Net 1 UEPS Technologies Reports First Quarter 2018 Results

Net 1 UEPS Technologies (NASDAQ:UEPS) has released its results for the first quarter of fiscal 2018.
As quoted in the press release:

• Q1 2018 Revenue of $153 million, 8% lower in constant currency;
• Q1 2018 FEPS of $0.43, which reflects the adverse impact of a higher share count, taxes and interest expense;
• Concluded investment in Bank Frick for $41 million and repaid Korean debt in full in October 2017.

Summary Financial Metrics
Three months ended September 30,
% change	% change
2017	2016	in USD	in ZAR
(All figures in USD ‘000s except per share data)
Revenue	152,558	155,633	(2	%)	(8	%)
GAAP net income	19,483	24,632	(21	%)	(26	%)
Fundamental net income (1)	24,446	25,753	(5	%)	(11	%)
GAAP earnings per share ($)	0.34	0.46	(26	%)	(30	%)
Fundamental earnings per share ($) (1)	0.43	0.48	(10	%)	(16	%)
Fully-diluted shares outstanding (‘000’s)	57,243	53,923	7	%
Average period USD/ ZAR exchange rate	13.17	14.10	(6	%)

(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 Q1 2018 and Q1 2017 results

• Earnings and FEPS dilution impact from issue of additional shares of common stock: Our Q1 2018 fundamental earnings per share was impacted by the issuance of five million shares of our common stock in February 2017;
• Favorable impact from the weakening of the U.S. dollar against South African Rand: The U.S. dollar depreciated by 6% against the ZAR during Q1 2018, which positively impacted our reported results;
• Growth in insurance businesses: We continued to experience volume growth and operating efficiencies in our insurance businesses during Q1 2018, 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;
• Higher equity accounted earnings related to DNI: The acquisition of 45% of DNI has positively impacted our reported results by approximately $1.4 million, before amortization of intangible assets, net of deferred taxes;
• Adverse impact on interest income from utilization of surplus cash to invest in Cell C and DNI: Our interest income was adversely impacted by approximately $1.2 million, before the impact of any taxes, as a result of our utilization of approximately ZAR 1.4 billion and $23.0 million, respectively, of our surplus cash reserves to partially fund our investments in Cell C and DNI;
• Higher interest expense resulting from South African facility: Our interest expense increased due to the South African lending facility we obtained in August 2017, to partially fund our 15% investment in Cell C;
• Masterpayment expansion costs: Masterpayment has incurred additional employment costs as it grows its staff complement to execute its expansion plan into new markets;
• Lower prepaid sales and ad hoc terminal sales: The number of transacting users purchasing prepaid products through our mobile channel decreased due to security features introduced in fiscal 2017. In addition, our results were adversely impacted by few ad hoc terminal sales; and
• Higher transaction-related costs in fiscal 2018: We incurred $1.5 million in transaction-related costs pertaining to various acquisition and investment initiatives pursued during Q1 2018.

“Our execution has progressed steadily on our key focus areas including our strategic review of the various business units, consolidation of various operations, conclusion of our investments in Cell C, DNI and Bank Frick, as well as providing our support to the South African government, and re-engaging with our shareholders,” said Herman Kotze, CEO of Net1. “We are excited with the numerous identified opportunities within and between our various business units and investments. In fiscal 2018, we intend to successfully implement the identified synergies with Cell C and DNI, expand our financial inclusion businesses to carefully selected markets, optimize our existing international operations and focus on key markets and solutions. As always, we remain fully committed to supporting the South African government to ensure uninterrupted social grant service delivery,” he added.

Click here to read the full press release.