Shares of Net 1 UEPS Technologies Inc. (NASDAQ: UEPS) slumped Thursday after the payment solutions and transaction processing services provider reported preliminary fourth-quarter results. Both revenue and earnings declined as the company completed what it called "a turbulent year." The stock was down about 16.6% at 11:15 a.m. EDT.
Net 1 reported fourth-quarter revenue of $149.2 million, down 4% year over year in U.S. dollars and down 16% year over year in South African Rand. In its earnings release, the company explained some of the decline: "We achieved this result despite the deferral of significant revenue related to Q4 activities under our SASSA contract, until we receive pricing confirmation from the Constitutional Court."
Image source: Getty Images.
Net 1 was awarded its contract with the South African Social Security Agency, or SASSA, in 2012. CPS revenue plunged 81% in the fourth quarter due to the phase-out period of the SASSA contract, which is scheduled to terminate on Sept. 30.
Fundamental earnings per share , a non-GAAP figure, came in at $0.22, down from $0.41 in the prior-year period. A significant loss in the CPS business due to the phase-out of the SASSA contract contributed to the earnings decline.
"While many investors have been concerned that the end of this relationship would severely impact our other South African businesses, I can happily point to our solid Q4 we achieved despite a nearly 80% decline at CPS, as well as our guidance for fiscal 2019," said Net 1 CEO Herman Kotze. "Furthermore, the elimination of the negative impact that this contract has had on our business, management's time and shareholder value, should provide a meaningful lift to product refinement and R&D going forward."
Net 1 expects to produce fundamental EPS of at least $1.05 in fiscal year 2019, with no contribution from CPS. That's down from $2 in fiscal year 2018.
With profits plunging and guidance calling for an even bigger decline next year, the market punished the stock. Net 1 will need to show that it can return to growth absent the SASSA contract over the next few years.
10 stocks we like better than Net1 UEPS Technologies
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Net1 UEPS Technologies wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of August 6, 2018
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.