33200000000500000000.0010.001Accelerated Filer--06-302021Q10001041514YesYes0.11991false
Derived from audited financial statements.
Refer to Note 20 for discontinued operations disclosures
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from

 

To

 

 

Commission file number: 000-31203

 

NET 1 UEPS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

Florida

 

 

 

98-0171860

(State or other jurisdiction

 

(IRS Employer

of incorporation or organization)

 

 

 

Identification No.)

 

 

President Place, 4 Floor, Cnr. Jan Smuts Avenue and Bolton Road,

Rosebank, Johannesburg, 2196, South Africa

(Address of principal executive offices, including zip code)

 

Registrant’s telephone number, including area code: 27-11-343-2000

 

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

 

Title of each class

Trading Symbol(s)

Name of each exchange

on which registered

Common stock, par value $0.001 per share

UEPS

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

 

 


 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO

 

As of November 3, 2020 (the latest practicable date), 56,638,725 shares of the registrant’s common stock, par value $0.001 per share, net of treasury shares, were outstanding.

 

 


Form 10-Q

NET 1 UEPS TECHNOLOGIES, INC

Table of Contents

 

 

Page No.

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2020 and June 30, 2020

2

 

Unaudited Condensed Consolidated Statements of Operations for the three months ended September 30, 2020 and 2019

3

 

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended September 30, 2020 and 2019

4

 

Unaudited Condensed Consolidated Statement of Changes in Equity for the three months ended September 30, 2020 and 2019

5

 

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2020 and 2019

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

45

Item 4.

Controls and Procedures

45

Part II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

46

Item 6.

Exhibits

46

Signatures

 

46

EXHIBIT 10.28

 

 

EXHIBIT 10.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1


Part I. Financial information

Item 1. Financial Statements

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Balance Sheets

 

 

 

 

 

September 30,

 

June 30,

 

 

 

 

 

 

2020

 

2020(A)

 

 

 

 

 

 

(In thousands, except share data)

 

 

 

 

 

ASSETS

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

$

209,185

 

$

217,671

 

Restricted cash related to ATM funding (Note 8)

 

6,726

 

 

14,814

 

Accounts receivable, net and other receivables (Note 2)

 

28,314

 

 

43,068

 

Finance loans receivable, net (Note 2)

 

20,508

 

 

15,879

 

Inventory (Note 3)

 

18,084

 

 

19,860

 

 

Total current assets before settlement assets

 

282,817

 

 

311,292

 

 

 

Settlement assets

 

3,993

 

 

8,014

 

 

 

 

Total current assets

 

286,810

 

 

319,306

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - September: $31,182 June: $29,524

 

6,286

 

 

6,656

OPERATING LEASE RIGHT-OF-USE (Note 16)

 

4,848

 

 

5,395

EQUITY-ACCOUNTED INVESTMENTS (Note 5)

 

50,367

 

 

65,836

GOODWILL (Note 6)

 

24,865

 

 

24,169

INTANGIBLE ASSETS, NET (Note 6)

 

548

 

 

612

DEFERRED INCOME TAXES

 

288

 

 

358

OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and 7)

 

30,172

 

 

31,346

TOTAL ASSETS

 

404,184

 

 

453,678

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Short-term credit facilities for ATM funding (Note 8)

 

6,726

 

 

14,814

 

Accounts payable

 

5,213

 

 

6,287

 

Other payables (Note 9)

 

25,242

 

 

23,779

 

Operating lease liability - current (Note 16)

 

1,921

 

 

2,251

 

Income taxes payable

 

1,298

 

 

16,157

 

 

Total current liabilities before settlement obligations

 

40,400

 

 

63,288

 

 

 

Settlement obligations

 

3,993

 

 

8,015

 

 

 

 

Total current liabilities

 

44,393

 

 

71,303

DEFERRED INCOME TAXES

 

91

 

 

1,859

OPERATING LEASE LIABILITY - LONG TERM (Note 16)

 

3,105

 

 

3,312

OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7)

 

2,074

 

 

2,012

TOTAL LIABILITIES

 

49,663

 

 

78,486

REDEEMABLE COMMON STOCK

 

84,979

 

 

84,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

COMMON STOCK (Note 10)

 

 

 

 

 

 

Authorized: 200,000,000 with $0.001 par value;

 

 

 

 

 

 

Issued and outstanding shares, net of treasury - September: 56,638,725 June: 57,118,925

 

80

 

 

80

 

 

 

 

 

 

 

 

 

 

 

PREFERRED STOCK

 

 

 

 

 

 

Authorized shares: 50,000,000 with $0.001 par value;

 

 

 

 

 

 

Issued and outstanding shares, net of treasury: September: - June: -

 

-

 

 

-

ADDITIONAL PAID-IN-CAPITAL

 

301,946

 

 

301,489

TREASURY SHARES, AT COST: September: 24,891,292 June: 24,891,292

 

(286,951)

 

 

(286,951)

ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 11)

 

(161,245)

 

 

(169,075)

RETAINED EARNINGS

 

415,712

 

 

444,670

TOTAL NET1 EQUITY

 

269,542

 

 

290,213

NON-CONTROLLING INTEREST

 

-

 

 

-

TOTAL EQUITY

 

269,542

 

 

290,213

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY

$

404,184

 

$

453,678

 

 

 

 

 

 

 

 

 

 

 

 

(A) – Derived from audited financial statements

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

2


 

 

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Operations

 

 

 

 

 

Three months ended

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

2020

 

 

2019(A)

 

 

 

 

 

 

 

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

REVENUE (Note 15)

 

$

37,113

 

$

47,938

 

 

 

 

 

 

 

 

 

 

 

EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold, IT processing, servicing and support

 

 

28,437

 

 

32,428

 

Selling, general and administration

 

 

18,528

 

 

20,622

 

Depreciation and amortization

 

 

923

 

 

1,324

 

 

 

 

 

 

 

 

 

 

 

OPERATING LOSS

 

 

(10,775)

 

 

(6,436)

 

 

 

 

 

 

 

 

 

 

 

INTEREST INCOME

 

 

611

 

 

363

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

747

 

 

1,347

 

 

 

 

 

 

 

 

 

 

 

LOSS BEFORE INCOME TAX (BENEFIT) EXPENSE

 

 

(10,911)

 

 

(7,420)

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX (BENEFIT) EXPENSE (Note 18)

 

 

(1,090)

 

 

970

 

 

 

 

 

 

 

 

 

 

 

NET LOSS BEFORE (LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS

 

 

(9,821)

 

 

(8,390)

 

 

 

 

 

 

 

 

 

 

 

(LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS (Note 5)

 

 

(19,137)

 

 

1,063

 

 

 

 

 

 

 

 

 

 

 

NET LOSS FROM CONTINUING OPERATIONS

 

 

(28,958)

 

 

(7,327)

 

 

 

 

 

 

 

 

 

 

 

NET INCOME FROM DISCONTINUED OPERATIONS (Note 20)

 

 

-

 

 

2,935

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

 

(28,958)

 

 

(4,392)

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS) INCOME ATTRIBUTABLE TO NET1

 

 

(28,958)

 

 

(4,392)

 

Continuing

 

 

(28,958)

 

 

(7,327)

 

Discontinued

 

$

-

 

$

2,935

 

 

 

 

 

 

 

 

 

 

 

Net (loss) earnings per share, in United States dollars (Note 13):

 

 

 

 

 

 

Basic (loss) earnings attributable to Net1 shareholders

 

$

(0.51)

 

$

(0.08)

 

Continuing

 

$

(0.51)

 

$

(0.13)

 

Discontinued

 

$

-

 

$

0.05

Diluted (loss) earnings attributable to Net1 shareholders

 

$

(0.51)

 

$

(0.08)

 

Continuing

 

$

(0.51)

 

$

(0.13)

 

Discontinued

 

$

-

 

$

0.05

 

 

 

 

 

 

 

 

 

 

 

(A) Refer to Note 20 for discontinued operations disclosures

See Notes to Unaudited Condensed Consolidated Financial Statements

 

3


 

 

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income

 

 

 

 

 

 

Three months ended

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2020

 

2019

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(28,958)

 

$

(4,392)

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of taxes

 

 

 

 

 

 

Movement in foreign currency translation reserve

 

6,142

 

 

(18,085)

 

Movement in foreign currency translation reserve related to equity-accounted investments

 

1,688

 

 

2,718

 

 

Total other comprehensive income (loss), net of taxes

 

7,830

 

 

(15,367)

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

(21,128)

 

 

(19,759)

 

 

 

 

Add comprehensive loss attributable to non-controlling interest

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss attributable to Net1

$

(21,128)

 

$

(19,759)

 

 

 

 

 

 

 

 

 

 

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

4


 

 

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Changes in Equity

 

 

Net 1 UEPS Technologies, Inc. Shareholders

 

 

 

 

 

 

 

 

Number of Shares

 

Amount

 

Number of Treasury Shares

 

Treasury Shares

 

Number of shares, net of treasury

 

Additional Paid-In Capital

 

Retained Earnings

 

Accumulated other comprehensive loss

 

Total Net1 Equity

 

Non-controlling Interest

 

Total

 

Redeemable common stock

 

 

For the three months ended September 30, 2019 (dollar amounts in thousands)

 

Balance – July 1, 2019

81,459,717

$

80

 

(24,891,292)

$

(286,951)

 

56,568,425

$

276,997

$

523,028

$

(195,812)

$

317,342

$

-

$

317,342

$

107,672

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation charge (Note 12)

 

 

 

 

 

 

 

 

 

 

387

 

 

 

 

 

387

 

 

 

387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation charge related to equity accounted investment (Note 5)

 

 

 

 

 

 

 

 

 

 

71

 

 

 

 

 

71

 

 

 

71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

(4,392)

 

 

 

(4,392)

 

-

 

(4,392)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,367)

 

(15,367)

 

-

 

(15,367)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance – September 30, 2019

81,459,717

$

80

 

(24,891,292)

$

(286,951)

 

56,568,425

$

277,455

$

518,636

$

(211,179)

$

298,041

$

-

$

298,041

$

107,672

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


 

 

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Changes in Equity

 

 

Net 1 UEPS Technologies, Inc. Shareholders

 

 

 

 

 

 

 

 

Number of Shares

 

Amount

 

Number of Treasury Shares

 

Treasury Shares

 

Number of shares, net of treasury

 

Additional Paid-In Capital

 

Retained Earnings

 

Accumulated other comprehensive loss

 

Total Net1 Equity

 

Non-controlling Interest

 

Total

 

Redeemable common stock

 

 

For the three months ended September 30, 2020 (dollar amounts in thousands)

 

Balance – July 1, 2020

82,010,217

$

80

 

(24,891,292)

$

(286,951)

 

57,118,925

$

301,489

$

444,670

$

(169,075)

$

290,213

$

-

$

290,213

$

84,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation charge (Note 12)

 

 

 

 

 

 

 

 

 

 

682

 

 

 

 

 

682

 

 

 

682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reversal of stock-based compensation charge (Note 12)

(480,200)

 

 

 

 

 

 

 

(480,200)

 

(283)

 

 

 

 

 

(283)

 

 

 

(283)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation charge related to equity-accounted investment (Note 5)

 

 

 

 

 

 

 

 

 

 

(40)

 

 

 

 

 

(40)

 

 

 

(40)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from disgorgement of shareholders' short-swing profits (Note 21)

 

 

 

 

 

 

 

 

 

 

98

 

 

 

 

 

98

 

 

 

98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

(28,958)

 

 

 

(28,958)

 

-

 

(28,958)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,830

 

7,830

 

-

 

7,830

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance – September 30, 2020

81,530,017

$

80

 

(24,891,292)

$

(286,951)

 

56,638,725

$

301,946

$

415,712

$

(161,245)

$

269,542

$

-

$

269,542

$

84,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

6


 

 

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Cash Flows

 

 

 

Three months ended

 

 

 

 

September 30,

 

 

 

 

2020

 

 

2019(A)

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

$

(28,958)

 

$

(4,392)

 

Depreciation and amortization

 

923

 

 

4,765

 

Movement in allowance for doubtful accounts receivable

 

514

 

 

512

 

Loss (Earnings) from equity-accounted investments (Note 5)

 

19,137

 

 

(1,063)

 

Movement in allowance for doubtful loans to equity-accounted investments

 

78

 

 

-

 

Fair value adjustment related to financial liabilities

 

886

 

 

87

 

Interest payable

 

(63)

 

 

632

 

Profit on disposal of property, plant and equipment

 

(10)

 

 

(154)

 

Stock-based compensation charge (Note 12)

 

399

 

 

387

 

Dividends received from equity accounted investments

 

57

 

 

1,068

 

Increase in accounts receivable and finance loans receivable

 

(8,115)

 

 

(5,666)

 

Decrease (Increase) in inventory

 

2,359

 

 

(12,313)

 

Decrease in accounts payable and other payables

 

(415)

 

 

(3,396)

 

(Decrease) Increase in taxes payable

 

(14,917)

 

 

1,288

 

Decrease in deferred taxes

 

(1,755)

 

 

(88)

 

 

Net cash used in operating activities

 

(29,880)

 

 

(18,333)

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Capital expenditures

 

(275)

 

 

(2,624)

Proceeds from disposal of property, plant and equipment

 

16

 

 

213

Proceeds from disposal of Net1 Korea (Note 2)

 

20,114

 

 

-

Proceeds from disposal of DNI as equity-accounted investment (Note 2)

 

329

 

 

-

Loan to equity-accounted investment (Note 5)

 

(78)

 

 

-

Investment in equity-accounted investments (Note 5)

 

-

 

 

(1,250)

Repayment of loans by equity-accounted investments

 

-

 

 

4,268

Net change in settlement assets

 

4,068

 

 

(13,509)

 

Net cash provided by (used in) investing activities

 

24,174

 

 

(12,902)

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from bank overdraft (Note 8)

 

69,146

 

 

183,674

Repayment of bank overdraft (Note 8)

 

(76,850)