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

JOHANNESBURG Feb. 3, 2011 December 31, 2010 $89.0 million $9.9 million $19.3 million December 31, 2009 $0.22 $0.42 $0.39 $0.51

$153.3 million $0.38 $0.79 $0.75 $0.96

Summary Financial Metrics

Three months ended December 31,

2010

2009

% change
in USD

% change
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,

2010

2009

% change
in USD

% change
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:
  • Favorable impact from the weakness of the US dollar:
  • Increased revenue from KSNET at lower operating margins, before acquired intangible asset amortization, than the Company’s legacy business: October 2010
  • Increased transaction volumes at EasyPay:
  • Increased revenue from MediKredit and FIRHST at lower operating margins than other SA transaction-based activity business:
  • Iraq Iraq
  • Lower revenues and margins from hardware, software and related technology sales segment:
  • Intangible asset amortization related to acquisitions: $2.0 million
  • Lower interest income and increased interest expense resulting from KSNET acquisition: $1.7 million
  • Non-recurring items included in selling, general and administration expense: $2.7 million $1.8 million

Comments and Outlook

Serge Belamant January 2011 September 30, 2011 South Africa

$1.50 Herman Kotze

Results of Operations

www.net1.com

   SA transaction-based activities

$46.6 million

   International transaction-based activities

Iraq $17 million November 1, 2010

   Smart card accounts

$8.4 million

   Financial services

$1.6 million

   Hardware, software and related technology sales

$15.4 million

   Cash flow and liquidity

December 31, 2010 $71 million $154 million June 30, 2010 $8.1 million $13.8 million July 1, 2010 $31 million $16 million $4.0 million $0.7 million October 29, 2010 $240 million $124 million $116 million $100 million

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

February 4, 2011 8:00 Eastern Time Canada South Africa www.net1.com 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.

South Africa Ghana Iraq Uzbekistan

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.

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

$

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