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Net 1 UEPS (UEPS)

Participants
Dhruv Chopra Investor Relations
Herman Kotzé Chief Executive Officer
Alex Smith Chief Financial Officer
Allen Klee Maxim Group
Scott Buck B. Riley FBR
Josh Rosen Peter Street
Call transcript
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Operator

Good day, ladies and gentlemen and welcome to the Net 1 Third Quarter 2019 Earnings Call. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the conference over to Dhruv Chopra. Please go ahead, sir.

Dhruv Chopra

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

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

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

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

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

be African rand. U.S. by results know, fluctuations currency company’s the South As you dollar the the significantly impacted and can between

turn let will over to Q&A with We a have that, following our And the call remarks. prepared me session Herman.

Herman Kotzé

good This highlighted from on the call you, key we progress areas day specifically Thank where we focus and to on and will and morning, review the third highlights everybody. here. Dhruv the quarter our go I last

cost in Alex transformational XXXX by the review that, quarter detail, base. implemented a went third we followed our as Following will and which changes of be your results business X will Net QX questions. more through during restructuring comprehensive

following the of target complete objectives migration to set the mass on are ourselves, EPE main We in cardholder X our QX. base we

massive and loans early-settle and to which The sheet operations major monthly related in earn-out DNI achieve being balance transaction to week our to additional a accomplished African part X% a our particularly to employee payment members staff South liabilities has painful retrenchment also forward; such by and with unemployment last workforce DNI. and component during or palpable. our to impact initiative base, program South our significant first overall African second, staff of difficult the XXXX of significant XX% the is the effects high through June cash with the basis our which is setting rates the inevitable environment South RMB, X,XXX sales persistently cost was in flow execute to on It struggling the was the on of of been breakeven de-leverage of reduction a the approximately total. from retrenchment The in economic negative going long-term Africa,

the are the past recent on hopefully in darkest states. we and rebuilding history, now are in group We focused our all times the

broadly interest expectations now we with to believe businesses holding, remaining remaining of though part DNI. also considered substantial exclude in we operate our sale a to to contribution a to line as to in and EBITDA continue be its Our with transaction-related which EBITDA, need We will group, pertaining continue provide XX% of majority cash source the to our the payments of group’s dividend receive group the should generation.

XXXX, comfortable of liquidity and months. of group’s we had the million position next cash XX, net March with remain $XX As over XX the

share had liquidity prevented removes started have XXXX we remaining have commence many to we will great our with stake DNI. course week this holistic relationship. sales sufficient monetize for be authorization. XX% and team, that a is business continue $XX remaining million. we our underpins debt values This assets thus and our to early-settle repurchases various week, have a stake. repurchasing stake approximately in review, strike under settling valid DNI, Should with our a our The from are Last long-term geographic commenced the price of the over existing in at realize our our strategic announced XX% the until monetize pillars lines. long-term on remaining X a would us of far work identified Selling option on basis we to them non-strategic too I the we in As with to debt. shares. our our our solid looking is commercial we monetize and synergies of XX, where the December to business X.X% management option agreed RMB focus part our able covenants with strategy. March, we in we in core four introduced investment It DNI a stake is fin-tech have by our earlier And to call that to actions followed stake quarter, a that have of DNI

provide earnings and notable million ZARX.X power first, trends for South include: levels this then of operations turnaround I component remained maintained of and the into our our has is Before stable as first company. on African The updates African the accounts delve some however, key to stability near-term I EPE South since November a active XXXX. at key operations approximately want the these

book debts from micro-lending XXXX close and performance are increased our the with EPE on running also the during debit catch-up insurance closer modestly has auto-migration XXXX, Smart QX increase But to to orders. an since bad levels. policies historical the historical range. downed the Second, returned to played QX Life in

QX see XXXX grow you is ATMs see expect our to to when first QX our in network, September with we continue cards staff larger-scale with Fourth, Third, and demand we again. X,XXX Finbond launch expect for approximately and we a currently. in ATM we issued XXXX, our commercial account-based which XXXX, UEPS/EMV early to

ATMs network. airtime to sales nicely, us continues the and by to all deploying more payment begun business grow our XXX finally, payments, mobile business. our interest in merchant-acquiring processing have EasyPay express driven them, potentially transactions, could for ATMs And and plus further Third-parties add to

XXXX earlier, I we South by African beyond breakeven unit. at mentioned in be operating the As track and on business are QX level to end of EBITDA the

additional key now of developments highlight pillar. turn will pillars. the in I have key covered our Africa, Let our four South first in already but me developments to some

EPE micro-lending last infrastructure services; to Moneyline services built the stem them up To Africa to over accounts; social consumer next grant with able businesses in The micro financial lenders, related out we to would Smart years With quarter. its and We and beneficiary banking with insurance; discussions leverage differentiator on to including opportunity consumers. EPE being their services with XX commercial roots millions QX will address pilot for value-added our have distribution. Life and establish have to low that un-banked the and and to first network ATM providing we and base. our Our lower begun the be effect, us, we the mobile to deliver financial other bank sheet and and our the loans so of launch stepped from Providing our services cards includes: its in people not South a these key use the a banking, Finbond return early collaboration issued efforts also limited but risk. relationships of Finbond, have wider too the of be and is cost our under-banked be expect balance third-party in UEPS/EMV would a Finbond, beneficiaries. XXXX, credits broad

branch liquidity, of by we of that challenging C distribution relocated branch. XX have to its the on XXXX soft infrastructure, to We quarter, transitioning fixed higher a our including which whose low-cost infrastructure of to locations, network-sharing of a cost second and Cell close And managing deploying movable focus to last expand due arrangement MTN. and are and traffic had short-term new significantly engaged higher also half ATMs managing Vodacom investment, macro a ATMs. old with its quarter proposed company The costs. a containers, will able been with actively our is for cost the one reduce Fed-servicing is their Consortium out a environment current through actively with is The Buffet

the through the to our are us issues our the when outstanding yet XXXX, our been forward. are auto-migration with SASSA as have of primary of these Lastly, last courts operationally of yet involved contract working we be we SASSA, to fees put Both X two businesses are as for going SASSA are The EPE since with focus areas and end-of-contract payable and on related resolved. our can few customers. the issues there actively energies months and the unresolved, but a we legality soon to to not us issues September that behind on

Moving XX% of a and which to only our is deployment adult operational pillar, for the of second mobile-based opportunity strong we substantial are the on partners, on Botswana. Africa. have Namibia remains to XX% local to country, In financial and us. cloud-based access solutions, Africa, thus populations depending the in together with Today, card And services.

MTN. in partnership through footholds VTU have our countries X in We offering with other

old months finance Africa. consumer are Ghana; QR-based have Nigeria Zap a through through OneFi UEPS in initiatives as We our national payment and X growing a operation in payment Group system rapidly

to different the made actively We businesses existence. Zap maximize potential and investments accelerated the our have up to also in time Group significant the market. of second strides quarter stepped has between cooperation and

up bank Zap live During had QX XXXX, largest in the Ghana product. and with the beta Group went signed

with is Zap also signed merchant three aligned two merchants. for live and offering each largest its of mobile with integrated into Group up country. QX bank have XXXX, the the operators network, They also largest During the the has in XX,XXX

and Zap to bank customer produce increase We central in sign commenced Group working also and closely the UEPS Nigeria One which its contracts to to runs have them involvement GIPS, is activities and us Finance. dramatically system. introduced payment the also in is switch national with has

services Lastly, Carbon transactions fund to launched across OneFi processed during digital digital in in as expanded market financial during and and lending enhances million lending called XXX,XXX product, its continues the platform XXX,XXX offers addition loan transfers a that platform disbursed leader to an savings its and space, payments, now given has on QX loans. of the loans OneFi and offering success a which the period. products, digital be full-fledged Carbon, $XX

IPG of centralized IPG’s KSNET. is is Malta have excluding the pillar certified. and Europe or The is third Asia, our Group, activities. platforms IPG. driven and international restructuring International of card-issuing the new through complete, with The primarily having Payments pillar operation and been reorganization become now This merchant-acquiring

Europe, Visa’s Visa projects required SME is recertification its with deployment QX Frick by Once can Bank which the begin of undergo market. European the As completed new is to underway. merger XXXX, with part Visa, currently to of IPG

issuing been principal UnionPay are we During waiting and international QX secured the authorization. IPG of to with member acquiring. a approval from China for and This shared UnionPay, also XXXX, their has become Mauritian approval regulators

due we relation largely XX% the initiatives. expertise with headcounts to to asset of investments its development continues headcount XXXX year, slightly therefore, and cryptocurrency and the and cryptocurrency We capacity and in finalizing the go-to-market strategy. Frick its scaling on storage IPG, product, crypto production the Bank our requiring to commercializing launch than are develop over very revolutionary technology. which expanded about was last recording to and in excited blockchain up calendar made are technology, systems. diligently working progress or and performance improving has Bank Frick solution continues was storage expanding lower the in work with It and anticipated, processing its closely the

with virtual the given has growth, steady current MobiKwik by applied Our bank continued card to partner. demonstrate project our issuing constraints

result successful expand of issuance to guidance, once transition with has as due expectations, regulatory has being – in advance And However, direct itself allow primarily digital of a to MobiKwik finalized, its driven services for millions the membership MobiKwik Visa. to a will customers. provider. performed new to well of applied financial us

since momentum revenue ended of than financial around $XX MobiKwik maintains loans services October million positive monthly doubled During financial reach more digital of total revenue disbursed excess has its contribution XX, in QX ago. the its March from its XXXX, margin now a XX and XXXX account and for $XXX breakeven MobiKwik in current across GNV users. year. million to during year has been for processed its XX% and approximately And XXX,XXX zero million year

quarter. is weakest fourth pillar specifically. Korea, QX is Our KSNET additionally KSNET’s

to driven QX revenues volumes by QX margin in by primarily lower declined lower constant values from XXXX, currency quarter. processed revenue. EBITDA driven KSNET’s margins mainly during the XX.X% at For decreased in XX.X%

have years and amortization intangibles XXXX last X as improved and result QX CapEx of X.X% to in levels lower certain during margin been last the declined fully as operating depreciation a X% from have significantly amortized. However, year

the strategic and As initiatives, several an of by appointed will as we assist and comment completed these our will when alternatives. external adviser year-end by expect These identification update to goal of growth and the QX. in is first $XX with run on key profitability. us to achieving results. better implemented parallel, our phase the a the And improving financial a a line discussed potential team, engagement the We on previously, activities In QX during to the we be adviser EBITDA engaged position are made with towards contributing this assist rate to the million And types with of start which now we management acceleration report complex we identified board initiatives XXXX. we be KSNET top you of progress time-consuming. of outcomes

on investment balance a per alike. investment and has I our leading to underserved our steps the a at now that portfolio, is individuals its transition the which want remaining equity to to portfolio, $X.XX of or developed to of our value businesses Net share and emerging number already investment in in sheet. X countries reflected of recorded fintech being taken the also provider $XXX is in DNI Turning our highlight in million total

to and our We an period, stakeholders. have but undergone dedicated have remained our vision extraordinary we

be and return relatively Q&A. and line financial growth and detail, QX fiscal XXXX. over We more stable bottom now for the to expect it metrics go performance in before operation opening Alex top our to up in in will

Alex Smith

to and year you, be I’ll third XXXX Herman, of day trends and operating to compared ago. fiscal a quarter Thank discussing good for key the everybody. segments within our the results

dollar-based For rate a ZARXX.XX dollar U.S. rand to QX was compared results of year adversely impacted ago, ZARXX.XX our XX%. average which by exchange approximately XXXX, our

the of South Our consolidated into segment equity-accounted incurred equity-accounted of operations value negative of impact $X.XX impairment the disposed and been to quarter, move changed DNI, Operationally, loss DNI an we quarter. by from caused the operations from quarter, Cedar and our share date. of but a earnings the $X.XX, by into the earnings Cellular includes that was per which to of the losses note. which at for African non-cash from At in end XX% The a results the from fair subsidiary will adjustments DNI of loss investments C the third IPG. Cell investment our have fourth of fundamental of the fundamental declined

discuss the as for classified provide transaction have of purposes remaining we that Given option disposal shareholders performance I view the with our on business. has call a transactions, will By the and African investment, disclosure operation the been granted later, which segment, discontinued of remaining DNI to DNI a South processing constant reported of a the is the of million and the on the reduction XXXX, currency lesser basis. to in of third the EPE $XX.X The decrease quarter revenue the number down to due quarter XXXX XX% primarily of contract a third to extent, accounts. termination in compared of SASSA

volumes in operating with and reduction our income revenue adversely the South transaction higher number also was Grindrod recipients completed Our as revenue These cards income impacted in SASSA partially by result accounts Post to position as a ATMs and offset were increased revenue Grindrod its SASSA-grant significant to Office. Bank and operating by higher SASSA-branded usage of of African at of EasyPay. the linked decreases

Our XX.X%, respectively. operating the negative was and XXXX quarter and for XX.X% of margin XXXX third

reported a specifically in IPG third the third of for with negative to Operating margin loss processing X.X% lower a XXXX. XXXX, of down the the stronger transaction operating transaction and due XXXX million KSNET quarter in which negative to was quarter transactions a of processing the of in XX.X% contraction of generated International was values than crypto and revenue compared the lower XXXX, modestly – third China of in XX% costs, the processed. $XX.X revenue of processed, quarter restructuring meaningfully XX.X%. primarily Excluding QX as quarter margin exchange margin third lower result XXXX was

X.X%, segment million QX and for impairment and refund, hoc and income However, excluding respectively. the were XXXX operating goodwill ad $X.X tax margin

to very IPG remains profitability quarter improve of KSNET’s had good, from the transaction moved while decreased low. a team distribution are management $XX.X margin implementing For remaining as channel. that another remains million, quarter, the third environment regulatory challenging to XX% in in increase progressing various low. The conversion quarter XX.X% revenue XXXX. decreased the to Korean and with XX.X% third are investment direct EBITDA actions of to capital XXXX, volume won cash and remains KSNET’s the fluid of

the Included the is crypto reduction small Now in losses. new in there development storage of asset loss in $XXX,XXX of was product. our respect costs a

gradual initiatives down quarters, a European the insurance cost top by quarter coming its $XX.X over to particularly XX% primarily fiscal with to prepaid IPG in the Operating of in X.X% partially quarter technologies improvement for materialize. Financial the the lower and XX.X% of line XXXX, to expect decrease $X.X of to as We quarter third various of due start grow it inter-segment of and of Operating and the applied segment performance XXXX, million. was the retrenchment against compared in third operations XXXX DNI. revenue and which looks for fewer compared a the value-added sales, XXXX. growth offset million in the of inclusion third generated the of margin inclusion and included operating airtime was services income this quarter lending revenues, revenue third

and costs, margin Active through April stable steady XXXX million quarter May for remained million the operating cycles. retrenchment numbers were the Excluding $X.X income the quarter, $X.X third and through third been segment with XX.X%, respectively. the accounts and EPE have these payment and of

of result return seen the account the our we normal loan the base, performance of to stability book have levels. As a also more in EPE

over we Smart Moneyline, the a Life delayed line a as trends, as slightly seen book. in we have their against quarter, historical Following and any with similar criteria, credit halved the book policies has value. now the number we’re both trend are are believe Default current quarter. broadly Due the the our substantial growth base in base for write-offs loans last seeing of not is the real of products Post levels order was to to South strict in to Office, XXX,XXX of conservatively quarter the beneficiary meant But XXXX. during is focused the Life period both on now policyholder rebuilding to at developing that lapse the third stabilized is the lapsing. Smart only markets a the was customer the This grace African broader now due crystallized its significant new in portion around lives. before X-month of achieve auto-migration and growth. provided and

as non-employee Cell a external investment Our intangible reporting to carry related carrying in million impairment to due are and We fluctuations at expenditures reported its direct well loss from fair expenses fees. to non-employee higher-acquired transactional-related and primarily – from provider DNI as value period asset increased director period service C expenses, amortization, corporate our expected. $X.X value

QX $XX.X non-cash of value our During XXXX, recorded a adjustment we impacted fair results. which million, adversely

Our has lower and valuation decline EBITDA at methodology is the unchanged fair attributable Cell remained in C. value to

the saw as group multiples costs arrangements. With last performance trading in African in Cell trading operators, The we emerging the similar in consumer X South quarter. peer of and well network-sharing the C reflects to as their African the of market weaker what mobile telecoms market market broadly conditions associated with the difficult inflated

Cedar to value had the carrying notes this value. also reduction in We fair impair in line of with Cellular the

net reduction the comparative quarter. equity in million did quarter period same the quarter. as to months last quarter comparative equity-accounted the million a from to third $X.X due quarter is losses for in ago, funding well expense DNI movement This to income fact year. to due business in the XXXX incurred in the contribute the of million as the of substantial of losses ATMs. $X.X third net million the business to the of earnings compared recognized primarily cost to during $X.X compared not to Our interest income over XXXX consolidated as the was that interest balances reduced X our this cash was compared the last We of was $X investments The from due in year period

more which Following our will detail will fourth later, in accounted recent equity DNI be disposal, for XXXX. the discuss I quarter

decrease to March last our as the our December. million reported the in investments. contribution of We impacted non-controlling the $XX.X expenditures. and balances from million it March, the various territories cash payments significantly $X.X dividend The weaker million due At financial which the basis a our by inclusion and South We at compared facilities book. positive These million repayments, be primarily XXXX, to $XX.X debt approximately equity-accounted at trading in offset capital XX, investments XX expect cash available $XX of our by to short-term had contribution DNI was activities, end of unrestricted timing results year-end the had African the lending from our XXXX, various to scheduled were was banking on annual of to decrease in by interest utilized. from been is us of partially

March had of utilized optimally million XX, associated $X.X we XXXX, $XX.X cash and of restricted short-term facilities As million.

into flow in to X, to under to included was on We the cash terms facilities for we DNI to shareholders May cash sheet settle used of balance obligation DNI processing investment. the have the due XXXX, XX% concluded to date, under credit March and amount minority the our fund shareholding the $XXX XX%, This On the Subsequent in DNI million. million, to amounted on billion Free $X.X ZARXXX purchase or X.X% short-term deferred sheet. in selling a resources, debt these further the ZARXX million of million, quarter capital. $XX.X the presented ZARXXX ZARXXX ATMs as used to long-term system that South we in cash RMB. proceeds our million to of March the balance million Africa, ZARX.XX which XXXX. facilities with of place working investment specifically XX, the from settle, on of of if as sale was outstanding DNI along reduced cash a to utilization existing XX% drawn million restricted we and stake XX,

there Following is term second transaction, debt sheet. balance no on the left the group’s

on funding operations international commit of there buybacks. $XX our ability liquidity new And have South that working balance all product we to units. term to the particular, African profitability. of operational launches short some In have we requirements to South now million net in operations they the in on we capital African a to debt resources requirements continue and share to perspective the have business sheet, of term as debt-free and While future cash funding are are and in from we in requirements flows constrain the some amount businesses, growth return cash of opportunities some the the need respect

DNI buybacks. the as of such event, occurrence the on the capacity investment, of will However, this a disposal create share liquidity for remaining

XXXX of to was quarter quarter million the an million third $X.X benefit expense of $XX.X compared tax Our in third XXXX.

Our has quarter benefits effective tax of impacted for these the losses XXXX by and effectively incurred the to we South rate by been African have as not the recorded significantly businesses, third certain impairments losses. asset operating related deferred net tax

incurred position. Our to tax continue a our breakeven will losses, rate certain to be until businesses heavily return effective the by at distorted affected least by of we operations

of actual weighted each share QX and XX.X XXXX March XX, for million Our shares. average XXXX, of was and count

Looking longer forward DNI and will, therefore, reported into be note no to have our will EBITDA not to in to QX, we consolidated contribute results QX.

can some by losses the We show the which during African our should and to in for is materialize Excluding the opportunities in been stable should XXXX off achieving year. rebuilding particularly our next the of eliminating IPG year, to we an million result end to call KSNET of the the launches as once we sequential contribution quarter which We for Internationally, the significant outlook this have the change third DNI’s exploit and to business the returning now profitability improvements feel see fiscal already achieved, up would expect we by quarter, can business that benefits strategic a of South to to aim fourth initiatives that while factors product we XXXX. provide fourth positive These excited over identified. have if start fiscal DNI, EBITDA of available excluded operations should focus made combine the current continue And we progress quarter have adjusted of from open to in capital the the in quarter. coming are in the base, last from review. towards months, expect $X some a EBITDA we loss Q&A. the also significant

Operator

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

Allen Klee

in So, you us and hello, can for feel And on are a where run-rate lot potentially once there terms the EPE of that without what all of give do those by stabilizes is to Africa or anything do a to network you what and that it you grow at believe the getting sense revenue on moving fees extent, South can impacted you parts, that of businesses your more we the kind SASSA? can of businesses, you. profitability? negatively EPE-related related you a specifically Thank

Herman Kotzé

multifaceted A aspects the Alex let a comment I’ll it Allen. part on and question, it. I on Thanks, will numeric comment of

that the place, processes those There with negotiations they keep We have you quarter, I place. think but those with some than up-to-date. of the in and take expect it’s remaining as fourth bearing through important mind are SASSA, end African place, are and way certainly we’ll issues and any in certainly we forward, obviously other to further we’ll are recognize as half there not when QX legal that we in fluctuations, the see when the businesses. a major of do going towards we sort that concluded, already stabilization deal of core South are and some

is with of and forward of and value-added sale in services things, We and to conjunction part utilization to our of insurance the in us want the portfolio So we of for to over base. which offerings, part that all including And South point of going with focus is one Africa with services in X ATM Finbond, of of financial things in continued micro-lending the the our Everywhere rollout connected account to obviously the our other focus rollout do really that of course, networks. on continue is Net the conjunction EasyPay holder build-out companies.

and it And think to other certainly these return EPE I accounts. utilization levels to that prior are we so levels to growth the stabilize of the you put and whole kind with the story things had we of business the But important if saga all the the together seen offering aiming of that both would from and our that holders, to not used a it target EPE services view of looking grant forward, you financial point like is that recipients. what to is current we’re our for account note part limited putting base together I of only to be to

Our Africans. products the of opportunities in significant We markets. base broader see of are much the under-banked to needs targeted now a addressing so-called underserved also or South

are that terms services and that accounts, So, the services restricted employed that financial people who probably of are access the services they bank or to that made accounts people. service to available given these financial of access is in financial who have have highly received not with too they normally those are the cost and happy but are to those

So, areas the give us please? if is, focus indication a sustainable to an those key where of revenue think forward. Alex, flow you we going for are want

Alex Smith

know. fairly don’t we strip approximately of if certainly million. at next you look seen so revenue in the about monthly as be $XX and numbers have stable, DNI, the I certainly third of quarter terms It’s the would that basis out on a effect quarter for

level. stabilize breakeven we said that, are trying we EBITDA to position neutral that a to As of

fixed the revenue would So look cost growth line seeing be to move into we quite would drop-down into with given number, which a EBITDA substantial the a XXXX, base.

will directly drop lot line. contribution So bottom to of a

Allen Klee

things, one in Okay, And two XX% moving U.S. then XX% to thank constant your the KSNET, revenues down dollars. area, or international you. currency are on

that on Frick point. seems fiscal something are it’s guess better. on of because sure turned doing can the is but to $XX changing you rest seem understand But sounds going it doesn’t turning become you get review IPG, waiting little think for at it yet. around around don’t that, really EBITDA get to side, could regulatory point until SME approval for at that like I but like a And what million you us then you could thought I’m potentially seems it XXXX. year related calendar like stretch So or we that that’s give this maybe quite there, that that, one if the there’s this maybe next to Bank lending, a not it’s things

right? thinking if that know – if a or you. Let true am things if me that’s those statement about I Thank

Herman Kotzé

Okay.

a things I view fiscal as actual think There quarter as so quarter year. outset, Allen, things. a this of from of use seasonality side lot every well QX historically KSNET the point a is the an of the from year with start is during let’s happening as to notoriously benchmark. So, of third difficult

are a timing extraneous the all New weather plays number a the that sorts holidays. of like role, Lunar have factors of There the holidays etcetera. We Year of

of us. we presented I opportunities a There couple main the or will have have think extensive are the our that processed. just key and the are, keep There that at some pockets that size element changed looking if in for a when a the is from that a the doing important profitable customer and done the others. for quarters review think quarter in in strategy, I of it you I forward, X to this levels areas mind shorter-term the the growth your to fairly over the years going terms volume be much is in bear initiatives was calculated, mind X at are or the basis. us exhaustive these of look think, it’s an giving we reduction basis are of themselves than us impact key But of the think was there appropriate takeaways not obviously comparison last of following some and current the last some at is we away without of the operating specifically, secret previously margin current that of impact calculated, focusing But on takeaways want business year-on-year yes, changes the certain necessarily now business back on but business So the I the the way and aspects for we was those the be. fees do the as revenues underway, quarter. in the analysis. no second fee next if volumes to X there too over values It’s could as actual there QX that where our the by to business review looking right And that that base. currently value are are of how cuts of following And in they that the the

customers, is, So, bearing have an that in mind exercise this obviously, as run merchants through. do intensive XXX,XXX we quite to

the KSNET, Then been businesses. looking has finance on those some we gateway. marketing are has at payment growing itself KSNET, implications reliant specific that agent finally, businesses We initiatives. banking then historically, addressing. capital that very on are an in direct working network, then in cost focusing are we our are And niche

rate XXXX. around of and basis those the of towards in result believe our focus an going is and form what will forward million achievable calendar in activities the run EBITDA the of So $XX end still end will we

So that’s placed that we proceeds. our the run in have rate

to end end So target XXXX. of the that’s we up where the towards want fiscal

on that operate important that us built In facilitator, you’ve what all done that get by IPG, order is way. of a that as Visa literally guys absolutely has of that the mentioned, process IPG the of preparation dependent terms to to of be few be It’s been work out will lot as the of Frick ability payment recertified the has to and next and for note, all do getting the and pipeline done Visa. to Bank been believe sales and to a to In the that just need matter in a audit give a months. process certification. We we the for

soon merchants. onboard as we done, be that to will our So as able first is

And plan, segment SME to the the to issue the business cost. is implement focused we’ll able be will be business space. which execute on able and entire We within European

you obviously that, can are and the there said overall the tell acquiring on failure, other point as potential and in we revenues And not so, and just a initiating the for that of a as profitability to certification need issuing partners contribution also way. is strategy. out rapid soon exploring also that single to we I European our we Having or get improvement of see banks gateways expect as

contribution new you if with, have be launches in X calendar XXXX, we we obviously, the so, will product bundle X specifically, that to major but its believe fiscal during together there during that that during of months, improvement XXXX. And IPG all for already targeted next a for the

Allen Klee

ask Can another question? I

Herman Kotzé

Yes. Sure.

Allen Klee

the in DNI the then quarter Oh, have contribution? you excluded loss would great. What if EBITDA the was what

Herman Kotzé

Alex?

Alex Smith

the excluded DNI you If of contribution timing...

Allen Klee

said $X next you that the you be said Well, it million quarter, that I be and think an would loss you that, because was. would improvement what over

$X quarter, it apples if you’d what this can it to we loss. so look – been apples. like million have was But it – So, at if would

Alex Smith

sure. Yes,

the EBITDA DNI quarter. contributed so million if $X.X basically in of So,

have So, million. been $X.X would loss the

Herman Kotzé

XXX%.

Alex Smith

And in Yes. DNI. this on The gave for included loss, basically XXX% based million that’s with EBITDA. XX% quarter, we guidance the DNI’s $X the of

line we with basically where in the guided with So, EBITDA directly line. what we on were

Allen Klee

Okay thank very much. you

Operator

Scott Our next FBR. B. is from Buck, question Riley

Scott Buck

was shed the the your provide strategic on sort used First, to rather in some view nonstrategic additional week, business be read a date. around maybe and congrats the to or of the might able I this leaves some progress what on business know you to once tea fintech of earlier just as core you these I get want I business hoping what’s looks announcement than term you color sense of lines? to investments trying the like

Herman Kotzé

and is quite time-consuming review strategic process one is underway. and obviously the a got that’s complex currently that it’s I’ve Scott. Okay

us really around that. environment, indicated, the In financial EPE and our African we around the South is fintech for really offering core As our business. revolves related services focus the that side of the

be of be platform. tech rollout the part of fin part services. the the our would the offering the would And financial the So, technology, of UEPS/EMV fintech fintech of

loans, So the this to of would assets any IPG airtime, cetera. part review services, as a ability key would part utilities, thing, I potential value-added that insurance et value cetera, Obviously, and of of non-core business. the market think, be. we what The prepaid, what in the includes same apply of to et consider need is

that forward. to make we so and to business others is non-core an we believe do once are are want think the currently end elements we let probably you And sure plan potentially in some doing. core the we sale that capable I how of are that know. terms we absolute a focus realize assisted a dissolving is ones this is as we’ve going out in no on the made we going that up the the advisors list the But mapped of technology financial this assets. core be want by consider And are by of takeaway, a a decisions our company. fire of we to with of the final the of assets, means the properly. We some could very And and we we is exercise and or very competent will this what business But non-core It regard. key

Scott Buck

appreciate the I Great. color there.

confident you are DNI exercise in the will how option? Second, that call

Herman Kotzé

a cash-generative of know number parties. fact potential is for a business. space. investor It any and would these think to is ourselves until that will The option of attractive the complex fact highly think I doing that we’ve business time-consuming. so, what something there all the the we exercised. Well, reasonable of effort would want fairly side interested wouldn’t so, not so But And some, that we be putting the that that the, had market fantastic unless given have obviously, the that I I we in in through I could indicates the And and are legals will on timing we’ve the went possibility exercised. to highly quite stick my that the do is we December this also indication the granted option that options to other and it’s together the there’s was happen. likely Structuring for probability exactly out or I have the be the period neck be. likelihood exercise that option think, that a do given

Scott Buck

the quarters, we months, Great. Last line time one. of this? like of probably Are above? of years can we expect What kind announcements talking terms all additional in or

Herman Kotzé

all of the above. Probably

as But a years. place. months there than being these are fully it’s of Again, some and they in these look that obviously, strategic we of to of at a any at lot easier look a of we when parties. and When the marketability, valuation of and when function shorter-term of Some abreast matter rather interested developments, announce keep will, execute. lot review, take product you side things, initiatives function all a any will announced are and a the think of transactions be I of there’s you you more them will

Scott Buck

business. QX? Perfect. One retrenchment to guys. during the I you’ve kind any cash But in know outlays additional the quarter? some expected lied, significant of any during requirements more, cash I that, of kind what outside cash outsized out fourth for costs of requirements further regards the laid there are Are of

Alex Smith

outsized There a be may few we more think. than but costs, more ones about we’re restructuring talking not

Herman Kotzé

Yes.

what which the we’re up I think large, But were was we’re to expecting up. concerned. we in close costs all water-shaped It’s sort and tying know of seen QX, quarter those as the far I by largely we’ve loose think, ends complete. absolute as

Scott Buck

thank guys. Perfect you

Operator

Our of next Peter is question from Rosen Street. Josh

Josh Rosen

my question congratulations Hi, made. the that have you and for taking process thank you on

How the C? that You the there? Cell DNI, entire affect East it Could strategic what went packs? it Thanks. talk through to and does And between majority imply looking for a investment position in position. starter pretty in rapid financial shift you’re products South about sell the finding to does bundle now shift with you strategy

Herman Kotzé

Josh, initial Sure. acquisition, a say, of then obviously control to DNI, you was that through increased the towards year. we end last as position the went of

to a We it and South could said situation we And believe place said the analysis full built what It forward. much be took we dire the we that do up. go core the of the pretty February management found it I fabulous team. exactly profitability and is to to situation we And think is we before, period of business complementary going that I’ve to the one ourselves needed on that we we in. from we have very a exactly take got as get look a long DNI what will African and impact squarely wanted focus October at that side of a business, on. to focus involved fantastic as understand generation cash point needed business view. resolve resolve ourselves also, found as the I how had things. obviously, has we could to the telecom what we obviously to is But had dramatic a that We’ve fresh have the over in. events network, hot could where a that result rapidly the of of we the a the on distribution and and that

to We a work business. also in be we businesses without able looking specific took into necessarily would being with, which together account shareholder majority that

to ability that And products we’ve so services and the the rollout know in to to that bracket. continue We we squarely team DNI fell that work identified. in the have with management DNI

in as As a Cell far shareholder of an our to as through distribution important natural the Cell is C close we remains DNI remained concerned, C business DNI also there. obviously our progression ownership

to think more C Cell is complicated deal slightly with. investment a I

couple specific or is C produces indication giving shareholder last in XX% we business. obviously itself have been the C that issues quarters, an you of that a are some months from facing, We the Cell Cell public results And over kinds in of time of investment. underway, to favored point current space And of be time about that the C us and potential are for that at think current that any it appropriate to time. Cell the not I the would of talk exit this transactions given

being an, spoken or always or have a event We the sale about an event strategic the IPO liquidity exit the business. of

an stating probably obviously as is in the management is Cell progresses towards record as as the pipeline we that’s that in that on although the have the alternatives investment XXXX roughly over when will concerned. the far that by they we the not Cell consider something so, are in C that C time. That’s And is targeting short medium-term, X team IPO or term, years’

Josh Rosen

you. as Great. Thank the business. just re-segmenting question. secondary of was talk I And know a there

expect still that have to we SASSA Now you. And are something implement looking so, you that longer the Thank at? you no contract, is that it? when if you will

Alex Smith

Yes.

We it. are looking still at

finalize we that point think in as then at we’ve to this that review. indicated, at time. going obviously first and through re-segmentation We’re, And look appropriate and it’s strategic we’re

moment. done at looking the still We’re at business the as we historically have

this So, it by driven will review strategic process. be

Operator

Klee. Our last from Allen is question

Allen Klee

questions do with two have I Sorry, anything other. each have that to don’t

us you you could is last in annualized. the one not have EBITDA of said from the would the what kind first – quarter what The they’re give been quarter,

little about value If about be? network from Africa fees that that? the talk of can then understand second, trouble have could more Thank you. think you the a businesses, how you we bit get of you South excluded processing value would And the that? the and you what Maybe the you in

Alex Smith

rate $X the businesses, $XX the think that’s I the just transaction-type think And of region question, business, in of in million ATM would also from receiving the looking And forward as million first holding. of run on would Herman so based now. XX% of so million. going on EBITDA be EasyPay, So, KSNET, out the then dividend mentioned, flow the XX% at remaining have that’s that DNI to about dividend annually we $XX investment we probably I be first the

run So of those that’s rate all discussed. terms based on that X QX I in operations

KSNET So, QX. the particular, in rate for run

see in servicing population. And particular it’s combination un-banked generate leveraging of having and as our SASSA insurance continue being ATM that we population, the significant and XX that under-serviced the sense So got of we a products. fact the fees of look issuing loans we fees, infrastructure. the and We’ve most of that stake. then services, mean can of really fees, African at related of the around particularly that’s strong that the contract. South we’re We infrastructure built kind And interchange the of into think to the years South the the I state financial into future business. value over size we on miles a And part DNI can of of within African infrastructure. reach African the X of with top terms from there’s in a about regardless out then that, working that And how last of population. the of the obviously the probably worked as that’s look for But critical EBITDA the South

that into of And leave lifestyle in effect telecoms that base should all opportunities strong a leveraging incremental also again. is cost of mix of infrastructure. and products with margins the there network that so we higher as into the type the terms grow And customer

Operator

conference. gentlemen for concludes joining you that today’s us. Ladies and Thank

may You disconnect lines. now your