EX-99.1 2 exhibit99-1.htm NEWS RELEASE DATED FEBRUARY 3, 2011 Net 1 UEPS Technologies, Inc.: Exhibit 99.1 - Filed by newsfilecorp.com

Exhibit 99.1

Net 1 UEPS Technologies, Inc. Announces 2011 Second Quarter Results

JOHANNESBURG, February 3, 2011 – Net 1 UEPS Technologies, Inc. (“Net1” or the “Company”) (Nasdaq: UEPS; JSE: NT1) today announced results for the three and six months ended December 31, 2010 (“2Q 2011”). Revenue for 2Q 2011 was $89.0 million, a year over year increase of 21% in US dollars (“USD”) and 36% in constant currency. During 2Q 2011, net income under US generally accepted accounting principles (“GAAP”) was $9.9 million versus net income of $19.3 million for the three months ended December 31, 2009 (“2Q 2010”). GAAP earnings per share for 2Q 2011 was $0.22 versus GAAP earnings per share of $0.42 a year ago. Fundamental earnings per share for 2Q 2011 was $0.39 compared to $0.51 for 2Q 2010, representing a decrease of 24% in USD and 30% in constant currency.

Revenue during the first half of fiscal 2011 (“1H2011”) was $153.3 million, a year over year increase of 10% in US dollars (“USD”) and 2% in constant currency compared to the first half of fiscal 2010 (“1H2010”). Earnings per share under GAAP during 1H2011 was $0.38 versus $0.79 a year ago, a decline of 52% in USD and 55% in constant currency. Fundamental earnings per share for 1H2011 was $0.75 compared to $0.96 for 1H2010, representing a decrease of 22% in USD and 27% in constant currency.

Summary Financial Metrics

    Three months ended December 31,
                % change   % change
    2010     2009     in USD   in ZAR
(All figures in USD ‘000s except per share data)                    
Revenue   89,011     73,864     21%   36%
GAAP net income   9,948     19,284     (48)%   (52)%
Fundamental net income (1)   17,511     23,239     (25)%   (30)%
GAAP earnings per share ($)   0.22     0.42     (48)%   (52)%
Fundamental earnings per share ($) (1)   0.39     0.51     (24)%   (30)%
Fully-diluted shares outstanding (‘000’s)   45,494     45,588     0%    
Average period USD/ ZAR exchange rate   6.94     7.52     (8)%    

    Six months ended December 31,
                % change   % change
    2010     2009     in USD   in ZAR
(All figures in USD ‘000s except per share data)                    
Revenue   153,294     139,378     10%   2%
GAAP net income   17,377     37,225     (53)%   (57)%
Fundamental net income (1)   34,034     45,043     (24)%   (30)%
GAAP earnings per share ($)   0.38     0.79     (52)%   (55)%
Fundamental earnings per share ($) (1)   0.75     0.96     (22)%   (27)%
Fully-diluted shares outstanding (‘000’s)   45,455     47,253     (4)%    
Average period USD/ ZAR exchange rate   7.14     7.67     (7)%    

(1) Fundamental net income and earnings per share is GAAP net income and earnings per share excluding the amortization of acquisition-related intangible assets, net of deferred taxes, and stock-based compensation charges. In addition, the calculation of fundamental net income and earnings per share for 2Q 2011 also excludes transaction-related costs and an unrealized foreign exchange gain (related to foreign exchange contracts entered into in order to hedge the fluctuations in the ZAR/ US dollar related to the anticipated flow of funds from South Africa to the United States to fund a portion of the KSNET (“KSNET”) purchase price).

The following factors had an influence on the comparability of our 2Q 2011 and 2Q 2010 results:

  • SASSA price and volume reductions: The Company’s new contract with SASSA has reduced its revenue and operating income as a result of the previously announced price and volume reductions;
  • Favorable impact from the weakness of the US dollar: The US dollar depreciated by 8% compared to the ZAR during the second quarter of fiscal 2011 compared to fiscal 2010 which has had a positive impact on the Company reported results;
  • Increased revenue from KSNET at lower operating margins, before acquired intangible asset amortization, than the Company’s legacy business: The Company’s KSNET acquisition in October 2010 positively impacted its revenue during the second quarter of fiscal 2011, however, because KSNET has an operating margin, before acquired intangible asset amortization, that is lower than the Company’s legacy businesses, it negatively impacted its operating margin. The inclusion of KSNET in the Company’s results has also contributed to the increase in selling, general and administration and depreciation and amortization expenses;
  • Increased transaction volumes at EasyPay: The Company’s reported results were favorably impacted by increased transaction volumes at EasyPay resulting from growth in value-added services;
  • Increased revenue from MediKredit and FIRHST at lower operating margins than other SA transaction-based activity business: The Company’s MediKredit and FIHRST acquisitions positively impacted its revenue during the second quarter of fiscal 2011, however, because MediKredit generated a modest operating loss and FIHRST has operating margin that is lower than the Company’s other transaction-based activity businesses, they negatively impacted its operating margin. The inclusion of these businesses in the Company’s results has also contributed to the increase in selling, general and administration expense;
  • Increased user adoption in Iraq: The Company’s reported results were positively impacted by increased transaction revenues at NUETS from the adoption of its UEPS technology in Iraq;
  • Lower revenues and margins from hardware, software and related technology sales segment: The Company’s hardware, software and related technology sales segment was adversely impacted by lower revenues at Net1 UTA, offset by ad hoc hardware sales;
  • Intangible asset amortization related to acquisitions: The Company’s reported results were adversely impacted by additional intangible asset amortization of approximately $2.0 million related to the acquisitions of KSNET in the second quarter of fiscal 2011, as well as MediKredit and FIHRST during the third quarter of fiscal 2010;
  • Lower interest income and increased interest expense resulting from KSNET acquisition: The Company’s reported results were adversely impacted by lower interest income due to the payment of a portion of the KSNET purchase price in cash and increased interest expense due to the payment of a portion of the KSNET purchase price utilizing long-term debt and facility fees of approximately $1.7 million; and
  • Non-recurring items included in selling, general and administration expense: During the second quarter of fiscal 2011, we recognized 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

“The second quarter of fiscal 2011 was a transformational quarter for us with the closing of our KSNET acquisition, which diversifies our revenue, earnings and product portfolio, as well as reduces Net1’s dependency on any one single economy, currency or political jurisdiction. Our revenue and profitability in 2Q 2011 continued to be negatively impacted by the previously announced reduction in the economics of our contract with SASSA, but offset by the inclusion of KSNET for two months of the quarter and sustained growth at EasyPay,” said Dr. Serge Belamant, Chairman and Chief Executive Officer of Net1. “In January 2011 we extended our contract with SASSA for a period of six months to September 30, 2011, under the same terms and conditions of the existing contract. We expect SASSA to commence a new tender process for the distribution of social grants in South Africa in the near future, and remain well positioned to capitalize on our market leading solution, distribution and position. Separately, in 2Q 2011 KSNET’s performance was in-line with management’s expectations while Net1 made demonstrable progress in the deployment of our newer Virtual Card and EasyPay Kiosk initiatives,” he concluded.

“We remain comfortable with our Fundamental EPS guidance of at least $1.50 on a constant currency basis for fiscal 2011. We continue to expect KSNET to be accretive to Fundamental EPS for fiscal 2011, but it is too soon to provide guidance on such level of accretion,” said Herman Kotzé, Chief Financial Officer of Net1.

Results of Operations

Net1’s frequently asked questions and operating metrics will be updated and posted on the Company’s website (www.net1.com).

     SA transaction-based activities

SA transaction-based activities revenue was $46.6 million, up 3% compared with 2Q 2010 in USD and 5% lower on a constant currency basis. In ZAR, the decrease in revenue was primarily due to the new SASSA contract at lower economics, which was partially offset by increased transaction volumes at EasyPay and the inclusion of MediKredit and FIHRST. Operating income margin of the Company’s SA transaction-based activities decreased to 40% from 59% a year ago. The decrease was primarily due to the lower revenues generated under the SASSA contract, additional intangible asset amortization related to the acquisition of MediKredit and FIHRST and lower margins at MediKredit and FIHRST compared with the Company’s legacy SA transaction-based activities. Excluding amortization of acquisition-related intangibles, 2Q 2011 segment operating margin was 43% compared with 61% during 2Q 2010.

     International transaction-based activities

The Company’s new International transaction-based activities segment includes the operations of KSNET, Net1 Virtual Card and NUETS’ operations in Iraq. International transaction-based activities revenue was $17 million and segment operating margin was 2%. Excluding the amortization of intangibles, segment operating margin was 14%. KSNET is the largest contributor to the segment and has been included in the Company’s results from November 1, 2010.

     Smart card accounts

Smart card account revenue was $8.4 million, up 4% compared with 2Q 2010 in USD and 4% lower on a constant currency basis. Operating margin for the segment remained consistent at 45%.

     Financial services

Financial services revenue was $1.6 million, up 89% compared with 2Q 2010 in USD and 74% higher on a constant currency basis, principally due to an increase in lending activities. Operating margin for this segment increased to 76% from 64% in 2Q 2010 largely as a result of the increased lending activities.

     Hardware, software and related technology sales

Hardware, software and related technology sales revenue was $15.4 million, down 21% compared with 2Q 2010 in USD and 27% lower on a constant currency basis. The decrease in revenue and operating income for 2Q 2011 was primarily due lower revenues generated by Net1 UTA, partially offset by ad hoc hardware sales. Excluding amortization of all intangibles and the impairment of goodwill, segment operating margin was 14% compared to 22% during 2Q 2010.

     Cash flow and liquidity

At December 31, 2010, the Company had cash and cash equivalents of $71 million, down from $154 million at June 30, 2010. For 2Q 2011, the Company utilized net cash of $8.1 million for operating activities, compared to generating operating cash flow of $13.8 million in 2Q 2010. The decrease in operating cash flow resulted mainly from the SASSA price and volume reductions which were effective July 1, 2010 and provisional tax and Secondary Taxation on Companies payments of $31 million in 2Q 2011, compared to provisional tax payments in 2Q 2010 of $16 million. Capital expenditures for 2Q 2011 and 2010 were $4.0 million and $0.7 million, respectively. On October 29, 2010, the Company paid approximately $240 million to acquire KSNET, which was funded from $124 million of the Company’s cash reserves and from $116 million in long-term borrowings. During 2Q 2011, the Company did not repurchase any shares under its $100 million authorization.

Use of Non-GAAP Measures

US securities laws require that when the Company publishes any non-GAAP measures, it discloses the reason for using the non-GAAP measure and provides 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

The Company’s GAAP net income and earnings per share for 2Q 2011 and 2Q 2010 include amortization of intangible assets and stock-based compensation. In addition, GAAP net income and earnings per share for 2Q 2011 includes transaction-related costs and an unrealized foreign exchange gain described above. The Company excludes all of the above-mentioned amounts when calculating fundamental net income and earnings per share, because management believes that these adjustments enhance its own evaluation, as well as an investor’s understanding, of the Company’s 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 the Company’s 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. Attachment C presents the reconciliation between the Company’s net income used to calculate earnings per share basic and diluted and HEPS basic and diluted.

Conference Call

Net1 will host a conference call to review second quarter results on February 4, 2011 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 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 February 25, 2011.

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, Iraq and Uzbekistan. In addition, Net1’s proprietary Mobile Virtual Card technology offers secure mobile payments and banking services in developed and emerging countries.

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 the Company’s actual results, levels of activity, performance or achievements to differ materially from those expressed in such forward-looking statements are included in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

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

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

    Three months ended     Six months ended  
    December 31,     December 31,  
    2010     2009     2010     2009  
    (In thousands, except per share data)     (In thousands, except per share data)  
                         
REVENUE $  89,011   $  73,864   $  153,294   $ 139,378  
                         
EXPENSE                        
                         
     Cost of goods sold, IT processing, servicing 
     and support 		  29,182     20,915     47,249     37,742  
                         
     Selling, general and administration   28,763     18,866     59,089     36,606  
                         
     Depreciation and amortization   9,092     4,664     13,996     9,243  
                         
OPERATING INCOME   21,974     29,419     32,960     55,787  
                         
INTEREST (EXPENSE) INCOME, net   (2,080 )   1,893     756     4,264  
                         
INCOME BEFORE INCOME TAXES   19,894     31,312     33,716     60,051  
                         
INCOME TAX EXPENSE   9,836     11,492     16,043     22,523  
                         
NET INCOME FROM CONTINUING OPERATIONS BEFORE LOSS FROM EQUITY- ACCOUNTED INVESTMENTS   10,058     19,820     17,673     37,528  
                         
LOSS FROM EQUITY-ACCOUNTED INVESTMENTS   (166 )   (270 )   (382 )   (381 )
                         
NET INCOME   9,892     19,550     17,291     37,147  
                         
(ADD) LESS: NET (LOSS) INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST   (56 )   266     (86 )   (78 )
                         
NET INCOME ATTRIBUTABLE TO NET1 $  9,948   $  19,284   $  17,377   $ 37,225  
                         
Net income per share, in United States dollars                        
     Basic earnings attributable to Net1 
     shareholders 		$ 0.22   $ 0.43   $ 0.38   $ 0.79  
     Diluted earnings attributable to Net1 
     shareholders 		$ 0.22   $ 0.42   $ 0. 38   $ 0.79  

NET 1 UEPS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets

    Unaudited     (A)  
    December 31,     June 30,  
    2010     2010  
    (In thousands, except share data)  
ASSETS  
CURRENT ASSETS            
               Cash and cash equivalents $  71,383   $  153,742  
               Pre-funded social welfare grants receivable   4,772     6,660  
               Accounts receivable, net of allowances of – December: $1,687; June: $807   76,308     41,854  
               Finance loans receivable, net of allowances of – December: $-; June: $-   9,511     4,221  
               Inventory   6,986     3,622  
               Deferred income taxes   17,655     16,330  
                  Total current assets before settlement assets   186,615     226,429  
                       Settlement assets   157,448     83,661  
                          Total current assets   344,063     310,090  
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION OF – December: $43,635; June: $35,271 		  32,738     7,286  
EQUITY-ACCOUNTED INVESTMENTS   2,452     2,598  
GOODWILL   184,215     76,346  
INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF –
December: $48,034; June: $34,226 		  192,022     68,347  
OTHER LONG-TERM ASSETS, including available for sale securities   15,016     7,423  
TOTAL ASSETS   770,506     472,090  
LIABILITIES  
CURRENT LIABILITIES            
               Bank overdraft   420     -  
               Accounts payable   13,410     3,596  
               Other payables   72,941     50,855  
               Current portion of long-term borrowings   7,166     -  
               Income taxes payable   5,553     3,476  
                  Total current liabilities before settlement obligations   99,490     57,927  
                        Settlement obligations   157,448     83,661  
                           Total current liabilities   256,938     141,588  
DEFERRED INCOME TAXES   62,052     38,858  
LONG-TERM BORROWINGS   107,934        
OTHER LONG-TERM LIABILITIES, including non-controlling interest loans   5,219     4,343  
TOTAL LIABILITIES   432,143     184,789  
COMMITMENTS AND CONTINGENCIES   -     -  
EQUITY  
NET1 EQUITY:            
       COMMON STOCK            
               Authorized: 200,000,000 with $0.001 par value; 
               Issued and outstanding shares, net of treasury - December: 45,535,353; 
               June: 45,378,397 		  59     59  
       PREFERRED STOCK            
               Authorized shares: 50,000,000 with $0.001 par value; 
               Issued and outstanding shares, net of treasury: 2010: -; 2009: - 		  -     -  
       ADDITIONAL PAID-IN-CAPITAL   137,614     133,543  
       TREASURY SHARES, AT COST: December: 13,149,042; June: 13,149,042   (173,671 )   (173,671 )
       ACCUMULATED OTHER COMPREHENSIVE LOSS   (38,381 )   (66,396 )
       RETAINED EARNINGS   409,720     392,343  
                TOTAL NET1 EQUITY   335,341     285,878  
NON-CONTROLLING INTEREST   3,022     1,423  
TOTAL EQUITY   338,363     287,301  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $  770,506   $  472,090  
               (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,  
    2010     2009     2010     2009  
    (In thousands)     (In thousands)  
Cash flows from operating activities                        
Net income $  9,892   $  19,550   $  17,291   $  37,147  
Depreciation and amortization   9,092     4,664     13,996     9,243  
Loss from equity-accounted investments   166     270     382     381  
Fair value adjustments   3,344     (29 )   238     (171 )
Interest payable   67     77     140     155  
Profit on disposal of property, plant and equipment   (3 )   3     (8 )   2  
Stock-based compensation charge   1,558     1,432     2,996     2,854  
Decrease in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable   (13,563 )   491     (2,608 )   5,990  
(Increase) Decrease in inventory   2,168     1,671     66     2,686  
Increase in accounts payable and other payables   (2,248 )   (9,367 )   3,777     (9,342 )
Increase in taxes payable   (6,364 )   (6,527 )   (1,230 )   (316 )
(Decrease) Increase in deferred taxes   (12,165 )   1,536     (12,938 )   2,111  
     Net cash (used in) provided by operating activities   (8,056 )   13,771     22,102     50,740  
Cash flows from investing activities                        
Capital expenditures   (4,011 )   (685 )   (4,779 )   (1,326 )
Proceeds from disposal of property, plant and equipment   11     13     18     62  
Advance of loans to equity-accounted investment   -     -     (375 )   -  
Repayment of loan by equity-accounted investment   34     -     407     -  
Acquisition of KSNET, net of cash acquired   (230,225 )   -     (230,225 )   -  
Net change in settlement assets   (31,641 )   -     (47,185 )   -  
     Net cash used in investing activities   (265,832 )   (672 )   (282,139 )   (1,264 )
Cash flows from financing activities                        
Loan portion related to options   -     -     20     720  
Treasury stock acquired   -     -     -     (126,304 )
Long-term borrowings obtained   116,353     -     116,353     -  
Acquisition of remaining 19.9% of Net1 UTA   (594 )   -     (594 )   -  
Repayment of short-term borrowings   419     -     419     (137 )
Net change in settlement obligations   31,641     -     47,185     -  
     Net cash generated from (used in) financing activities   147,819     -     163,383     (125,721 )
Effect of exchange rate changes on cash   (2,709 )   460     14,295     8,330  
                         
Net (decrease) increase in cash and cash equivalents   (128,778 )   13,559     (82,359 )   (67,915 )
Cash and cash equivalents – beginning of period   200,161     139,312     153,742     220,786  
Cash and cash equivalents – end of period $  71,383   $  152,871   $  71,383   $  152,871  

Net 1 UEPS Technologies, Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended December 31, 2010 and 2009 and September 30, 2010

                                  Change – constant
                          Change - actual   exchange rate(1)
                          Q2 ‘11   Q2 ‘11   Q2 ‘11   Q2 ‘11
Key segmental data, in ’000, except                         vs   vs   vs   vs
margins   Q2 ‘11       Q2 ‘10       Q1 ‘11     Q2 ‘10   Q1 ‘11   Q2 ‘10   Q1 ‘11
   Revenue:                                      
       SA transaction-based activities $ 46,588     $ 45,415     $ 44,892     3%   4%   (5)%   (3)%
       International transaction-based 
       activities 		  16,950       -       -     nm   nm   nm   nm
       Smart card accounts   8,434       8,137       7,970     4%   6%   (4)%   (1)%
       Financial services   1,623       858       1,248     89%   30%   74%   22%
       Hardware, software and related 
       technology sales 		  15,416       19,454       10,173     (21)%   52%   (27)%   42%
             Total consolidated revenue $ 89,011     $ 73,864     $ 64,283     21%   38%   11%   30%
                                       
   Consolidated operating income (loss):                                      
       SA transaction-based activities $ 18,547     $ 26,733     $ 17,776     (31)%   4%   (36)%   (2)%
       International transaction-based
       activities 		  327       -       -     nm   nm   nm   nm
            Operating income excluding
             amortization 		  2,359       -       -     nm   nm   nm   nm
             Amortization of intangible assets   (2,032 )     -       -                  
       Smart card accounts   3,832       3,699       3,622     4%   6%   (4)%   (1)%
       Financial services   1,231       546       929     125%   33%   108%   24%
       Hardware, software and related
       technology sales 		  (319 )     1,660       (2,660 )   (119)%   (88)%   (118)%   (89)%
       Corporate/ Eliminations   (1,644 )     (3,219 )     (8,681 )   (49)%   (81)%   (53)%   (82)%
             Total operating income $ 21,974     $ 29,419     $ 10,986     (25)%   100%   (31)%   87%
                                       
   Operating income margin (%)                                      
       SA transaction-based activities   40%       59%       40%                  
       International transaction-based
       activities 		  2%       -       -                  
       International transaction-based
       activities excluding amortization 		  14%       -       -                  
       Smart card accounts   45%       45%       45%                  
       Financial services   76%       64%       74%                  
       Hardware, software and related
       technology sales 		  (2)%       9%       (26)%                  
       Overall operating margin   25%       40%       17%                  

(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the second quarter of fiscal 2011 also prevailed during the second quarter of fiscal 2010 and the first quarter of fiscal 2011.

Six months ended December 31, 2010 and 2009

                        Change –  
                        constant  
                  Change -     exchange  
                  actual     rate(1)  
                  Q2 ‘11     Q2 ‘11  
                vs     vs  
Key segmental data, in ’000, except margins   Q2 ‘11       Q2 ‘10     Q2 ‘10     Q1 ‘11  
   Revenue:                          
       SA transaction-based activities $ 91,010     $ 90,393     1%     (6)%
       International transaction-based                          
       activities   17,420       -     nm     nm  
       Smart card accounts   16,404       16,211     1%     (6)%
       Financial services   2,871       1,650     74%     62%  
       Hardware, software and related                          
       technology sales   25,589       31,124     (18)%     (23)%
             Total consolidated revenue $ 153,294     $ 139,378     10%     2%  
                           
   Consolidated operating income (loss):                          
       SA transaction-based activities $ 35,986     $ 53,401     (33)%   (37)%
       International transaction-based                          
       activities   116       -     nm     nm  
             Operating income excluding                          
             amortization   2,148       -     nm     nm  
             Amortization of intangible assets   (2,032 )     -              
       Smart card accounts   7,454       7,369     1%     (6)%
       Financial services   2,160       1,077     101%     87%  
       Hardware, software and related                          
       technology sales   (2,979 )     (53 )   5521%     5132%  
       Corporate/ Eliminations   (9,777 )     (6,007 )   63%     51%  
             Total operating income $ 32,960     $ 55,787     (41)%   (45)%
                           
   Operating income margin (%)                          
       SA transaction-based activities   40%       59%              
       International transaction-based                          
       activities   1%       -              
       International transaction-based                          
       activities excluding amortization   12%       -              
       Smart card accounts   45%       45%              
       Financial services   75%       65%              
       Hardware, software and related                          
       technology sales   (12)%     -              
       Overall operating margin   22%       40%              

(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the first half of fiscal 2011 also prevailed during the first half of fiscal 2010.

Net 1 UEPS Technologies, Inc.

Attachment B

Reconciliation of GAAP net income to fundamental net income:

Three months ended December 31, 2010 and 2009

    Net Income     EPS, basic     Net income     EPS, basic  
    (USD’000)     (USD)     (ZAR’000)     (ZAR)  
    2010     2009     2010      2009      2010     2009     2010     2009  
                                                 
GAAP   9,948     19,284     0.22      0.42       69,040     145,091     1.52     3.20  
                                                 
Amortization of intangible assets(1)   4,302     2,524                 29,857     18,988              
           Customer relationships   3,726     3,346                 25,862     25,171              
           Software and unpatented                                                
           technology   1,939     -                 13,458     -              
           Trademarks   176     90                 1,220     679              
           Database   73                       507                    
           Deferred tax benefit   (1,612 )   (912 )               (11,190 )   (6,862 )            
Stock-based charge(2)   1,558     1,431                 10,813     10,767              
Gain on FEC, net of tax   (1,799 )   -                 (12,485 )   -              
Facility fees for KSNET debt   1,728     -                 11,993     -              
Acquisition-related costs.   1,774     -                 12,313     -              
   Fundamental   17,511     23,239     0.39      0.51       121,531     174,846     2.67     3.85  

(1)

Amortization of acquisition-related intangibles, net of deferred tax benefit.

(2)

Includes stock-based compensation charges related to options and non-vested stock awards.

Six months ended December 31, 2010 and 2009

    Net Income     EPS, basic     Net income     EPS, basic  
    (USD’000)     (USD)     (ZAR’000)     (ZAR)  
    2010     2009     2010      2009      2010     2009     2010     2009  
                                                 
GAAP   17,377     37,225     0.38      0.79       124,089     285,601     2.73     6.06  
                                                 
Amortization of intangible assets(1)   6,916     4,964                 49,393     38,080              
           Customer relationships   6,281     6,582                 44,858     50,494              
           Software and unpatented                                                
           technology   2,897     -                 20,687     -              
           Trademarks   268     177                 1,915     1,358              
           Deferred tax benefit   142     -                 1,013     -              
           Deferred tax benefit   (2,672 )   (1,795 )               (19,080 )   (13,772 )            
Stock-based charge(2)   2,996     2,854                 21,394     21,897              
Gain on FEC, net of tax   (114 )   -                 (813 )   -              
Facility fees for KSNET debt   1,728     -                 12,340     -              
Acquisition-related costs.   5,131     -                 36,640     -              
   Fundamental   34,034     45,043     0.75      0.96       243,043     345,578     5.35     7.34  

(1)

Amortization of acquisition-related intangibles, net of deferred tax benefit.

(2)

Includes stock-based compensation charges related to options and non-vested stock awards.


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, 2010 and 2009

    2010     2009  
             
Net income (USD’000)   9,948     19,284  
Adjustments:            
   Profit on sale of property, plant and equipment (USD’000)   (3 )   3  
   Tax effects on above (USD’000)   1     (1 )
             
Net income used to calculate headline earnings (USD’000)   9,946     19,286  
             
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings (‘000)   45,433     45,378  
             
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings (‘000)   45,494     45,588  
             
Headline earnings per share:            
   Basic earnings – common stock and linked units, in US cents   22     43  
   Diluted earnings – common stock and linked units, in US cents   22     42  

Six months ended December 31, 2010 and 2009

    2010     2009  
             
Net income (USD’000)   17,377     37,225  
Adjustments:            
   Loss (Profit) on sale of property, plant and equipment (USD’000)   (8 )   2  
   Tax effects on above (USD’000)   3     (1 )
             
Net income used to calculate headline earnings (USD’000)   17,372     37,226  
             
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings (‘000)   45,409     47,097  
             
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings (‘000)   45,455     47,253  
             
Headline earnings per share:            
   Basic earnings – common stock and linked units, in US cents   38     79  
   Diluted earnings – common stock and linked units, in US cents   38     79