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Lesaka (LSAK)

Participants
Dara Dierks Managing Director, ICR
Alex Smith Chief Financial Officer & Interim Chief Executive Officer
Raj Sharma B. Riley
Call transcript
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Operator

Good day, ladies and gentlemen and welcome to the Net1 Q3 2021 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] Please note that this call is being recorded. I'd now like to turn the conference over to Dara Dierks. Please go ahead ma'am.

Dara Dierks

operator. you, Thank third our earnings call. Welcome quarter to XXXX Interim me Smith. is and today CFO CEO, Alex With

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

making to look with the in during which we this XX-K our discuss As our our our release contained forward-looking at and underlying and regarding a results you will results statements. the is cautionary rand, reminder, non-GAAP will African risks our the be ask I measure. forward-looking in we call, Form language to statements associated Also of business. rand South operations press in understanding assist analyze We in uncertainties investors of trends

dollar know be rand. results can African the the significantly you currency company's the the and South by As US affected fluctuations between

Q&A prepared will remarks. session We the following have

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

Alex Smith

it is the we to the executive feel already with and new with as we the and uncertainty strategic we grow. along excitement desirable ranks consumers - prior, tasks strategy there very African up been as a And during financial This hopeful over good enabled times. are and delays. southern strategy, continue finally, some suffered the the only African longer made some southern at we everyone and Mali, review concerns business, revitalize months banking through the recently of help operational us Lincoln we and new in who goals this the of X this ambitious new months. as a will is opening transition, before initiatives and industry. up then been a the is from has the currently financial inclusion up time vaccination strategic but data hitting But for on South questions. all and the in services up-to-date third term can become a major latest to first, announced new It's but some The is we to review respected relatively focus earnings the Net Africa, among lockdown call. and expect everyone. about Thanks, several for we anchor a enterprise, government now financial South the on program. We Lincoln wave in have are one, on To hired hemispheres company merchants. a I'll years we on relative place used winter our work and the continue energy safe we Having our the Dara. The has these early April. our joining the in Monday, to in Africa and the focused a well amazing office that our term which well Net focused ahead. level our and relatively short call out highlights review the restrictive our executive in through since been bring at mission be situation the rolling everyone in new its South has in South I thank levels underserved quarter, for stage dynamic least and we’ll is initiatives, South executing. country, stable infections undoubtedly we'll from X's But To CEO experienced attract for talent And low we to on to will run level lockdown us for player environment. Nevertheless, took can say are is today's third healthy call, during which Africa, eight currently quarter also approach five you a are on hope the following; day for On staying and Africa. drive Fintech our business difficult COVID-XX

be operationally We've final for During selling more focus the us the DNI, our for Bank in months, substantially our have here reducing the burn these business ample South our European IPG, inclusion preserving in which Frick, of products on our collected proceeds streamlined the closed venture, financial a stake and preparing down been cash stake XX payments re-launch over Africa, next also position strategic we months. cash of opportunities. will in eight our sale for thereby key the

really while workings to less inner of the are be summary, may the the we beyond glimpse in believe So get obvious create scale quarterly and standout not strategy definitely financial with we of talent, company, the to and the who Africa. it a much our South Fintech business energy investors, in well-positioned meaningfully financials, inclusion

the been and as for quarter. has key very third quarter the be theme scaling as business, we’re team on to current and from highlights as the strategic pursuing the our progress, Now The this continues financial busy to well board executive operational initiatives.

operationally. reported adjusted last revenue due results and $XX.X While decline sales, dollar terms, as POS EBITDA XXXX. $XX during The start primarily and a disappointing, able in saw XXXX, impacted total to The and million quarter third XX% been quarter reflecting the loss was reported as prepaid have we building [ph] $XX.X US account EBITDA African XX% South was terms a been the to X% airtime XXXX meaningful, was decrease operations US our acquisition revenue our which we tangible revenues. was fee made to good in fewer in well of rand year-over-year dollar lower to for fiscal of core also have and have the comparable project, of The million, reported customer fiscal the of rand in million, progress momentum the financial the million, $X.X quarter. quarter which losses We the second compared weaker of weaker results. against which third

cost significant base we and have remained the stable, available capacity. However,

year third Africa, about share Corporate from ago. our previous progress, loss and the $X.XX of fall does inflated accounts, was XXXX million, in The last we XX,XXX gross bank South were to share or the during rate increased but further amount quarter Everywhere $X.X quarter. $X.XX quarter. EPE of more per net costs accounts to run fundamental expectations quarter. the an a consumer In the reflects a fundamental per normal by accounts compared XX,XXX set out returning EasyPay the This short loss

executives. monthly we to the departure clearly receive changes number much external which process some they of acquisition to which the pushes achieved. several accounts serving it been make expecting not some caused easier long a have by are a From designate had X.X March, We and grant. we to with from And million expectations has SASSA we've EPE The high perspective, number by not had and an recipients meaningful a management for of proposed This into account been regulatory acceleration through. the Internally, seen delay reaching in internal believe customer this caliber bank changes several we external. months. have backed are several a their drafted the have to team changes, open factors, expected and our push see additions been of we grant

to As printing office then recipient involves regulation form deliver has a discussed and in which has passing into be gazetted, them filling law. pretty the deliver out would the yet to processing. which changes These we've previously, and - assess existing to draft are for is hand onerous process result the to

In changes. We've significant we regulation for our waiting we idly communicate serve nationwide again sitting last any our the is time to customer have plan and marketing put feel made target the campaign. communities marketing not market. right we're investment our not campaign. to embark However, a years, comprehensive X.X the on into lift in acquisition we together And profile now a to

and where significant Our cost we Africa a support stable in base business can activity. level remains in growth South

to result, at a clear coming revenue level. any profitability to should large of the corporate relatively Africa profit and then drop quarters in to achieving As providing a breakeven line, in the growth reaching us South path percentage the

initiatives. encouraging Our plan by restrictions that becoming active we little we may regulatory COVID achieved next accounts so future date continue impacted this is reach in with without process have that revenue The in the proposed emphasizes the year, half and initiatives, proactive because be affect our while South - to growth monthly earlier and seems generating. important to fiscal the basis, is a I breakeven accounts on in over our lockdown primarily acquisition to these adversely continues may been believe respect total regulatory active number million, be in referred plan. caveat a to to bank related ongoing the This or to increases be why see of that X we of and first change Africa of of customer delays marketing net

utilization Our values, the has total affects slightly to and which volumes lower withdrawal in reduced ATM network this direction, were right though fees trend continued quarter. transaction

same expansion low volume new of important electricity due this an book is prior by transactions about Transaction by prior seasonality March the more in to There's base. versus any in was XXXX. XX around the EasyPay penetration X% higher last ZARXXX customer though Compared in XX the growth growth quarters, see the growth loans Future likely stronger, For they recharges, the on We the million up The of in infrastructure finished loan to loan reductions on customers. margin but bill therefore any period at lag volumes at the the to loan through that same quarter X% and down last three growth the in up XX% year, quarter. from is And our quarter, XXXX the see customer book been using higher unique base. there and December March customer and fiscal the encouraging into last into little loan X% year. come of the lending we same in but airtime our around room million compared number penetration payment trend existing to the space. apply will XXXX to months this quarter continue in for transactions quarter XXXX. ZARXXX to requirements were base. million in did than currently over EPE of affected the were The growth customers indicating the normal quarter two we ZARXXX our limited XX% switch customer books expected XX%

short the some months, We volume into the coming in also new few next high result in in the term. have should relationships growth good ecosystem which

million for IPG, as significant any loss provided with quarter, costs with $X.X loss the million for million the quarter quarter, expected of terms we balance recorded all we is respective $X.X last loss we in of for the the this operations Bank million impact indicated for quarter the of last to In a of This be the IPG, with loss process formed as $X.X balance profit was the the of unit. various the largely quarter closure for IPG complete, cost having that of Frick. is entities the of settlement business The we quarter. of reached liquidation account that the are closure the in $X.X business the now around settlement been Included loss of for quarter the for the already and for in accounted the operational entering part and settlement the this creditors. represents the

a review just to few various minutes investments. Now

Frick. Bank the First

the Foundation are remaining for As sold Family Frick we quarter. to interest the in our aware, you $XX million back Kuno

a all this $X.X and settle purchase due Only $XX.X of over the the IPG outstanding XXXX to price million We was the was was was initial completion, reminder, process. two in as the installment major price liabilities the Frick. of cost As the received purchase closure completion, October million and believe payments million balance between and final on XXXX. used due group further $XX of with any on received July in that Bank

same carry in continue Finbond the $X.XX which share. XXXX, recorded We around December at per to value to equates

an recovery the of And equity around accounted write our up last saw over value are it in to investment, share trading we we [ph] has Finbond able price. to price. been As not the stake ZARX.XX some the month market quarter, the the During

$XX.X into million. which is only will year, have end will be fiscal the incorporated visibility Finbond’s MobiKwik $XX.X our quarter performance We We the results. despite trading of to shareholders pre the by our some fourth million increase the of as buy to valuation March through million capital in investment growth to market. February, value and the new India basis $XX.X later facing XXXX for to financial for adjustment at this player in leading to towards is particular, XXXX. In the issuance raised MobiKwik are money of of million our Their carrying of from performance rapid product in XX as of of they're to continues May, mid-March $XXX improve this additional end the positioning the achieving as in a latest pay shares India their of and the pandemic. In themselves due XXXX, challenges that now use March valuation

We operational investment at of results. Cell Cell our C but zero progress continues its but steady continue of to carry is to value make XX. the recapitalisation March slow delivering improved as C on plan,

million would like which While can sustainable is capital be completed. debt. progress $XX will are is just of that But through the sized, airtime priority on Investment to multi emerge. the right party South recapitalisation this highlight I realized the a that to have clearest way our out updated had restructuring. a acquisitions assure focus can not business frustrating, you, did matter. dollar the core status and is our clarifying the likely recovery At We we $XXX the And once of structure C operations, progress report we areas our slow be it that terms there complex to only total. of to remains of is can this we out keep XXXX, highly again, this continue of we top quarter balances about And million The our hold either confident balance currently is cash denominated XX Cell which on for March is the Act. $XXX a were Company under new anything sheet, are in million, our us. after we or of team. uncertainty no unrestricted for for African both investors US If

capital be will best our likely we return include a allocation use Company likely the will our generally look and shareholders. most capital is as shareholders. governed the remaining the return status where by for at soon time review Investment of capital clarified, Act the As will possible the generate is of circumstances the effective our which may capital, - What at for to

of to Net Finally, minutes few spend a future on X. the

in banking for position has on for with the hit As we Lincoln earlier, the the I CEO is He Head expand and services believe in the South February. Xst other May businesses. record track of as Eastern in and Mali at our recently accomplished a Africa Business the we Africa ground This invaluable Card is to company, the that Standard strong with mentioned member as joined chairs of is the Southern consumer the a and a Lincoln most Diners and look directors of position. announced industry. XX highly East And Middle and across African financial Group. perfect services and board Central appointment is countries candidate officially The he consumer and Club merchant we financial and us the He South Europe, certainly services African Bank visa. running. will was executive, Group for over be XX of years merchant He Payments financial Council new Africa and

estimated $X.X a is the estimated or financial consumer services dollars at reminder, services, total billion billion TAM or at billion and - is a ZARXXX As ZARXX or And approximately annually. million merchants banking market $X.X addressable billion TAM annually. financial approximately

cash payment product to superior to wishing Our and or offering exceptionally - channels or our for of coupled - transition offering competitive electronic platform. both market categories primary digital distribution an provides with markets, process

achieved and resources business more South on in were focus able activities last streamlining to over quarters, that our more the three the to Africa. the dedicate we With we've of

our activity, As a is as our M&A as [Technical - drive in well strategy progress result, focused our activity alongside initiatives. organic currently as Difficulty] South Africa our corporate fully on to

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formally on company the are X fully engage Africa. in business Net seeking clarify to investment Fintech to into we status to exploiting continue grow We [ph] x focused huge this our leading South in opportunity and

I customers Before extend who excellent Net exciting just to and to and we can for our of specifically an now questions, [Technical quarter, like an to developments to like you - that opportunities stakeholders. of time. provide taking hand feels uncertain service journey any an the appreciation can last really the my the customers for to our entire our unprecedented some team the provide of continued and customer during employees have to new X at it in all With I are Claudia, start it questions. returns back significant Difficulty]

Operator

you quick first from go Please B. Raj The ahead, Instructions] Riley. Thank very much, sir. from question Sharma Raj. [Operator comes

Raj Sharma

Good Hi. Alex. morning,

Alex Smith

Raj. Hi,

Raj Sharma

Good morning, Dara.

give going you [Technical said you related - that or out Difficulty] I pushed were more forward? that, XX,XXX expected So months. do ads higher? a net happening not think lockdown level. know, questions changes has to quarters there you - net Difficulty] stricter South could How significantly of been than saying to a this [Technical - XXX,XXX the you you few you're how What was target my how the new see few some additions. And changes that bit the would given that little do from Clearly Africa you – necessarily we very the a in and what if account lower

Alex Smith

think moment accept product starting are the our I public see that of bank government. I the with they really much base. customer and never proactive engagement as are of catalyst [Technical remarks, grants. requiring guess target Difficulty] from think the because Difficulty] that And people out we're Its I more are we that [Technical of years, last marketing have I to of the of to target done the base portion the planning start been now a market. very We That's now we’re major as here [Technical two that of the ramping we've people a a what a level. the accounts - limited is marketing we and entitled process Really customer And we're our becoming the terms opening comes much small much at key of we Difficulty] at we compelling that in prepared not see over as in more, enabling the relatively I think quarter faster believe [Technical last we acquisition to said we've campaign. preparing customer up lining but also also us through of And you and think, process. engagements half various can Difficulty] never a up start very we that are going that catalyst. believe process assist in know, I stakeholder a on the

Raj Sharma

there and or So, would decline know, a what new was you that the in was explain ads sequential - sequential it… net

Alex Smith

if [Technical our African services a then, and of given board consumers that of the more of supervision the this And, limited Cell to part know, very funding involvement, you financial of detailed that. for our respect associate, the the lie, of I around C African engage know, where C want from current rebuilding Cell - last happy far financial in and things C, you is in focused management space don't Trading discussion competency lies. know, which Cell where you on Difficulty] level on the aim offline core in we're – merchants. that. We're for inclusion the think and outside you was appropriate South quarter and business, core want or distracted we

Operator

for us. you today's that you Thank Ladies joining much. gentlemen, and conference. concludes very Thank

may now your You disconnect lines.