Filing identity and reporting period
The supplied filing is a Net 1 UEPS Technologies, Inc. Form 10-Q for the quarter ended March 31, 2021, covering its fiscal third quarter and first nine months of fiscal 2021. This does not match the request metadata identifying Lesaka Technologies Inc. and “2020 Q3”; verify the issuer and period before relying on this summary. Unless otherwise stated, amounts below are U.S. dollars in millions; comparative 2020 revenue figures were restated.
Financial performance
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Revenue | $28.8 vs. $34.6; down 17% in USD and 19% in ZAR | $96.3 vs. $119.7; down 20% in USD and 19% in ZAR |
| Operating loss | $(14.3) vs. $(14.2); operating-loss margin 49.6% vs. 41.1% | $(40.3) vs. $(31.1); operating-loss margin 41.8% vs. 25.9% |
| Net loss | $(6.2) vs. $(34.9) | $(39.7) vs. $(39.5) |
| Net loss per share | $(0.11) vs. $(0.61) | $(0.70) vs. $(0.69) |
| Operating cash flow | $(8.3) vs. $(4.2) | $(50.1) vs. $(18.1) |
| Investing cash flow | $18.9 vs. $183.7 | $46.2 vs. $183.7 |
Quarterly revenue weakness reflected lower prepaid airtime and hardware sales and reduced account-fee revenue. For the nine-month period, higher transaction fees partly offset those declines. Selling, general and administrative expense was essentially flat year over year for nine months, while the largely fixed cost base weighed on operating results. The quarter’s net loss was lower than the prior-year quarter, which included substantial equity-investment impairments and gains on business disposals; the nine-month net loss was broadly unchanged.
A $10.8 million quarterly and $25.9 million nine-month non-cash gain from the revaluation of MobiKwik shares helped results. Equity-accounted investment losses were $20.1 million for nine months, including $17.7 million of Finbond impairment. Interest expense fell to $2.2 million from $6.4 million for nine months, mainly due to lower borrowings, lower South African rates and reduced ATM-facility use.
Financial position and liquidity
At March 31, 2021, cash and cash equivalents were $207.8 million, with a further $19.0 million of restricted cash; combined cash, cash equivalents and restricted cash were $226.8 million. Cash and cash equivalents were $217.7 million at June 30, 2020. Total assets were $416.5 million, total liabilities $57.1 million, and equity $274.4 million; redeemable common stock was separately reported at $85.0 million.
Net cash declined by $5.7 million over nine months. Operating cash use was partly offset by investing proceeds, including the sale of Bank Frick and collections of deferred proceeds from prior disposals. The company reported $11.4 million of utilized ATM overdrafts. It also had $10.6 million of indirect and derivative facilities utilized to support guarantees and similar instruments; this is not presented as ordinary funded borrowing. Management said cash reserves and facilities were sufficient for the next 12 months and to fund the ATM network. Outstanding capital commitments were $0.1 million.
Material changes and significant items
- Revenue and related cost of goods sold for comparative periods were restated after the company identified duplicated acquiring-fee entries caused by misinterpreted system reports. The correction reduced both revenue and cost of goods sold by equal amounts and did not affect operating loss, net loss, the balance sheet or cash flows.
- The company sold its 35% Bank Frick interest for $30 million, receiving $18.6 million net at closing; $7.5 million was due in October 2021 and $3.9 million in July 2022. It recorded a $0.5 million disposal loss.
- The company continued winding down IPG, with most activities ended early in the third fiscal quarter and closure costs expected to be largely complete by fiscal year-end. It carried its Cell C investment at zero; Cell C remained in default on lending arrangements while pursuing recapitalization.
- Management reorganized reporting into Processing, Financial services and Technology segments and said the strategic focus was primarily South Africa, including exiting IPG activities.
- The company reported its disclosure controls and procedures were not effective as of March 31, 2021, because there had been insufficient time to assess remediation of a previously reported material weakness in internal control over financial reporting. Management continued additional procedures and manual mitigating controls.
Outlook, commentary and risks
Management said South African operations largely operated normally in the quarter, but warned that COVID-19 effects remained uncertain, including the possibility of renewed restrictions. Insurance benefit claims increased during the second wave; management said loan origination had resumed normally and collections had not deteriorated. South African financial-services customer additions were below expectations: quarterly gross additions were approximately 52,000 and net additions 27,000; about half of gross additions had become active. Marketing initiatives had been delayed, with launch expected during the fourth quarter and an anticipated acceleration in customer growth.
Management cited lower ATM transaction volumes than the prior quarter and seasonal softness in business processing. It expected limited fourth-quarter capital spending on vehicles, ATMs and the South African branch network. No quantified revenue or earnings guidance was provided. Risks include COVID-19 and vaccination delays, foreign-exchange movements (the company earns most revenue in ZAR but reports in USD), lending and receivable credit losses, insurance claims, equity-investment valuation and liquidity risks. Guarantees outstanding had a maximum potential payment of approximately $10.6 million; management had not recognized a related balance-sheet obligation.
Leadership changes included the appointment of Lincoln Mali as CEO of Net1 South Africa effective May 1, 2021, and an ongoing search for a permanent Group CEO; Alex M.R. Smith remained interim Group CEO. The filing also disclosed the resignation of a South African managing director and a former Group CEO’s consulting services through May 31, 2021.
Key facts for investors to verify
- Confirm that this Net1 UEPS filing—not a Lesaka Technologies filing—is the intended issuer and that March 31, 2021 is the intended reporting period.
- Review the restatement disclosures and the status and scope of remediation of the material weakness in financial reporting controls.
- Assess whether revenue trends, segment losses and cash burn improve, particularly in Processing and Financial services.
- Check collection and repayment of the deferred Bank Frick sale proceeds and the pledged-share security supporting them.
- Monitor the MobiKwik valuation, Finbond investment impairment exposure, Cell C recapitalization and IPG wind-down costs.
- Track customer activation and income-transfer delays, insurance claims, credit quality and South African pandemic restrictions.