Lesaka (LSAK)

Dhruv Chopra Head of Investor Relations
Herman Kotze Chief Executive Officer and Chief Financial Officer
Call transcript
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Good day, ladies and gentlemen, and welcome to the Net 1 UEPS First Quarter 2018 Earnings Call. All participants are currently in listen-only mode. And there will be an opportunity for you to ask questions later during the conference. [Operator Instructions] Please also note that this call is being recorded. I would now like to turn the conference over to Dhruv Chopra. sir. ahead, go Please

Dhruv Chopra

Welcome me first is on Herman Chris. earnings our fiscal call. Kotze. With the to you, quarter our XXXX CEO, Thank call today

available a release, financial XX-Q press Investor and Our presentation website, Form are on ir.netX.com. our Relations supplementary

during our reminder, will we Form risks regarding press I release call, statements the cautionary and be look the with you and to this at forward-looking forward-looking uncertainties language and a As making ask contained statements. associated in XX-Q

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Herman, we I I prepared Before over to after have remarks. question-and-answer will reiterate our hand session want just a the call to that

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Herman Kotze

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enabled pay flow the in off of Korea full to during doubled than QX a holding paying XXXX, dividend has XXXX, in in Korean also debt the company. cash to and while Our us more

Before to the allocation want I for conclude, I business. address capital the

investments of the sizeable on XX our the Given for at we enough investments time. have to past do not months, and have we plates further therefore, made XX we anticipate the this multitude believe next over on any work months,

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go the but Further to of number first will Day with in opening the a actively past on you. feasibility to of Europe and the save follow, meet up basis. our regular that performance the closing I York for to December forward then share on in in and back detail, and and over the U.S., will our We hosting South will provide Investor opportunity evaluate more guidance details now a repurchases Q&A, I Africa appreciate Dhruv, over over however will it circle need and and months X. shareholders to the the look few New financial Dhruv please date. remarks before metrics

Dhruv Chopra

year-ago. a Herman. you, trends discuss quarter for operating will and Thank results within of segments compared key our to the the I XXXX first

exchange a of currency. year-over-year continue U.S. by the once exchange in impacted our results a over and ZAR positively be rates in $XXX has XXXX volatile Revenue XX.XX which XXXX, ZAR X% based dollar and constant year-ago, in to dollars compared was again million weeks. down QX past QX X% approximately few weakened average was X%. to rand/dollar rate The For XX.X rand/dollar

Our fundamental per QX relative to share XXXX. earnings decreased XX%

of increased increased Operating processing an the usage and the African impact of of due salary employees inter-segment ATMs, weighted million to diluted our in decreased increases year. increased usage parties, higher higher October X% XXXX a ATMs, of the processing and of transaction purchased as shares million XXXX, revenue basis. in charges, EPE the services increase revenue QX a modest in X result in social as revenue, By inter-segment and fully late - a processing a distributed. XXXX increase grants transaction the U.S. shares, and repurchase X% transaction to by number grants was million XXXX. as up X.X transaction in from result South QX primarily in share goods the reported than Our increased primarily in our due activities, a share income of number result of for social of in increases EPE offset In African shares offset XX% last million QX was increase third segment count to inter-segment in partially sale approximately and by $XX our of currency of transaction partially Largely rand, dollars activities welfare annual modest on a year-over-year XXXX, segment, increase revenue and QX South higher distributed. XX.X welfare in of constant granted

XXXX was and margin XXXX XX% Our respectively. QX income operating for XX%, and

and was increases services inter-segment margin increases purchased parties. third charges, goods adversely XXXX fiscal by Our the in and annual salary from impacted higher

in to be during South range during to and fiscal segment to The pressures costs new expansion our XX%, execute by ongoing XXXX was and XXXX continued was continue base operating XXXX. on it income KSNET's margins its in be South African South our offset cost by margin affected expect revenue, We grew mid into processing rollout in ATMs the of respectively. Operating income incurred our and of XXXX, XX% from largely due by margin inflationary offset low will in Korea revenue to QX regulatory in eliminated Africa. during KSNET, was on and Masterpayment an changes TransactXX. decrease XXXX, continue XXXX. generated increase in positive compared as increased a million Inter-segment to by India, lower which X% for of down meaningful Segment to processing staff QX to processing impact primarily have was partially revenue International in - to due the a during markets, activities on transaction XX% QX lower Masterpayment revenue its moderately losses revenue are ongoing $XX at transaction complement impact and on results. segment QX contribution TXX. XXXX, QX but Operating contributions by consolidation, XXXX the

For to margin XXXX, year. US$XX.X million, to EBITDA in XX% from revenue won last Korean QX XX% KSNET's while declined X% declined

impact we XXs continue mid and continue impact growth expect low EBITDA to XXXX. to fiscal in to the XXXX. changes to adverse reported return the Herman we revenue to in in As our the have in expect in regulations XXXX results Accordingly, of Korean the stabilize stated, an margin fiscal on to

CapEx We fiscal to margins in depreciation income EBITDA which continue less pronounced margins. the to lower on operating forward, result on will much in expect be impact so remain going charges will than lower XXXX,

Europe $XX capital book by And working XXXX. of total XXXX, as has financing $XX book since September June was the million. grown approximately approximately Our million in

We Frick. have funded by provided facilities Bank this growth through the of utilization

in book these We exploring offering, expect with months. opportunities order successful exposure this would Frick six to are to Bank maximize but currently If return to decline the our the in are we we three the in book. in lower negotiations, with next to

arrangement However, we would still in future. generate income from the the

and an businesses other million XXXX intersegment by increased $XX airtime constant basis. as ad prepaid in and in fewer revenues. inclusion our offset terminal QX to currency hoc technologies sales QX revenue well lower XXXX, compared primarily to increase partially services in sales, XX% rand, volumes insurance value-added revenue and was as due on decreased the financial down Our In applied a segment

of approximately comprising at gross deferred and at of QX lending ZAR million ZAR of service end XXX the capital out fees to book QX XXX compared million XXXX. end the XXXX was Our

branch of believe EPE growth we along infrastructures. expansion the and million accounts. services October to ATM commensurate our We financial At with offerings X.XX will approximately sustain XX, had our continue segment's

primarily The from continues an sales, business Our than the and ad sold sustain insurance revenues revenues terminal services operating affected during at more well in increased the low services XX% Africa. the purchased hoc was and due XXX,XXX expenditures and rate to segment, income the increases for momentum our South businesses fewer XXXX modest insurance margin inter-segment primarily respectively, in the goods to has relative the of segment XX% offset third-parties fewer dollar related margin fees. this XXXX, segment Operating and by improved increase contributions increases continue by in of in and as of eliminations of to transaction SmartLife and salary life prepaid have QX margin financial product business, increased the annual XXXX. its and will policies adoption we've various products. to October sales end directors' various from denominated due our Corporate and as and and higher U.S. be

charges. for expenses included of a of compensation million $X.X QX XXXX corporate stock-based for reversal Our

$X months year. decreased the long-term XXXX, six quarter. average net two XXXX average expense We in million, because in QX rate lower we million, South therefore after offset recognized the a Frick with generated tax interest XX% $X.X include somewhat last months accounted six our the our South income expect under to to to our the at and to from Cell be $X.X of expect a result obtained on Extrapolating Bank results for for by investments. the August. only net $XX to months' debt for accretive higher XXXX million lower earnings to primarily contributed of driven side surplus results. quarter in Finbond in million interest balance of and from of approximately foregone. QX balances as the provided fund cash fiscal investments compared our interest acquired June received investment And offset African C, Korea. first and interest to DNI impact October $X from XXXX, Frick QX interest onward achieved million fourth of in used to processing-terminals equity investment its on JSE, Frick any XXXX. given listed which Korea. factored already at XXXX to a August the XXXX during October October debt interest expenditures the of moderately we the million this have $X.X income and Bank approximately on six reserves. South And acquisition XXXX, we cash a our million $X.X during XXXX due QX fewer utilizing million months had XXXX during to Finbond June XXXX, we reported Bank our by primarily transaction end approximately Capital income contribution were fiscal in and decreased $X.X guidance earnings before fund Our in lower payment by for Korean of loan we In the a XXXX, our income we and the impact XXXX, we partially interest million QX closed respectively, into the XXXX $X.X for provided And is facility to -

by be than from $XXX We lower and Bank expect in of Francs and repayment At generated scheduled expenditures converted XXXX, the dollar our were expenditures, balances African South investments partially was offset decrease consideration Cell XXXX most XXXX. and businesses. our in in balances of in to mid-September significantly to We quarterly of debt due XXXX transaction continue long-term cash the settle XX, U.S. June cash to September to related to October C core XXXX. Frick capital capital was to which DNI our in Swiss primarily our cash some the by in our early our XXXX order investment reserves million,

offering We during in working Bank Frick capital from Europe also utilized quarter. short-term our grow to our the facilities financing

investments, $XX our group's Apart million facility As out of business XX, $XX our of generated capital utilizing we had Frick. September from fund we utilized reserves lending Bank continue the and activities. operations cash to approximately these from and arrangements, XXXX, off million cash our from

outstanding on and quantum XX%. balance approximately around XXX.X October are to for during is briefly principal multiplied payments margin our investments. the to the In African which ZAR generated the the interest fiscal JIBAR One, facilities based due the I fiscal growth our expect approximately rate, our XXXX, of period, towards at each of the outstanding the XXXX the to the in of remainder equates cash current to repayment outflows million, the by related to which X.XX%, to summarize our fund interest plus And, due and at payable repayments We South end of in generated provides two, quarter. the facilities settle utilize principal South we of interest are interest will million to full. internal our our Korea quarterly in facilities rates, quarterly XXXX. activities. us for long-term lending surplus expansion which facilities these US$XX.X South Korea is South The with At African interest cash surplus repayment and fiscal cash flexibility utilized reserves of of of again greater international a this in cash under point, like majority is go

Our XXXX tax XX% effective XX% was rate for compared last QX to year.

Our QX higher XXXX and the non-deductible expenditure long-term statutory facility. on a including South African interest our result was expenses of effective African transaction-related South than rate rate non-deductible as

for the We XXXX be XX% continue range. to expect our rate to in to effective XX%

Our closing now was for XXXX shares September Q&A. the XXXX, count was which the was impact up open the to QX Herman QX, weighted weighted XX.X was share before million of in well as QX we count for call full inclusion only impacted remarks, due the million of our to XXXX IFC share while XX - I Compared back sold partially X actual share shares, issued share XX.X higher million weighted which count it our Herman? will as hand only to with our shares. XXXX, to the in count. million shares XX partially

Herman Kotze

Dhruv. To conclude guidance, said what on Thanks, we reiterating last quarter.

fiscal be funding accounted DNI investments earnings, fiscal least equity at our earnings be at, a We offset by basis anticipate accretive XXXX. on combined per to but XXXX dilutive the share and our fundamental fiscal We therefore for C our XXXX remain fundamental earnings, to $X.XX. partially Cell to DNI's expect from of to

dollar, no New and With in tax a questions or ZAR your unable Net shares to XX%. a as this of we We of between million constant next of team. that, CPS York XX.X related at count our in XX.XX also onset, look introduce of any assumes and units, of the any many disruption shareholders to rate currency to time. XX% questions. the expanded mentioned guidance SASSA take at forward take Dhruv But to to management our are month will you X gladly share base Our business significant key a to meeting the


Ladies very you and [Operator appears much, Thank Instructions] no that we questions. it sir. gentlemen, have

conference conclude disconnect you this We lines. now will your And call. then may