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Net 1 UEPS Technologies, Inc. Announces 2010 Second Quarter Results
Feb 09, 2010 (03:02 PM EST)


JOHANNESBURG, Feb. 9 /PRNewswire-FirstCall/ -- 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, 2009. Revenue during 2Q 2010 was $73.9 million, a year over year increase of 20% in US dollars ("USD") and a decline of 8% in constant currency. Earnings per share under US generally accepted accounting principles ("GAAP") in 2Q 2010 was $0.42 versus $0.49 a year ago, a decline of 14% in USD and 34% in constant currency.  Fundamental earnings per share for 2Q 2010 was $0.51 compared to $0.36 in the 2Q 2009, representing an increase of 42% in USD and 8% in constant currency.  

Revenue during the first half of fiscal 2010 ("F2010") was $139.4 million, a year over year increase of 8% in US dollars ("USD") and a decline of 6% in constant currency compared to the first half of fiscal 2009 ("F2009"). Earnings per share under US generally accepted accounting principles ("GAAP") during F2010 was $0.79 versus $0.94 a year ago, a decline of 16% in USD and 27% in constant currency. Fundamental earnings per share for F2010 was $0.96 compared to $0.75 for F2009, representing an increase of 28% in USD and 12% in constant currency.

Summary Financial Metrics

    
    
    
                                    Three months ended December 31,
                                    -------------------------------
                                                     % change   % change
                                  2009        2008    in USD     in ZAR
                                  ----        ----  ---------  ---------
    (All figures in USD '000s
     except per share data)
    Revenue                     73,864      61,388         20%        (8)%
    
    GAAP net income             19,284      27,762        (31)%      (47)%
    
    Fundamental net income (1)  23,239      20,186         15%       (12)%
    
    GAAP earnings per
     share ($) (2)                0.42        0.49        (14)%      (34)%
    
    Fundamental earnings per
     share ($) (1) (2)            0.51        0.36         42%         8%
    
    Fully diluted shares
     outstanding ('000's) (2)   45,378      57,068        (20)%
    
    Average period USD/ ZAR
     exchange rate                7.52        9.96        (23)%
    
    
    
    
                                      Six months ended December 31,
                                      -----------------------------
                                                      % change   % change
                                   2009    2008 (2)    in USD     in ZAR
                                   ----    --------  ---------  ---------
    (All figures in USD '000s
     except per share data)
    Revenue                     139,378     129,323          8%        (6)%
    
    GAAP net income              37,225      54,006        (31)%      (40)%
    
    Fundamental net income (1)
     (2)                         45,042      42,834          5%        (9)%
    
    GAAP earnings per share ($)
     (2)                           0.79        0.94        (16)%      (27)%
    
    Fundamental earnings per
     share ($) (1) (2)             0.96        0.75         28%        12%
    
    Fully diluted shares
     outstanding ('000's)        47,253      57,777        (18)%
    
    Average period USD/ ZAR
     exchange rate                 7.67        8.80        (13)%
    
    

(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 2009 and the first six months of F2010 also excludes the effects of the change in the Company's fully distributed tax rate from 35.45% to 34.55%, JSE Limited ("JSE") listing costs, a bank facility fee, goodwill impairment and a foreign exchange gain, net of tax, related to a short-term investment.

(2) GAAP basic and fundamental earnings per share for 2Q 2009 and F2009, have been retrospectively adjusted, as required by FSP EITF 03-6-1 (Topic 260), to include participating securities in the weighted average number of outstanding shares of common stock.

The following factors had significant impact on the comparability of Net1's 2Q 2010 results to last year:

  • Favorable impact from the weakness of the US dollar: The US dollar depreciated by 23% compared to the ZAR during the second quarter of fiscal 2010 compared to fiscal 2009 which has had a positive impact on the Company's reported results;
  • Cost management and improvement in merchant adoption in our pension and welfare operations: The Company's second quarter of fiscal 2010 results were favorably impacted by cost management controls and continued increases in merchant adoption;
  • 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 and higher than expected activity at retailers during the Christmas season;
  • Increased user adoption in Iraq: The Company's reported results were positively impacted by increased transaction revenues 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 fewer ad hoc sales to the Bank of Ghana, lower revenues and overall margin generated by Net1 Universal Technologies (Austria) AG ("Net1 UAT") and weaker demand for its products as well as pricing pressures resulting from the global recession, but partially offset by hardware sales to Iraq;
  • Intangible asset amortization related to acquisition: The Company's reported results were adversely impacted by additional intangible asset amortization of approximately $0.5 million related to the RMT Systems (Pty) Ltd ("RMT") acquisition, which closed in April 2009; and
  • Non-recurring items: During the second quarter of fiscal 2009 the Company recognized a foreign exchange gain of $20.6 million (ZAR 202.3 million) resulting from an asset swap arrangement and the Company impaired goodwill with a value of $1.8 million (ZAR 18.0 million).

Comments and Outlook

"I am extremely pleased with our second quarter results, which demonstrate the strength of our business model and the power of our technology," said Dr. Serge Belamant, Chairman and Chief Executive Officer of Net1. "While we faced difficult year-over-year comparisons from our hardware, software and related technology sales segment, and last year's large foreign exchange gain, we continue to grow both revenue and profitability in our core transaction-based businesses. We remain an integral distributor of welfare grants for the South African government, and over the next few years, we have a much clearer path to drive the globalization of our technology. We remain committed to delivering sustainable growth for all of our stake holders, and to that effect I am pleased to announce that our Board has authorized a new $50 million share repurchase program," he concluded.

"We remain comfortable with our guidance of at least 20% constant currency fundamental earnings per share growth for fiscal year 2010," said Herman Kotze, Chief Financial Officer of Net1. "Our growth during 2Q 2010 was driven by EasyPay, Iraq and the further penetration of our merchant acquiring platform," he concluded.

Results of Operations

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

Transaction-based activities

Transaction-based activities revenue was $45.4 million, up 38% compared with 2Q 2009 in USD and 6% on a constant currency basis. Revenue increased as a result of increased transaction volumes at EasyPay and a modest contribution from our pension and welfare operations. Operating margin increased to 59% from 54% during 2Q 2009 primarily due to cost management and continued increases in merchant adoption in our pension and welfare operations, increased transaction fees from the utilization of our UEPS system in Iraq and improved margins at EasyPay.  Excluding amortization of intangibles for EasyPay and RMT, segment operating margin was 61% compared with 55% during 2Q 2009.

Smart card accounts

Smart card account revenue was $8.1 million, up 21% compared with 2Q 2009 in USD and 7% lower on a constant currency basis. Operating margin for the segment remained consistent at 45% for 2Q 2010 and 2Q 2009.

Financial services

Financial services revenue was $0.9 million, down 40% compared with 2Q 2009 in USD and 54% on a constant currency basis, principally due to the divestiture of the Company's traditional microlending business in 3Q 2009. Operating margin for the operating segment however, improved significantly to 64% from (110)% in 2Q 2009 as a result of the sale of this low-margin business, and higher profitability in our underlying UEPS-based lending activities.

Hardware, software and related technology sales

Hardware, software and related technology sales revenue was $19.5 million, down 5% compared with 2Q 2009 in USD and 27% on a constant currency basis. The decrease in revenue and operating income is primarily due to lower revenues at Net1 UAT and lower ad hoc hardware and software development sales in 2010 as compared with the prior year when we recorded revenue from sales under our Ghana contract, offset marginally by increased hardware sales to Iraq. As a result operating margin for the operating segment decreased to 9% from 27% in 2Q 2009. Excluding amortization of all intangibles, segment operating margin was 22% compared to 41% during 2Q 2009.

Cash flow and liquidity

At December 31, 2009, the Company had cash and equivalents of $153 million, down from $221 million at June 30, 2009. For 2Q 2010, the Company generated operating cash flow of $13.8 million compared to $45.9 million in 2Q 2009. The decrease in operating cash flow results primarily from the foreign exchange gain realized during 2Q 2009. Capital expenditures for 2Q 2010 and 2009 were $0.7 million and $0.4 million, respectively. Capital expenditures for each of F2010 and F2009 were approximately $1.3 million and $3.3 million. For F2010, the Company generated operating cash flow of $50.7 million compared to $12.9 million in F2009.  

Share repurchase authorization

On February 5, 2010, the Company's Board of Directors authorized the repurchase of up to $50 million of the Company's common stock. The authorization does not have an expiration date.

The share repurchase authorization will be used at management's discretion, subject to limitations imposed by SEC Rule 10b-18 and other legal requirements and subject to price and other internal limitations established by the Board.  Repurchases will be funded from the Company's available cash. Share repurchases may be made through open market purchases, privately negotiated transactions, or both. There can be no assurance that the Company will purchase any shares or any particular number of shares.

The authorization may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, liquidity and other factors that management deems appropriate.

MediKredit Closing

In January 2010, the Company acquired 100% of MediKredit Integrated Healthcare Solutions (Pty) Ltd ("MediKredit") for ZAR 74 million (approximately $10 million) in cash after all regulatory approvals were obtained. MediKredit is a South African private company that offers transaction processing, financial and clinical risk management solutions to both funders and providers of healthcare.

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

Under GAAP, the Company is required to fair value all intangible assets on the date of the acquisition and amortize these intangible assets over their expected useful lives. In addition, under GAAP, the Company is required to measure the fair value of options and other stock-based awards, and recognize a stock-based compensation charge over the requisite service period. The Company's GAAP net income and earnings per share for the three and six months December 31, 2009 and 2008, include amortization of intangibles and stock-based compensation, as well as, in 2008, JSE listing costs, a bank facility fee, goodwill impairment and a foreign exchange gain, net of tax, related to a short-term investment. Finally, the effect of the change in the fully distributed tax rate from 35.45% to 34.55% in July 2008 was included in net income and earnings per share for the six months ended December 31, 2008. 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 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 loss (profit) on sale of property, plant and equipment, net of related tax effects. Attachment C presents the reconciliation between our net income used to calculate earnings per share basic and diluted and HEPS basic and diluted.

Conference Call

Net1 will host a conference call to review second quarter results on February 10, 2010, at 8:00 a.m. Eastern Time. To participate in the call, dial 1-800-860-2442 (US only), 1-866-605-3852 (Canada only), 0-800-917-7042 (UK only) or 0-800-200-648 (South Africa only) five 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 10 minutes prior to the call. A webcast of the call will be available for replay on the Net1 website through March 3, 2010.

About Net1 (www.net1.com)

Net1 provides its universal electronic payment system, or UEPS, as an alternative payment system for the unbanked and under-banked populations of developing economies. Our market-leading system enables the estimated four billion people who generally have limited or no access to a bank account, to enter affordably into electronic transactions with each other, government agencies, employers, merchants and other financial service providers. Our universal electronic payment system, or UEPS, uses smart cards that operate in real-time but offline, unlike traditional payment systems offered by major banking institutions that require immediate access through a communications network to a centralized computer. This offline capability means that users of the Net1 system can enter into transactions at any time with other card holders even in the most remote areas so long as a portable offline smart card reader is available. In addition to payments and purchases, UEPS can be used for banking, healthcare management, international money transfers, voting and identification.

Net1 also focuses on the development and provision of secure transaction technology, solutions and services and offers transaction processing, financial and clinical risk management solutions to both funders and providers of healthcare.  Its core competencies around secure online transaction processing, cryptography and integrated circuit card (chip/smart card) technologies are principally applied to electronic commerce transactions in the telecommunications, banking, retail, petroleum and utilities market sectors.

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              Six months
                                    ended                     ended
                                    -----                     -----
                                  December 31,             December 31,
                                  ------------             ------------
                                2009         2008       2009           2008
                                ----         ----       ----           ----
                                 (In thousands,           (In thousands,
                             except per share data)   except per share data)
    
    REVENUE                   $73,864     $61,388     $139,378       $129,323
    
    EXPENSE
    
      Cost of goods
       sold, IT
       processing,
       servicing and
       support                 20,915      17,175       37,742         36,411
    
      Selling, general
       and
       administration          18,866      15,311       36,606         33,309
    
      Depreciation and
       amortization             4,664       4,261        9,243          7,684
    
    IMPAIRMENT OF
     GOODWILL                       -       1,836            -          1,836
                                  ---       -----          ---          -----
    
    OPERATING INCOME           29,419      22,805       55,787         50,083
    
    FOREIGN EXCHANGE
     GAIN RELATED TO
     SHORT-TERM
     INVESTMENT                     -      20,581            -         26,657
    
    INTEREST INCOME,
     net                        1,893       2,303        4,264          5,465
                                -----       -----        -----          -----
    
    INCOME BEFORE
     INCOME TAXES              31,312      45,689       60,051         82,205
    
    INCOME TAX EXPENSE         11,492      16,999       22,523         26,901
                               ------      ------       ------         ------
    
    NET INCOME FROM
     CONTINUING
     OPERATIONS BEFORE
     LOSS FROM EQUITY-
     ACCOUNTED
     INVESTMENTS               19,820      28,690       37,528         55,304
    
    LOSS FROM EQUITY-
     ACCOUNTED
     INVESTMENTS                 (270)       (226)        (381)          (536)
                                 ----        ----         ----           ----
    
    NET INCOME                 19,550      28,464       37,147         54,768
    
    LESS(ADD): NET
     INCOME (LOSS)
     ATTRIBUTABLE TO
     NON-CONTROLLING
     INTEREST                     266         702          (78)           762
                                  ---         ---          ---            ---
    
    NET INCOME
     ATTRIBUTABLE TO
     NET1                     $19,284     $27,762      $37,225        $54,006
                              -------     -------      -------        -------
    
    Net income per
     share, in cents
       Basic earnings
        attributable to
        Net1 shareholders        42.5        48.6         79.0           93.8
       Diluted earnings
        attributable to
        Net1 shareholders        42.3        48.5         78.8           93.5
    
    
    
    
                         NET 1 UEPS TECHNOLOGIES, INC.
                     Condensed Consolidated Balance Sheets
    
                                             Unaudited               (A)
                                            December 31,          June 30,
                                                2009                2009
                                                ----                ----
                                          (In thousands, except share data)
    
                       ASSETS
    CURRENT ASSETS
      Cash and cash equivalents               $152,871            $220,786
      Pre-funded social
       welfare grants
       receivable                                1,592               4,930
      Accounts receivable, net
       of allowances of –
       December: $374; June:
       $395                                     42,213              42,475
      Finance loans receivable,
       net of allowances of –
       December: $244; June:
       $226                                      4,548               2,563
      Deferred expenditure on
       smart cards                                  70                   8
      Inventory                                  4,953               7,250
      Deferred income taxes                      9,191              12,282
                                                 -----              ------
         Total current assets                  215,438             290,294
    
    OTHER LONG-TERM ASSETS,
     including available for
     sale securities                             6,886               7,147
    PROPERTY, PLANT AND
     EQUIPMENT, NET OF
     ACCUMULATED DEPRECIATION
     OF – December: $31,559;
     June: $28,169                               7,075               7,376
    EQUITY-ACCOUNTED
     INVESTMENTS                                 2,265               2,583
    GOODWILL                                   121,295             116,197
    INTANGIBLE ASSETS, NET OF
     ACCUMULATED AMORTIZATION
     OF – December: $39,854; June: $31,150      70,806              75,890
                                                ------              ------
    TOTAL ASSETS                               423,765             499,487
                                               -------             -------
    
                     LIABILITIES
    CURRENT LIABILITIES
      Accounts payable                           4,347               5,481
      Other payables                            57,431              61,454
      Income taxes payable                       7,598              10,874
                                                 -----              ------
         Total current liabilities              69,376              77,809
    
    DEFERRED INCOME TAXES                       46,876              41,737
    
    OTHER LONG-TERM
     LIABILITIES, including
     non-controlling
     interest loans                              4,200               4,185
    
    COMMITMENTS AND
     CONTINGENCIES                                   -                   -
                                                   ---                 ---
    
    TOTAL LIABILITIES                          120,452             123,731
                                               -------             -------
    
                        EQUITY
    
      NET1 EQUITY:
    
         COMMON STOCK
            Authorized: 200,000,000
             with $0.001 par value;
            Issued and outstanding
             shares, net of treasury
             - December: 45,378,397;
             June: 54,506,487                       59                  59
    
         ADDITIONAL PAID-IN-
          CAPITAL                              130,493             126,914
    
         TREASURY SHARES, AT COST:
          December: 13,149,042;
          June: 3,927,516                     (173,671)            (48,637)
    
         ACCUMULATED OTHER
          COMPREHENSIVE LOSS                   (46,666)            (58,472)
    
         RETAINED EARNINGS                     390,578             353,353
                                               -------             -------
               TOTAL NET1 EQUITY               300,793             373,217
    
      NON-CONTROLLING INTEREST                   2,520               2,539
                                                 -----               -----
    TOTAL EQUITY                               303,313             375,756
                                               -------             -------
    TOTAL LIABILITIES AND
     SHAREHOLDERS' EQUITY                     $423,765            $499,487
                                              --------            --------
    
      (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,
                               ------------               ------------
                             2009         2008        2009            2008
                             ----         ----        ----            ----
                               (In thousands)             (In thousands)
    
    Cash flows from
     operating
     activities
    Net income             $19,550       28,464      $37,147         $54,768
    Depreciation and
     amortization            4,664        4,261        9,243           7,684
    Impairment of
     goodwill                    -        1,836            -           1,836
    Loss from equity-
     accounted
     investments               270          226          381             536
    Fair value
     adjustments               (29)      (2,472)        (171)         (2,444)
    Unrealized
     foreign exchange
     reversal (gain)
     related to
     short-term
     investment                  -        5,061            -          (1,015)
    Interest payable            77         (408)         155             231
    Loss (Profit) on
     disposal of
     property, plant
     and equipment               3           (1)           2               -
    Stock-based
     compensation
     charge                  1,432        1,346        2,854           2,551
    Facility fee
     amortized                   -          352            -           1,100
    Decrease
     (Increase) in
     accounts
     receivable, pre-
     funded social
     welfare grants
     receivable and
     finance loans
     receivable                521        8,350        6,050         (37,791)
    Increase in
     deferred
     expenditure on
     smart cards               (30)          (4)         (60)            (27)
    Decrease in
     inventory               1,671          511        2,686             294
    Decrease in
     accounts payable
     and other
     payables               (9,367)      (3,174)      (9,342)        (17,589)
    (Decrease)
     Increase in
     taxes payable          (6,527)         775         (316)          4,184
    Increase
     (Decrease) in
     deferred taxes          1,536          751        2,111          (1,419)
                             -----          ---        -----          ------
      Net cash provided
       by operating
       activities           13,771       45,874       50,740          12,899
                            ------       ------       ------          ------
    
    Cash flows from
     investing
     activities
    Capital
     expenditures             (685)        (439)      (1,326)         (3,283)
    Proceeds from
     disposal of
     property, plant
     and equipment              13            1           62               2
    Acquisition of
     Net1 UAT, net of
     cash acquired               -         (458)           -         (95,786)
    Acquisition of
     shares in
     equity-
     accounted
     investments                 -          (50)           -            (600)
                               ---          ---          ---            ----
      Net cash used in
       investing
       activities             (672)        (946)      (1,264)        (99,667)
                              ----         ----       ------         -------
    
    Cash flows from
     financing
     activities
    Proceeds from
     issue of share
     capital, net of
     share issue
     expenses                    -            -          720             155
    Treasury stock
     acquired                    -      (24,752)    (126,304)        (24,752)
    Proceeds from
     short-term loan
     facility                    -            -            -         110,000
    Repayment of
     short-term loan
     facility                    -     (110,000)           -        (110,000)
    Payment of
     facility fee                -            -            -          (1,100)
    Repayment of non-
     controlling
     interest loan               -            -         (137)              -
    Proceeds from
     bank overdrafts             -           94            -              95
    Repayment of
     loans                       -            -            -               -
                               ---          ---          ---             ---
      Net cash used in
       financing
       activities                -     (134,658)    (125,721)        (25,602)
                               ---     --------     --------         -------
    
    Effect of
     exchange rate
     changes on cash           460      (31,538)       8,330         (35,449)
                               ---      -------        -----         -------
    
    Net increase
     (decrease) in
     cash and cash
     equivalents            13,559     (121,268)     (67,915)       (147,819)
    
    Cash and cash
     equivalents –
     beginning of
     period                139,312      245,924      220,786         272,475
                           -------      -------      -------         -------
    
    Cash and cash
     equivalents –
     end of period        $152,871      124,656     $152,871        $124,656
                          --------      -------     --------        --------
    
    

Net 1 UEPS Technologies, Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended December 31, 2009 and 2008 and September 30, 2009

    
    
                                                                  Change –
                                                                  constant
                                                                  exchange
                                               Change - actual     rate(1)
                                               ---------------     -------
                                                Q2 '10  Q2 '10  Q2 '10  Q2 '10
    Key segmental                               ------  ------  ------  ------
     data, in                                      vs     vs      vs      vs
     '000, except                                  --     --      --      --
     margins         Q2 '10    Q2 '09   Q1 '10  Q2 '09  Q1 '10  Q2 '09  Q1 '10
                     ------    ------   ------  ------  ------  ------  ------
     Revenue:
       Transaction-
        based
        activities   $45,415   $32,820   $44,978   38%     1%    6%    (3)%
       Smart card
        accounts       8,137     6,711     8,074   21%     1%   (7)%   (3)%
       Financial
        services         858     1,430       792  (40)%    8%  (54)%    4%
       Hardware,
        software and
        related
        technology
        sales         19,454    20,427    11,670   (5)%   67%  (27)%   60%
                      ------    ------    ------
         Total
          consolidated
          revenue    $73,864   $61,388   $65,514   20%    13%   (8)%    9%
                     -------   -------   -------
    
     Consolidated
      operating
      income
      (loss):
       Transaction-
        based
        activities   $26,733   $17,653   $26,668   51%     0%   16%    (3)%
       Smart card
        accounts       3,699     3,050     3,670   21%     1%   (7)%   (3)%
       Financial
        services         546    (1,570)      531 (135)%    3% (127)%   (1)%
       Hardware,
        software and
        related
        technology
        sales          1,660     5,493    (1,713) (70)% (197)% (77)% (193)%
       Corporate/
        Eliminations  (3,219)   (1,821)   (2,788)  77%    15%   35%    11%
                      ------    ------    ------
         Total
          operating
          income     $29,419   $22,805   $26,368   29%    12%   (1)%    7%
                     -------   -------   -------
    
     Operating
      income
      margin (%)
       Transaction-
        based
        activities        59%       54%       59%
       Smart card
        accounts          45%       45%       45%
       Financial
        services          64%     (110)%      67%
       Hardware,
        software and
        related
        technology
        sales              9%       27%      (15)%
       Overall
        operating
        margin            40%       37%       40%
    
    
    (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 2010 also prevailed during the second quarter of fiscal
    2009 and the first quarter of fiscal 2010.
    
    

Six months ended December 31, 2009 and 2008

    
    
                                                                      Change –
                                                                      constant
                                                        Change -      exchange
                                                         actual        rate(1)
                                                        --------      --------
                                                         Q2 '10        Q2 '10
    Key segmental                                        ------        ------
     data, in                                              vs            vs
     '000, except                                          --            --
     margins                 Q2 '10       Q2 '09         Q2 '09        Q1 '10
                             ------       ------         ------        ------
     Revenue:
       Transaction-
        based
        activities           $90,393      $73,164             24%          8%
       Smart card
        accounts              16,211       15,281              6%         (8)%
       Financial
        services               1,650        3,214            (49)%       (55)%
       Hardware,
        software and
        related
        technology
        sales                 31,124       37,664            (17)%       (28)%
                              ------       ------  
         Total
          consolidated
          revenue            139,378      129,323              8%         (6)%
                             -------      -------
    
     Consolidated operating
      income (loss):
       Transaction-
        based
        activities           $53,401      $39,291             36%         18%
       Smart card 
        accounts               7,369        6,945              6%         (8)%
       Financial
        services               1,077       (1,243)          (187)%      (176)%
       Hardware,
        software and
        related
        technology
        sales                    (53)       9,627           (101)%      (100)%
       Corporate/
        Eliminations          (6,007)      (4,537)            32%         15%
                              ------       ------
         Total
          operating
          income             $55,787      $50,083             11%         (3)%
                             -------      ------- 
    
     Operating income
      margin (%)
       Transaction-
        based
        activities                59%          54%
       Smart card
        accounts                  45%          45%
       Financial
        services                  65%         (39)%
       Hardware,
        software and
        related
        technology
        sales                      -%          26%
       Overall
        operating
        margin                    40%          39%
    
    
    (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 2010 also prevailed during the first half of fiscal 2009.
    
    

Net 1 UEPS Technologies, Inc.

Attachment B

Reconciliation of GAAP net income to fundamental net income:

Three months ended December 31, 2009 and 2008

    
    
                            Net Income   EPS, basic   Net income   EPS, basic
                            (USD'000)   (USD cents)   (ZAR'000)    (ZAR cents)
                            ---------    ---------    ---------      ---------
                         2009     2008   2009 2008  2009     2008    2009 2008
                         ----     ----   ---- ----  ----     ----    ---- ----
    
    GAAP                 19,284   27,762   43  49  145,091   272,875  320 478
    
    Amortization of
     intangible
     assets(1)            2,524    2,276            18,988    22,371
                          -----    -----            ------    ------
        Customer
         relationships    3,346    2,412            25,171    23,713
        Software and
         unpatented
         technology           -      676                 -     6,642
        Trademarks           90       69               679       679
        Deferred tax
         benefit           (912)    (881)           (6,862)   (8,663)
                           ----     ----            ------    ------
    Stock-based
     charge               1,431    1,346            10,767    13,230
    JSE listing
     costs                    -       84                 -       826
    Facility fee              -      352                 -     3,460
    Foreign
     exchange gain
     related to a
     short-term
     investment,
     net of tax of
     $7,111                   -  (13,470)                -  (132,397)
    Impairment of
     goodwill                 -    1,836                 -    18,046
                            ---    -----               ---    ------
      Fundamental        23,239   20,186   51  36  174,846   198,411  385 348
                         ------   ------           -------   -------
    
    (1) Amortization of Prism, EasyPay, RMT and BGS 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, 2009 and 2008

    
    
    
                           Net Income    EPS, basic   Net income    EPS, basic
                            (USD'000)   (USD cents)   (ZAR'000)    (ZAR cents)
                            ---------    ---------    ---------     ----------
                          2009     2008  2009 2008   2009     2008   2009 2008
                          ----     ----  ---- ----   ----     ----   ---- ----
    
    GAAP                 37,225   54,006  79  94   285,601   475,302  606  826
    
    Amortization
     of intangible
     assets(1)            4,964    3,749            38,080    32,995
                          -----    -----            ------    ------
        Customer
         relationships    6,582    3,609            50,494    31,759
        Software and
         unpatented
         technology           -    1,509                 -    13,284
        Trademarks          177      154             1,358     1,358
        Deferred tax
         benefit         (1,795)  (1,523)          (13,772)  (13,406)
                         ------   ------           -------   -------
    Stock-based
     charge(2)            2,854    2,551            21,897    22,451
    JSE listing
     costs                    -      495                 -     4,356
    Facility fee              -    1,100                 -     9,681
    Foreign
     exchange
     gain
     related to
     a short-
     term
     investment,
     net of tax
     of $9,210                -  (17,447)                -  (153,549)
    Impairment
     of goodwill              -    1,836                 -    16,158
    Change in
     tax rate                 -   (3,456)                -   (26,524)
                            ---   ------               ---   -------
      Fundamental        45,043   42,834   96   74 345,578   380,870  734  662
                         ------   ------           -------   -------
    
    (1) Amortization of Prism, EasyPay, RMT and BGS 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, 2009 and 2008

    
    
    
                                                 2009         2008
                                                 ----         ----
    Net income (USD'000)                       19,284       27,762
    Adjustments:
      Impairment of goodwill                        -        1,836
      Loss (Profit) on sale of property,
       plant and equipment (USD'000)                3           (1)
      Tax effects on above (USD'000)               (1)           -
    
    
    Net income used to calculate headline
     earnings (USD'000)                        19,286       29,597
                                               ------       ------
    
    Weighted average number of shares used
     to calculate net income per share
     basic earnings and headline earnings
     per share basic earnings ('000)           45,378       57,068
    
    Weighted average number of shares used
     to calculate net income per share
     diluted earnings and headline
     earnings per share diluted earnings
     ('000)                                    45,588       57,777
    
    Headline earnings per share:
      Basic earnings – common stock and
       linked units, in US cents                   43           52
      Diluted earnings – common stock and
       linked units, in US cents                   42           51
    
    

Six months ended December 31, 2009 and 2008

    
    
    
                                                  2009           2008
                                                  ----           ----
    Net income (USD'000)                        37,225         54,006
    Adjustments:
      Impairment of goodwill                                    1,836
      Loss (Profit) on sale of property,
       plant and equipment (USD'000)                 2              -
      Tax effects on above (USD'000)                (1)             -
    
    
    Net income used to calculate headline
     earnings (USD'000)                         37,226         55,842
                                                ------         ------
    
    Weighted average number of shares used
     to calculate net income per share
     basic earnings and headline earnings
     per share basic earnings ('000)            47,097         57,550
    
    Weighted average number of shares used
     to calculate net income per share
     diluted earnings and headline
     earnings per share diluted earnings
     ('000)                                     47,253         57,777
    
    Headline earnings per share:
      Basic earnings – common stock and
       linked units, in US cents                    79             97
      Diluted earnings – common stock and
       linked units, in US cents                    79             97
    
    

SOURCE Net 1 UEPS Technologies, Inc.