37,843 )     42,099     (37,843 )
Fair value adjustments and foreign currency re-measurements   90       (110 )     91     (209 )
Interest payable   53       (17 )     294     (264 )
Facility fee amortized   51       120       206     467  
(Profit) Loss on disposal of property, plant and equipment   (147 )     (50 )     (413 )   71  
Loss (Profit) on disposal of business   5,140       -       5,140     (463 )
Stock-based compensation charge, net   487       575       1,672     2,010  
Dividends received from equity accounted investments   -       1,946       454     4,111  
Decrease (Increase) in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable   (14,938 )     41,679       6,533     (2,438 )
Decrease (Increase) in inventory   1,451       1,072       3,612     (2,776 )
Increase (Decrease) in accounts payable and other payables   8,196       2,827       (11,339 )   5,775  
Increase in taxes payable   795       9,007       2,142     8,091  
(Decrease) Increase in deferred taxes   (4,153 )     7,824       (11,223 )   8,252  
Net cash (used in) provided by operating activities   (14,134 )     84,945       (2,913 )   97,464  
                     
Cash flows from investing activities                    
Capital expenditures   (1,615 )     (4,225 )     (7,280 )   (7,801 )
Proceeds from disposal of property, plant and equipment   295       160       781     575  
Disposal of DNI   (2,114 )     -       (2,114 )   -  
Investment in equity of equity-accounted investments   (489 )     (18,597 )     (2,989 )   (132,335 )
Acquisition of intangible assets   -       -       (1,384 )   -  
Investment in MobiKwik   -       -       (1,056 )   -  
Proceeds on return of investment   -       -       284     -  
Investment in Cell C   -       -       -     (151,003 )
Loans to equity-accounted investments   -       (10,635 )     -     (10,635 )
Acquisition of held to maturity investment   -       -       -     (9,000 )
Other investing activities   -       300       -     146  
Net change in settlement assets   (1,083 )     43,222       76,879     280,390  
Net cash (used in) provided by investing activities   (5,006 )     10,225       63,121     (29,663 )
                     
Cash flows from financing activities                    
Proceeds from bank overdraft   278,288       9,802       584,525     42,372  
Repayment of bank overdraft   (257,097 )     (42,650 )     (502,823 )   (56,993 )
Repayment of long-term borrowings   (12,499 )     (15,826 )     (36,310 )   (60,967 )
Long-term borrowings utilized   3,609       17,726       14,613     113,157  
Dividends paid to non-controlling interest   (1,148 )     -       (4,085 )   -  
Payment of guarantee fee   -       (202 )     (394 )   (754 )
Net change in settlement obligations   1,083       (43,222 )     (76,879 )   (280,390 )
Net cash provided by (used in) financing activities   12,236       (74,372 )     (21,353 )   (243,575 )
                     
Effect of exchange rate changes on cash   (3,199 )     1,478       (5,971 )   4,489  
Net (decrease) increase in cash, cash equivalents and restricted cash   (10,103 )     22,276       32,884     (171,285 )
Cash, cash equivalents and restricted cash – beginning   133,041       64,896       90,054     258,457  
Cash, cash equivalents and restricted cash – end of period (1) $ 122,938     $ 87,172     $ 122,938   $ 87,172  
                     
(1) Cash, cash equivalents and restricted cash as of March 31, 2019, includes restricted cash of approximately $74.2 million related to cash withdrawn from the Company’s various debt facilities to fund ATMs. This cash may only be used to fund ATMs and is considered restricted as to use and therefore is classified as restricted cash.
 
 

Net 1 UEPS Technologies, Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended March 31, 2019 and 2018 and December 31, 2018

...
              Change - actual   Change –
constant
exchange rate
(1)
Key segmental data, in ’000, except margins Q3 ‘19   Q3 ‘18   Q2 ‘19   Q3 ‘19
vs
Q3‘18
  Q3 ‘19
vs
Q2 ‘19

  Q3 ‘19
vs
Q3‘18

  Q3 ‘19
vs
Q2 ‘19
Revenue:                                  
South African transaction processing $ 17,374     $ 73,508     $ 21,970     (76 %)   (21 %)   (72 %)   (22 %)
International transaction processing   34,358       46,240       38,124     (26 %)   (10 %)   (12 %)   (11 %)
Financial inclusion and applied technologies   36,650       59,574       38,755     (38 %)   (5 %)   (27 %)   (6 %)
Continuing   18,808       59,574       19,047     (68 %)   (1 %)   (63 %)   (2 %)
Discontinued   17,842       -       19,708     nm     (9 %)   nm     (10 %)
Subtotal: Operating segments   88,382       179,322       98,849     (51 %)   (11 %)   (42 %)   (12 %)
Intersegment eliminations   (1,898 )     (16,601 )     (1,699 )   (89 %)   12 %   (86 %)   11 %
Consolidated revenue   86,484       162,721       97,150     (47 %)   (11 %)   (37 %)   (12 %)
Continuing    68,642       162,721       77,442     (58 %)   (11 %)   (50 %)   (12 %)