Dhruv Chopra Head of IR
Herman Kotzé CEO
Alex Smith CFO
Allen Klee Maxim Group
Tom Zeifang Lucrum
Call transcript
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Good day, ladies and gentlemen, and welcome to the Net 1 Quarter Four Earnings Conference Call. All participants will be listen-only mode. [Operator Instructions] Please note that this call is being recorded. I'll now hand the conference over to Mr. Dhruv Chopra. sir. ahead, go Please

Dhruv Chopra

Welcome on fourth our the our Kotzé; Irene. call. CEO, XXXX With and Smith. Alex me call CFO, to you, quarter our earnings Herman Thank today is

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

or to Form weeks expect a couple XX-K We in file of our sooner.

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

In certain directly addition, these we a be during this most call, of GAAP comparable we have non-GAAP will using non-GAAP reconciliation the and financial to measures. measures measures, provided

results discuss African of press in South our our assist a release Rand, in will Rand non-GAAP in business. results trends operations analyze underlying of understanding the to in is We our investors our which measure. We

South fluctuations by U.S. you dollar be significantly As affected the Rand. results can the between the know, African currency company's and

We will following remarks. have prepared session a Q&A our

So over to turn Herman. the call with me that, let

Herman Kotzé

Thank and to shareholders. our of good you, morning, all afternoon Good Dhruv.

We SASSA, days be days expiration to are exact. XX to our contract counting eagerly down of the with the

to XX%. that sustainable, Despite inclusion Africa expand processing conservative our South offerings and and South and of beneficiaries positioning businesses underserved paid has our CPS allegations, African been very strategy past political internationally. financial during transaction as are fintech further shareholders. differentiated social we the to millions competitors the remain and its fueling XXXX and company obligations of We revenue have revenues, to by of SASSA by challenges exit While and proud years, on our the to mention to QX to Concord South reduction hostile our sometimes upliftment competitive, the are over on media demonstrated Africans achievements X.X the approximately our declined in and unfounded they NGOs track this the and recognition policies not number distractive

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Alex Smith

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

average dollar was XX.XX down Revenue down currency. but XX%. For ago ZAR QX of rate of QX XXXX X% XX.XX U.S. XXXX, our ZAR in approximately our constant year and compared positively by dollars a in million $XXX dollar results XX% impacted year-over-year rand in exchange was to

XXXX to by on C constant-currency share in and basis per include QX Cell a USD our X.XX earnings XX% fundamental relative Our a the decrease tax-affected decreased investment. fair of value

share earnings fundamental $X.XX was the in adjustment, value fair the fourth of per Excluding XXXX. quarter

improvement we will be amount this of to returns in last any last offset included group, included in we've believe due And it significant in caused quarter the GAAP deduction operating to fiscal C market accounting appropriate for the lower company's investment is this of for assessment announcement results performance. earnings as the be performance guidance. multiples of in Cell new earnings quarter, it the reflected in their from The reflected partially indicated our underlying by and As adjustment in week. included in fundamental because in in peer the decline this XXXX, generated the by value is

with and in pleased are XX, for the showed months in evident Cell XXXX, We which announced progress continued profitability. subscriber and June improvements the C's X ended recently revenue growth results

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in management's plan around to ability potential in is a planning confident business underway. on IPO XXXX and deliver are We the

in segment, carrying impacted resulting fair required from the Our holding purchase than the to earned, the to revenue was this lower value the a in million quarterly by compared of in basis. grants, order number date a noncash contract Court of loss billed of processing have adversely equity dollars recommendation. being income holding U.S. of a constant-currency due as lower fourth X% price The XXXX, transaction have record and is social rate in reported $XX was measurement value XXXX the loss. as we on In a on results XXXX. old as primarily of the our treasury's revenue short, African million, By Constitutional on and of acquisition a at of segment South also the welfare quarter XX% the performed the issued XX% were fourth $X result currently were an not DNI allocation yet which of national June the remeasurement decrease to quarter we acquisition decline significant of as down XX, of the preliminary price

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not Constitutional propose activities. the to Constitutional at part treasury on a the be losses the XX.XX, the that in application the August rectifying While XXst quarter. filed in first XX.XX on further. the severely for recognized during aggressive our inaction a of excluding to price have migration fiscal did XXXX this an CPS increase therefore, prejudices The CPS. earlier. and of by ex income we was VAT recommendation resulting result as revenues, incurred to transaction quarter offset only EPE-related any higher primarily resulting increase increased or decline the old Court with partially the decreased, segment the CPS processing revenue intersegment you given and we Court, African discussed has monthly their of post beneficiaries contract to of accepted CPS to Operating transition and revenue We've the by of the revenue a an fixed ZAR urgent Without efficiently considerable ZAR instituting price, court the price loss South increase expect office,

margin Our operating XX.X%, X.X% of income and the fourth segment and XXXX quarter respectively. XXXX was for

order the fiscal expect margins Given depressed last which contract. by CPS margins of SASSA for of the will currently the await rationalize the quarter we to of transaction compared $XX.X million with Group. the quarter XXXX end X% quarter of that Court, the $X.X of concluded to contract, be International the International infrastructure segment quarter was the of higher fourth fourth as currently down transaction results for allowance Once loan we as fourth the during the our income we to the Constitutional generated processing dollar-based full a XXXX, from first from due we've no we given XXXX levels structure, SASSA than as XXXX, revenue the required cost the Payments in maintain because our longer receivable. required we contract. a expect XXXX, South these to Operating coinciding remain limited year's lower visibility, quarter African finance contribution doubtful recover to can million our was fourth included see processing

of lower them XXXX contribution is that by XXXX fourth XXXX This it sequentially compared lower year, X.X%, the as Korea the XX% than the the other last fees the respectively. and though the of Korean businesses, a quarter XX% under of in margin Group. fourth and international units and of comparative in quarter equivalent fourth broadly and charged improve regulations XX% adversely XXXX, from the consolidate may on have transactions the governing last to million in Operating compared period International due lower KSNET we to generated allowance, the Korean restructured was in be was flat quarter Won third over $XX.X card as been discussed as various the X.X% revenues in to a quarters for reduction XXXX. changes EBITDA from prior quarter margin year-over-year this to was operating while Excluding declined X the result the amounted in South quarter to impacted income year to the the and Payments regulations, earlier. income did

sequential an for to effect impact XXXX. have We But have around. on turning remainder expect trends businesses continue of a shown quarterly adverse the this results to basis, on results the calendar reported

the had is we fiscal flow with Looking seeing in fourth Payments are XXXX. International to in as companies quarter we business. the cash although first lower the improve half performance transaction for quarter of a the CapEx calendar XXXX the forward, of the South landscape in free strong out And the fourth from in of the Group dropping seen a off VAN returned to expect XXXX, remains challenging level challenging The a as the XXXX. quarter revenue, this its capital incurring the the which IPG impacted value been particular, in as in second quarter dissipated up of of the quarter. fiscal levels had in of on we most seen these restructuring currencies we costs pick in seized which regard, given margins third In some the the XXXX. experienced of focused quarter working of third the elimination also cryptocurrency for in various higher operations, finance well processing result, operating volumes Korea. decline regulatory generation the has

and segment business primarily lower revenue services, and XX% other of in down applied to on the growth fewer intersegment X% operating technology criteria decreased Our applied of Financial fees down constant-currency fewer basis. dollar in by value-added with financial compared fourth revenues, offset $XX.X million our a due XXXX account revenue fourth prepaid as technology income charged in terms customers. we and was U.S. and partially monthly to and lending and quarter our insurance the tightened airtime quarter in lending volumes inclusion inclusion XXXX, products and

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expect accretive going We margins to segment DNI's forward. inclusion to be

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our amortizing XX.X acquisition-related quarter we our of income expect as a commence rate XXXX DNI result, We exchange ZAR $X using or to expense include million the in will an of first and million intangibles fiscal XXXX operating each fiscal approximately quarter.

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Frick forward. to earnings equity Bank expect to provide a going positive We contribution

vehicle quarter As via XXXX Capital method. contribution equity the to and through it's XXXX we last for instead of of and Korea, $X.X in consolidation by a in the in and an now of to recognize DNI, million our processing fiscal South Africa. $X.X control fewer XXXX million, due acquisition the partially earnings, ATM terminals were acquisitions decrease we expenditures respectively increase offset and payment and

South Scheduled our capital long-term due arrangements, cash activities. of to infrastructure from our Cell expand capital equivalents higher Africa. XX, note investments offset and in partially we the of businesses ATM Frick, decrease payment and African XXXX fiscal repayments expenditures our to cash XXXX, in our and balances At Bank cash C new our and South from in in other lending June our repayment continue the group's some $XXX.X be our our repayments and million, by Apart cash listed June we XX, investments XXXX, from cash expenditures primarily $X of in XXXX, utilizing million facilities, Korean our generated expect were in DNI, reserves totaling South generated full, a our $XX.X book business long-term African cash as debt million. than and facilities. were our was African fund our capital lending core growth debt, unscheduled our and operations short-term South by to We

and facilities possible, to We majority fund interest extent cash to fiscal expect under XXXX South of our to share principal our generated growth and in repay lending African our to investments reinitiate the buyback the used be to our program. internal

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during repayments equal fiscal remainder principal in XXXX XXX our be debt ZAR XXXX. and the settled million X full of will early fiscal make to in of expect We

Our fourth XXXX quarter $XX.X expense million to tax $XX.X was XXXX. million compared in

was nondeductible a XXXX interest CPS, long-term the result for XX% statutory a remeasurement small expenditure loss, DNI South loss, of incurred and and African in the at as much rate tax than impairment transaction-related fiscal South expenses, our nondeductible losses African rate was higher effective Our including facility.

million XXXX doubtful $X effective the including impacted by finance million a adversely XX% to to highlight rate loss, and loan approximately been noncash our $XX loss tax remeasurement be that expect the impairment XX%. We of allowance XXXX million has DNI I'd for $X our a for events, number of receivable. rate like effective

Excluding be XX%. our effective these would items, rate approximately

million of X.X of of the the fourth was actual middle of million count quarter March the our versus lower due share in our XX QX quarter XX.X Our shares. to with XXXX weighted weighted shares was fourth repurchase count XXXX, the share share XXXX. Compared for XX.X million of count

Turning to our guidance.

contributors. during guidance process is prudent volatility the transition quarter issue it of our SASSA first of the more believe on focusing the Given predictable to profit XXXX, we

expect XXXX. therefore, assumptions per comments. fiscal on For into net earnings following per $X.XX the Low which contribution CPS in share we income and XXXX, based of fundamental is from share,

million EPE active X.X number to accounts expect average year with of for be on to around ARPU the those the accounts We be flat year. and on the last

for X now million and previously months, goal EPE by next with confusion XX accounts feel warrants SAPO in We of conservatism SASSA long-term have we the indicated caused the current updates but quarterly.

synergies we South potential expect shares in expect the rate second fiscal XX.XX With DNI, XX.X Korea of full to a in $X, XX%. fiscal we see significant results growth of our year of And we constant half currency although XXXX results, should improvements see prepared to basis with consistent approximately we with year. businesses. a respect ZAR reflecting tax base although the on other guidance of XXXX, and million our for be the has XX% the been fiscal

through SASSA actions September, under on review have more we which could provided reflects to Additionally, current would to transpire, include, operating and to competitive current with to service number at that expect quarter one, would like be are we would is for through a undertaken reduce are the for September of our to but the currently were XXXX, a uncertainty to expect of could of Two, guidance. contract various environment EPE loss. normalized results. pricing there by end unilateral performed limited which XX, the we that us following XXXX account transition regarding exist. accounts players through would the but our -- events positively a highlight their not guidance cause impact dialogue key first CPS net SASSA paid process the XXXX our the Constructive positive the EPE These

guidance, our expect see EPS $X.XX and to $X.XX between For benefit. million over every we incremental EPE X.X accounts, retain we

Cell offering. our in and factors XXXX transition lastly, all given not long-term the outlined Also addition expect income and drive is year likely we C of We is biggest to fiscal actions initiatives, for fiscal also customers accounts And we months. Our Q&A. up to XXXX, it target be EPE to our growth new call in we've this DNI target data has our in pushing the the space. fiscal to our can of expect the to various in open to now out by with changed company's earlier initiatives history, investments our bottom million-plus be year this XX X the result months means due of X EPE higher noting worth and


first from Klee Our Allen is Instructions] of Maxim question Group. [Operator

Allen Klee

Good morning.

might so you're in customers when could Can And getting churn processing about what mentioned reallocate potential EPE. from XXX,XXX most the much. getting quarter? rates hear people the for a given And you risk, on that CPS proactively the that and when and you like that, SASSA sounded underpaid earnings talk for mitigate then ends they that higher - can EPE do customers of XXX,XXX customers? the about on you Thank you to that? sounded contract can on that? to then you’re timing you expensive And positive try the were also create ability maybe at that quantify questions Some those the now, of then the a it like the loss - to infrastructure

Herman Kotzé

Thanks, Alan.

them. if but remind on of up questions, list have skipped I think your I of a I've got please me, some

at numbers. provided end those of are the contract they, we review, out In to period. the terms the to a subject final They and of the obviously, split CPS to don't need loss, be court

we the the were. So what publish as losses exactly is done, that of results as soon will

not continue. provide the to will court On timing question, it your exactly response. when expect know We do with we us

the the some guidance in filed to with We matter. to addressed to application Chief urgent to correspondents Justice us have this an also We've ask them please provide court.

being we understand, these But National recommendation time agreeing court of a no from terms do Treasury, made. the simply kind was considering set heard. the As in recommendation of court that of land, as have far and the there the highest approving it's that as we matter in applications are is the how

that as I that system. this of we part assets become said contract, the about with spoke the -- interoperable we the what of the deployed these or Second, we've part we reapplication when form fully are enabled about already vehicles just of talking these banking return to

those that so these - initiative of is our card the specifically, EasyPay South now the can, to cash to they reutilize the African technology we've any we will certainly with the vehicles be are part biometric the deployed acquiring access in lot will considering dispensers bank But readers, strategy, deployed form Everywhere vehicles network. And that to as X.X and and will these part it form of a intention redeployed years that important basically our of allow the an old. the which any on extent of

Net So on to banks. that customers. population of being last any not is of mission of in system customers our users mile access the can provide terms dependent from to the be the the X They one

hope use infrastructure. to that of And so we the maximize

grants have that these that will receive the old the cards, SASSA customers view, necessary EasyPay banking legal people these But From different regulations big those crisis by big, the customers taking and actions our there into messages believe we to the to on receive that who there them to contrary got will they XXX,XXX state. apparently what potential with September that regulations and for spoke the basis. be activate issued and Everywhere card. acts to we be first with rules Turning not trying problem are be at the risk, which a to are accounts. advise in are an that then urgent the -- point account, XXX,XXX-odd sending or face, them will we order And SMSs. would action we've to we SAPO as to also of may the relevant alleviate will contravened and about the a result, that ensure a are in new money of separate And some proactively cardholders

of our the went call we be the on terms centers, helpers published payment the in statement and also yesterday, of Saturday. the out when starts We media will terms press cycle and on fully advisers our ground, manned that in or statement

Allen Klee

And on from about, think of a Okay. and based what if in talk you with the Cell providing can DNI, XX% 'XX? you commissions you on this plans, how C, generate SIM 'XX? C comfortable can terms little you Cell that Cell And the EPS then that cards will you C XX% cellular do can if fiscal to be about DNI think in plus feel around fiscal still accretive in -

Herman Kotzé

with those XXXX We will between and of ability of a Cell it meaningful network year. in that fiscal technologies confident are very combined be distribution and our the C the contributor DNI

For big three it us signal dollar-sharing for changer, together the cover, the experience country. a national urban has more the I which coverage the XX% improves the guess, entire in previously was to across mainly game its than up which a been opens of us Cell the or from It virtually C can has geographical signed, that the way XX% initiative basis. I customer on really put centers that reach if

also is part and huge South of now of lot be adequately of will EPE our a so a clients our covered. where Africa And side reside. That rural lot customers of obviously a reside the

products, foresee a terms the our the reliable to now well low-cost in side particular this growth of revenues, of cellular accounts, service with as insurance with so And significant them very data as provide our low-cost the we're and uptick prospects of and credits and in We users. about business strategy. bullish ability the bank low-cost

We what slightly before. also to of now have customer a the different segment we had target than ability

of an in point that provide and we we exclusive the C DNI C, as result have we the done other quarters, basis. stake are of Cell so If the two from requirements, the synergies identified So we've in that investment minority of bullish. with majority Cell ability the acquisition a certainly over SIM almost extremely talk card our been view, about have to and on the last

content believe of financial we for or form And good when able phones and through talk competitive and we and us, being services. and service. expect with just an of that very product terms our more underserved services, very continue in through believe in either to been about about there we provide airtime, market. an We customers we being is we in talk or us and tablets. that's them as delivered or that way and banked to distribute products in today about of potential So telephony having normal by talk one data ours cell are a terms Those and some enormous other we communication-based

together, upside is these bringing by the of all so enormous. And

Allen Klee

can then turns KSNET, environment? business little Okay. you the about a growth? what Thank for eventually you. back talk And competitive this And to

Herman Kotzé

Sure. highly Korea environment. is a competitive

influenced that the ones. And has the provision, government services rates of there introduction a by But top of players. are financial Korea value-added competitive probably industry other competitors been the and industry X highly say, would in by hand. the environment, is one. a the serviced of between XX country capped South of XX of being an value transaction these in think, two is network I networks which primarily in are by the dominated the one and major I number processing added smaller transaction a players totality. they is KSNET side In it and these is on by hugely and of industry the business processing really our variety

So fact we now there the is cap - we put we basis, charged one on that on before just been can what are be the could hamstrung hand. on pricing compete a by a slightly that's

prevents there that hand, activities. been other from engaging the certain On the in introduced then have companies regulations are also that promotional

of were to in customers. provide of now stopped those the able initiatives charge the our devices by have also example, free past, point-of-sale kind That -- an government. been As to we the

reduction, that ourselves. now the differentiate of The losses in the how the The really an to that's fees. way could have for acquiring for your absorb fix we volumes by the order immediate removed to us is, issuing you your by increase lost. to have regain is So down and that also key -- you us element rather to if in go what or XX%, fees XX% right

volume. there a focus big So is on

that VAN to extent agents. various they other each utilize element is companies the the unique other which in differentiate The space from the Korean does

during receive agents element smaller are we and them more to along be that -- VAN are normally fees which issuers the are They between there merchants to pretty so can is And the companies. passed to from service the utilized the in pretty such agents. I And easy companies time by card KSNET of any Agents frame would to in -- call switch as for an SME the areas. rural what them cut the free agents. various -- it's extent

individual any fee quite and the you medium-enterprise uniquely a businesses. more on a or so to case, impact sector KSNET on the are lot the focused In the extent retailers. our competitors is market. other the provider the And of push the which as of also small- Whereas, profitability can have largest to significant our down Korean cut larger positioned

believe so edge our that's we to improve volumes. that's lies competitive And where and where the we need

been a obviously the material companies Obviously, experience, the the on just it's cut fees had on of the catastrophic. painful will say I for smaller it's VAN has more ones. been But much frankly. players, impact Finally, some for had us, smaller bigger than it's in very the a that

lot effectively a players obviously are a as Korean are those so volumes and to available result, the seeing market. we're And in closing surviving shop of those that the


question is Instructions] Zeifang Tom next Lucrum. [Operator of from Our

Tom Zeifang

you in granularity in forward a us losses Can the QX? guys. more give going Hello, QX and CPS on little

Herman Kotzé

court point this Tom, of X-month we're the at submissions the we the we financial make time, over in process in overall CPS of performance to the to period. terms are finalizing the in that - of have extension

I that's mathematics Safe in absence -- until finalized, that the to simple we our much mathematics too charge of fee, elaborate ability say to fair are pretty a to So broad want think quantify. it. the to on don't

number to XX.X and QX We QX And to of rate number only let used cash only to paid per process this and the say points. rate, first, opposed would we recipients, on probably XX.XX as are that which X.X for quarter now as grant charge I old of the at to the obviously steadily million last are an allowed phaseout ZAR on the roughly under moment declined XX.X still actual people say charge charging has differentiator That pay the QX, happens. the whereas, is paid payment. is the between X.X we we average The me beneficiaries million. at the million rate

you but XX.XX, our revenue. broad of probably a quarter. cost reduction million reduction multiply if XX of ZAR million at a a I So ZAR over a overall, loss the reduce month obviously X you it by that accordingly, measure, run an around in gives as indication to tried the We've our about would say we've last base the

Tom Zeifang

larger over a Q... And XX in last the million month gets quarter? ZAR it

Herman Kotzé


Tom Zeifang

And in larger Yes. it gets QX.

Herman Kotzé

the It gets the be we base months correct. beneficiary last offset for partially extent may QX that the of once totality, in X period. that But or the larger reduces, to the pricing get contract in obviously finalized that's

Tom Zeifang

exactly my ZAR is which Okay. expenses, ZAR Can I ZAR is for million that ask math mentioned You question by a too? housekeeping X.XX, what X X.XX, quarter a for?

Herman Kotzé

about I the head -- are think talking office expenses? you that

Dhruv Chopra

think, get Tom, it's amortization X $X -- I I think Herman, ZAR DNI for the million I can that. acquisition. million in

Tom Zeifang

our it for But employee? wasn't compensation legacy

Dhruv Chopra


Herman Kotzé


Tom Zeifang

back you. Okay. in queue, I’ll Thank get


follow-up Allen Group. Klee Maxim of a from have We

Allen Klee


talk earnings potential longer you mobile rollout then about, be MobiKwik, could what with as and international to the from the there you're For could you. areas, wallets a their potentially term you what And Thank similarly as can potential be? consolidating perspective? other the revenue base it,

Herman Kotzé

you want it to do part Dhruv, the MobiKwik just handle of first?

Dhruv Chopra


in obviously, products. months So We're previous X get revenues to particularly need you're MobiKwik, to India, here when the the dollars Allen, in And as you rolling significant on in. in we've of to only is key we on innings are volume. reporting out calls our generating mentioned first

a and if you initial good we've $X quarter million. growth, though last still even at new great got products I in were in mean, the So processed value and we've look seen pipeline the of there,

But volume impact products we financial of start have best more can ways the our here. go the introducing before giving the by: and quantifying So B, up. a ones that ourselves up have; keep shot A, we ramping we to driving to still in

Herman Kotzé

to from that and flagship the our through platforms we've Thanks, over as those IPG month gone or all certification terms, await In are certified, We and the our we And strategic flagship, instant on planning side, and a last two as completed. development just effectively being just, as multicurrency rollout MasterCard the three direction. strategic of it's mainly and got broad session Visa that. Allen, acquiring finalizing well commence significant marketing with I the while onboarding so group our think platform, the issuing important soon Dhruv. as

top and us. contribution all set gentlemen, growing Thank and today. much that's for we line line bottom years. ourselves you the X of in that IPG, next business factor of have very We over in Ladies of joining for a terms by XXx at least target have its time a

You may now lines. your disconnect