Good afternoon, ladies and gentlemen, and welcome to the Net 1 UEPS Third Quarter 2015 Earnings. All participants are now in listen-only mode. And there will be an opportunity for you to ask questions after today’s presentation. [Operator Instructions] Please also note that this conference is being recorded. I would now like to hand the conference over to Dhruv Chopra. Please go ahead, sir.

Thank you, Dylan. Welcome to our third quarter fiscal 2015 earnings call. With me today are Dr. Serge Belamant, our Chairman and CEO; and Herman Kotze, our CFO. Both, our press release and Form 10-Q, are available on our website www.net1.com. As a reminder, during this call, we will be making certain forward-looking statements and I ask you to look at the cautionary language contained in our press release and Form 10-Q regarding the risks and uncertainties associated with forward-looking statements. In addition, during this call we will be using certain non-GAAP financial measures, and we have provided a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. We will discuss our results in South African rand, which is a non-GAAP measure. We analyze our results of operations in our 10-Q and in our press release in rand to assist investors in understanding the underlying trends of our business. As you know, that company’s results can be significantly affected by currency fluctuations between the U.S. dollar and the South African rand. So with that, let me turn the call over to Serge.

Thank you, Dhruv. I must admit that the sound is not great on our side. I don’t know if it’s the same everywhere else. Good morning to all of our shareholders. Our fourth quarter results continued to demonstrate the quality and strength of our earnings. We achieved $151.1million in revenue and $0.57 in fundamental earnings per share, which translates into 9% and 21% growth in dollars respectively, and 18% and 50% growth in rand terms, when compared to the third quarter of 2014. Our businesses continue to perform and grew at par or above our expectations, and our new and focused initiatives are showing better signs of adoption and scale compared to what we had originally anticipated. Today Herman will provide the details of our financial performance. We’ll also spend some time discussing our group’s strategic direction, its associated performance, and critical timeframes. Our business units continue to diversify their activities by introducing our products and services to new jurisdictions, market segments, and customer groups that offer us, due to the nature and the size of their populations and GDP, the potential for higher revenues. The first leg of our strategic plan, which required the development, certification, stabilization, and commercialization of our technology platforms and products, is complete and, as a result, not only opened a myriad of new business opportunities, but more importantly allowed us to consider alternative business models both in South Africa and other countries in the world. At this point, let me spend some time on our CPS government business, the status of the RFP issued by SASSA on April 17, 2015, and the different options and alternatives we are currently evaluating to ensure that the best possible outcome for the Company going forward. I’m sure that you are all aware of the sustained efforts we…

Thank you, Serge. I will discuss the key results and trends within our operating segments for the third quarter of 2015 compared to a year ago. For Q3 of 2015 our average rand/dollar exchange rate was ZAR11.74 compared to ZAR10.87 a year ago, which negatively impacted our U.S. dollar basis results by approximately 8%. The U.S. dollar, our reporting currency, has continued to strengthen against all major currencies, while the rand continues to be plagued by South African specific risks. The rand is currently trading at around ZAR12.06 to the dollar and as predicted the stronger dollar has progressively, adversely impacted our fiscal 2015 results thus far. Notwithstanding the ongoing reporting currency headwinds discussed above, we have continued to sustain our top and bottom-line growth through Q3, 2015. On a consolidated basis for the third quarter of 2015 we reported revenues of $151 million and increase of 18% in constant currency. We reported fundamental earnings per share of $0.57 which grew by 50% in rand compared to a year ago. Our fully diluted weighted share count for Q3 2015 was $46.7 million shares. Let me now turned to a discussion of the segments and the financial performance during Q3, 2015. South African processing recorded revenue of $58 million during Q3 2015, 9% higher in local currency, driven primarily by increased low margin transaction fees generated from our customers using the South African national payment system, and more intercompany transaction processing activities. In addition, revenue from the distribution of social welfare grants grew modestly during third quarter, and was in line with the increase of 4% to 5% in unique welfare cardholder recipients, net of removal of invalid and fraudulent beneficiaries, but partially offset by the loss of MediKredit revenue as a result of the sale of that business in Q4,…

Thank you very much sir. [Operator Instructions] Our first question comes from Dave Koning of Baird. Please go ahead.

Yes. Good morning, guys, and nice job again.

Hi, thank you.

Yes. And I guess first of all, just on the SASSA contract, you mentioned the potential to not even bid on it. You wouldn’t just walk away from that contract and not bid unless you had pretty good insight into a good alternative where you would still play some sort of part or generate some economics, right? You’re not just going to walk away and say we’re willing to just give up a big revenue stream, right?

It’s a very good question, but I think you gave yourself the answer. We have spent too much time, effort, and money with this contract to ever decide to simply walk away if we did not believe that the alternative, if any, that we would have put together – that we would put together would not be better for the company and our shareholders.

Yes, okay. In those, you basically laid out the alternative. Maybe you could kind of talk through, maybe with a little more detail, what could you envision -- if you didn’t bid on this contract, do you envision that you would still play a technology part for one of the bidders? Or maybe you can just say what potentially could be an outcome.

I think -- number one, I think it’s too early to assume that we would not bid for the contract it is number one. Number two, I try to list a number of alternatives. And perhaps there are others which I did not actually talk about, because obviously at this point in time, a week away from tender response and submission to be due, we obviously do not want to give any sort of clear ideas to any our competitors what we intend to do or not to do. But, there is no doubt that at the end of the day I think we all know -- we’re all aware of the fact that the infrastructure today that we have deployed across South Africa to service the 10 million beneficiaries is a massive one. And it will always be playing a role in paying beneficiaries in one form or the other. The fact that we may make some part of the infrastructure available to maybe a different group of people is really irrelevant at the end of the day considering that we would still be the people that we will be making some sort of revenue and by -- for lack of a better word, rather than to be directly rendering the service, we would be the people to whom the service would be outsourced. And therefore, we would be picking up other sort of transaction fees or royalty fee. So and that does not apply to the entire solution. That only applies to parts and parcels of it. The technology, for example, is one which could be completely unleashed today - isolated from the operational -- specifically the rural area operational infrastructure that we have put together, which is again very different to the operational infrastructure that we have…

Yes, okay. That makes sense. And just as a follow up, and separately really from the SASSA business, it’s historically pretty easy or reasonably easy to model that the South Africa business and the international. But, the financial inclusion business is really where growth has been massive, and it’s almost difficult to model because growth is so big. And it sounds like there’s a lot of new things in the pipeline that you’re developing as well. I mean, is it fair to expect that that business continues to grow well above 10% next year, or is the law of large numbers getting to a point where we’re starting to see more normalized growth, back down to 10%?

I think it would be unfair to say that we’ve reached the cap in any form whatsoever. I think you are quite right. To try to model it accurately is right now almost impossible. The only thing we know is that the more products we put out there and the more we deploy our infrastructure, the more customers we get. And we are quite astonished at the take up rate of these particular customers. There is obviously, and there’s always been obviously, a huge demand for certain products and certain services that we somehow, either because we were quite right about it or simply by luck, but that we’ve managed to plug into the sort of the platinum mine to actually show us that in fact we can continue to grow, and I think grow exponentially for a while longer, specifically in any form of financial service. When everybody talks about banking, well, when you talk to the people we are speaking to, banking for them is a cost. It doesn’t really serve any purpose. As soon as you say, well, banking is there purely in order to facilitate financial service inclusion, then suddenly people open their eyes and are saying, well, you know what? If I can get the -- and I need a bank account in order to be able to get A, B and C and D, then I’m quite happy to have the bank account. In our model, the bank account is offered for free, which means there is no barrier to entry for people to sign up. And after that, it’s a question for them to simply start paying for whatever it is that they do, be it transacting or be it applying and being awarded or buying a particular financial service. Airtime and electricity are two of those. But, we do not believe that, in terms of margin, they will ever be the ones that are going to give us the biggest amount of revenue. There are many other products that are far more lucrative that in fact we didn’t even though existed. And these products we are starting to tap into in quite a big way, and this is why we are confident that we believe that, by targeting the five million people in the next 12 months. We should have a pretty high success rate of actually signing up a big proportion of them, which makes this business hugely more profitable than what it is at the moment.

Okay. Great. Well, thank you.

Thanks.

[Operator Instructions] Our next question comes from Russell Anmuth of Gotham Holdings. Please go ahead.

Hey, guys, another outstanding quarter of cash generation and margins. Two questions; one, any follow up to your thoughts for a potential restructuring of the company which you spoke a bit about two quarters ago on the call? And then secondly, could you flesh out a little bit further the opportunities that you’re looking at with MasterCard?

It’s very simple. On the first one, I think we are pretty much ready as management, or we will be -- by the end of the second week in June. We’ll be ready to discuss with management, with our Board, what we believe the form of restructuring should be in order to really optimize, what we would call the company in general, both from a South African point of view and an internationalization point of view. So, obviously we will inform all of you as soon as we are ready with that. But, the first thing is to formalize it through our Board, for our Board to actually tell us that, yes, they want to go ahead, and then candidly whatever it is we’re going to. But, chances are is that we are going to go out to our shareholders and actually sit and ask them for their views and to get their permission for it, even if we do not need to do so. So, that’s point number one. Point number two on MasterCard, I know that it can be a little bit frustrating because MasterCard is such a big tanker that for them to be able to slow down and to make a one degree turn to the right or to the left takes a huge amount of time. But, we’re starting to see more and more activities between ourselves and MasterCard, not only locally whereby things are getting very exciting. I did mention the fact that we are introducing PayPal into one of our -- into our card, which is a mask, which candidly would be one of the first cards worldwide to have thus multiple functionality. That also would allow our own customers to be able to use the one card to be able to go…

When you talk about potentially big wins with MasterCard, geographically are those going to be further centered around the continent of Africa or more spread out geographically?

Africa is obviously a big thing for us, and we love Africa. But, I can assure you that Africa is not our focus.

Okay. On the Hawks for a second, where do you stand -- where do the Hawks stand, do you think? I understand it might be difficult to calibrate, but if you could give us any color.

If it were a South African litigation, I would be able to give you my own views, which I think may be probably more correct. On the side of the DOJ, just let’s start there, at this point in time we can’t really comment too much because we haven’t really heard or seen anything or spoken with them, or our attorneys haven’t spoken to them for quite a long time now. And I mean by a long time, it’s probably more than a year. On the South African side, we obviously are a little bit more in touch with what’s going on. And it’s the second or third time now that it has been promised to us that the investigation would conclude and should have been concluded, funnily enough, by the end of April. And we are still awaiting further reports, and now we are being told the reports or the finalization of this report might come out during the month of May or at the beginning -- if not the beginning, towards the end of May. Now, I wish I could be more precise on that, but I think we’re dealing here with again big organizations that have got lots of people they’ve got to report to. They’ve got to be very careful what they write and how they write it. Lots of people are going to scrutinize it. And candidly, we would rather they go out and do the best possible job they can to make sure that, once this thing comes out -- which I have no doubt it’s going to clear us entirely. The last thing I need is somebody to go and challenge the report or something to actually say, oh, well, they got cleared but they shouldn’t have been. So, I think lets all be a little patient. At this point in time I’m pretty confident that things are going to happen in the very near term and are going to be -- from a South African point of view, are going to be positive for us.

Okay, that’s great. Lastly, on the MVC program that’s geared towards the First World, are you making progress educating potential customers?

That’s again a very good question. I tried to give some information. You probably saw that Zazoo has already entered into at least a pretty detailed discussion with more than 10 different organizations -- three months. So, the demand for MVC in this product and the excitement that it’s created is actually massive. And none of these, by the way, are in – at this point in time, apart from the one we’ve had in South Africa for a while, no new ones are actually in South Africa. Most of these are outside of Africa. They are either in Europe, India, or the Asia-Pacific rim. And as you saw, we also very much have identified an entry point into that space, which Herman tells me we should finalize very, very shortly, which we believe is going to give us a very, very, very good footprint for us to start expanding or introducing MVC to other organizations that before we were a little bit fearful to tread, e.g., a place like China. We believe that you have to do it with the right organization, people that understand the market and the people and how things operate. We believe we might have actually found that and already those people who were discussing this too believe that MVC in general, plus a few more of other products with the absolutely ideal for this market. So, I think the ramping up or the excitement this thing has created with very few resources put in and candidly a very, very small amount of time but focused time is starting to show some great result. And the intention of the Board – in fact, the Board has made a commitment to spend quite a bit more money to grow the people infrastructure and the support infrastructure we need to be able to accelerate and really capitalize on the momentum that this product is picking up.

When you talk about an entry point just generically, are you talking -- in China or whatever country you’re thinking about, is that with a strategic, a corporate, or is that from a government perspective?

Russell, unfortunately we didn’t hear you very well. But, if you’re saying is this a government – if this is government driven, the answer is no, it isn’t.

Okay. Okay, much more exciting then. Thank you. And then just lastly, with PayPal being integrated into the MasterCard combination in Africa isn’t that worthy of potentially announcing to explain on a broader scale how that works?

When we come a bit closer to finality. What I’m really – I mean at the moment, we know technology works that’s easy to explain. At the moment, we’re finalizing the important part of all of this, which is what do we get. And candidly, we believe that we have enough initiatives in many places in the world to make sure that we are not going to compromise simply because of anybody’s name or size if we are not getting what we believe is our pound worth of flesh. So, as soon as we closer to the finality of the financial negotiations we’ll certainly let everybody know what’s -- how it’s working.

Okay. Thank you for answering all these questions and for all your incredible work.

Thank you very much.

[Operator Instructions] We have a question from Bob Napoli of William Blair. Please go ahead.

Good morning. Thank you for taking my question, just a question on the long term growth of your business and your thoughts on the growth. This SASSA contract has been a very big part of your business and obviously it’s gone through a lot of turbulence and it’s had a lot of -- added a lot of volatility to your valuation. If you do walk away from that in some way, shape, or form and don’t bid on this business, what is -- how would you look at earnings growth or the earnings outlook? Would you be able to maintain earnings as you transition to the growth of these other businesses before you grow again, or would you expect earnings to initially decline as you’re investing? And then, what do you view as kind of the long term growth potential, top and bottom line, for your business?

Well, that’s obviously part of the modeling that we have been playing with. Obviously, we all want to know what we believe. Now, it’s very simple. What you have you have. What you don’t have, you think you’re going to get. At least initially, it’s a little bit more riskier because you have to attach a probability to it, okay? So, the way we’re looking at it, we’re saying if you look over the last couple of contracts with SASSA, we know that one thing is for certain. It’s that the pressure on price has been massive. There was a time we used to get ZAR27 a transaction and it went down to ZAR16.50 And now the new tender is actually asking for something even smaller than that. And more importantly, there have been a lot of overtures by SASSA; by the South African Post Office that all demonstrate that almost certainly after this contract period that they might decide to take this in-house, okay, which by the way does not necessarily exclude us. But, they might want to take it in-house. So, one has got to look at do you wait until that event has occurred before you make a call in terms of, for lack of a better word, starting to put in some time, effort and money into capitalizing on alternative business models that do not rely on SASSA? And certainly we would like to be able to do both at the same if we can. That would imply that certainly over the next year or probably by June next year, I don’t think anything would have changed. And therefore, our earnings would probably continue to grow, and they will grow for two reasons One, because SASSA will still delay in some form or other but, more…

Yes. Yes, that’s very helpful. Thank you very much.

Okay, Bob.

Ladies and Gentlemen as we have no further questions that concludes this conference. On behalf of Net1 UEPS thank you for joining us. You may now disconnect your lines.