Lesaka Technologies, Inc. (LSAK) Q2 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Net 1 UEPS Technologies Second Quarter 2017 results conference. All participants are currently in listen-only mode. And there will be an opportunity for you to ask questions later during the conference. [Operator Instructions] Please also note that this call is being recorded. I would now like to turn the conference over to Dhruv Chopra, Head of Investor Relations. Please go ahead.

Thank you, Chris. Welcome to our second quarter fiscal 2017 earnings call. With me today are Serge Belamant, Chairman and CEO; and Herman Kotze, CFO. 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, the company’s results can be significantly affected by currency fluctuations between the U.S. dollar and the South African rand. So without further ado, let me turn it over to Serge.

Thank you very much, Dhruv. Good morning to all of our shareholders. Today, I plan to spend most of my discussion focused on our strategy and how we intend to create a new impetus for both our rand and hard currency based earnings. At the same time, I will highlight how we plan to reduce our risk profile by relying far less on government contracts and the South African rand. Our results, barring specific temporary product or business related events, were good year-over-year. And for once, exchange rates did not cause wild swings in our reported numbers. Our international businesses are showing great potential. And as result of our investments and the strengthening of our management teams, our pipeline is growing meaningfully. To summarize our Q2 2017 performance, revenue of $151 million was flat in constant currency. And growth in EPE transaction growth, lending and insurance, and our Masterpayment and T24 acquisitions internationally were offset by the self-induced decline in our prepaid airtime sales, lower ad-hoc terminal sales and to a lower extent lower revenue in Korea due to recent regulatory changes. Our fundamental EPS in quarter two was $0.43, up 3% in constant currency, despite a 12% headwind due to the issuance of 10 million shares to the IFC in Q4 of 2016. Today, I would like to focus on three major topics, namely our strategic developments, SASSA, and our strategic investment in Bank Frick. But perhaps before I kick off, it is important to note that last night our President, President Zuma addressed the nation. His speech was pretty much focused on economic transformation for South Africa, South African businesses and South African citizens. I think it is important that this message is understood clearly by all businesses that operate in South Africa. And we believe we are one of those that have merit and supported any transformation plan that the government wishes to put in place. We believe that what we are doing not only in terms of providing financial inclusions for millions and millions of people, but also by employing tens of thousands of black South Africans and by empowering South African businesses, a lot of them that are start-ups, with our technology, giving them a chance to be able to compete with existing and well-structured and well-financed other businesses in our country. We believe that message should be understood clearly and is a sign that there are many changes that will occur in South Africa over time, rather sooner rather than later. And we believe that we are probably better placed both financially, more importantly, mentally to be able to tackle these changes and to ensure that we can deliver our piece to both the South African government and South African people. The second important piece of information from last night is that we have received a letter from SASSA that is asking us if we were willing and able to engage with them to assist them with what they call is a transition plan, which may occur over the next year to two years. I will discuss that a little bit more in detail, because already a number of conversations since this letter have taken place. And I will be able to hopefully throw a little bit better light in terms of what this plan is all about and if we believe that this plan is a viable plan or not. Now, without further ado, let me continue with the original press release. I have often spoken about putting pieces of the puzzle together, which in turn would allow us to paint a clearer picture of our group strategy going forward. Given our efforts, I believe that we are now in a position to start articulating this strategy and also demonstrating why we believe that it is successful and has the potential to scale exponentially not only in South Africa, but elsewhere in the world. Right from our inception as a NASDAQ listed company in 2005, we have said that Net 1 would become a company that provides financial services, so called financial inclusion, to the poorest communities in many different countries of the world, thus providing this financial inclusion in its truest form. Net 1 started out as a pure technology company, focusing on creating technological products like our UEPS that could meet the need of the poorest communities, namely security, accessibility, affordability and functionality. Over time, we have observed that it is harder to build a long-term sustainable business by being purely a technology provider to governments, banks and other financial institutions, given the inherent move by these institutions to squeeze costs and margins. From my inception, we have led to develop aggressive and disruptive business models in order for us to compete and to remain competitive. It was these observations that prior to our new SASSA system implemented in 2012, led us to view our technologies as an enabler, and to use these to provide financial and other services, and no longer be simply used as a commoditized third-party technology provider. To make this transition, we have to assemble a number of pieces of the bigger puzzle in order to own or control the entire value chain. And thus, maximize our returns, return flexibility and accelerate our market penetration. One of these tasks was the onerous and time-consuming effort of getting access to or owning licenses for banking, insurance and lending. Another was to formulate a strategy that will allow us to create a fast and low-cost customer acquisition strategy across various markets. Starting with South Africa in 1997, we have demonstrated that this strategy works and offers high incremental returns, while being capable of scaling rapidly. In the evolution of the FinTech industry, one can see that the customer is more than willing to pay higher interest rates for a microloan as an example, but conversely does not see as much value in paying for just for the technological part including switching and processing. The exception being where there are markets in which accessibility is a challenge. In these markets, that serve most people in the world, our technology will always remain integral to what we do. But the more we commercialize our products the faster we can deploy these. Far more financial service providers often make use of the rules and regulatory environments in existence to slow down or even prevent any new form of competition. For example, many countries’ central banks, they find the rules and standard that must be implemented in order to provide certain banking services. Over the years, we have experienced this first hand, and as a result made the decision that in order to compete we need to become a formal player that operates from inside the tent rather than from the outside. This breakthrough occurred five years ago, when we launched our all-new UEPS/EMV debit card and entered into an agreement with Grindrod bank. Since 2012, we have been able to use our advanced technology to win $10 million wealthy beneficiaries, open almost 2 million new banking accounts, issue in excess of $1.8 million small and short-term loans, sell nearly 300,000 life insurance policies and consistently provide more than 3 million customers on the monthly basis, with our prepaid products using our mobile platforms. We continue to grow our customer base as well as introduce new products and services which are relevant to our customers. In the last five years, we have built a UEPS-based banking platform that is fully compliant and certified with national and international standards, and regulatory bodies. And is able to offer banking services as well as any financial product and services such as microfinance and insurance. What is key however, is that we were able to achieve this, while still be able to introduce a news on superior technological platforms and solutions. This is what gives us a competitive advantage and allows us not only to become a comprehensive fintech company, but also to become a fully compliant digital banking platform that can compete with any form of bank, because of our security, simplicity, affordability, accessibility and functionality. Our digital banking platform, we just to be clear is fueled by UEPS and essentially institutionalizes the platform. There is no need an expensive brick and mortar infrastructure that formal banks have built over time. But it instead uses new distribution channels such as internet and mobile phones through which many different types of transactions can be performed. In addition, our solutions allow us to implement our banking platform in the deepest rural areas. In order to scale our model required an innovative customer acquisition strategy, many FinTech companies rely on acquiring customers through incentives, which over the long-term are in our view not sustainable. Our customer acquisition approach is therefore based on using B2B, and government to consumer channels. As example of this approach SASSA is an organization that is responsible for the payment of social grant to 10 million people in South Africa. And first provides payroll services to approximately 1,700 companies in RSA, and employees in excess of 700,000 employees. We therefore first offer these businesses are technology platform to service the on customer base. And second then target the customers and employees of these businesses while offering them a financial products and services. We have built a proven track record that this strategy works. Going forward, we will continue to look for businesses with large customer basis. To whom we can at some point to other introduce our digital products and services. This potential customers can include government tenders, electricity resellers, and then those intermediate service providers, transactions which is payment gateways, and of course mobile wallet providers. Now looking back at the various investments we have made over the past 18 months. You can see that all of these help us finish the puzzle and address one or more elements of this strategy. Our digital bank platform, she is currently called DB4B, that is the Digital Bank for Business, and EB4C, Digital Bank for Consumers. This banking platform targets the businesses mentioned above and once acquired can offer consumers specific products and services to its B2B2C clientele. Another important role, which is another point to note is that way possible. We will go to market ourselves with these same platform, but we’ll need to be supported by requisite licenses and infrastructure. For other markets including as additional emerging economies, we will take an indirect approach, where we can offer the platform as a service, and potentially were permissible from the cloud by utilizing the local license and infrastructures of our partners. This strategy will allow us to offer UEPS EMV based platform with all of our existing products, and deploy them quickly and across first as well as third-world economies. We are very close to replicating this model in Europe through our announced agreement with Bank Frick, which once finally approved by regulators would allow us to issue cards of our merchants and offer current savings accounts. In order to remove any future risk associated with possible context of the interest. We have agreed to acquire 30% interest in the bank, with an option to acquire further 35% within the next two years. DB4B will also four main business streams namely banking services, payment services, credit as well as UEPS/EMV banking platform for developing economy. In addition to our proposed strategy with Bank Frick, we can complement our strategy by leveraging our e-money licenses in Malta and in United Kingdom. Bank Frick will provide us with all of the necessary licenses in banking relationships and allow us to settle transactions anywhere in the world, and in any currency. In its initial state, DB4B will promote our German B2B business called Masterpayment, including its recently expanded operations across Italy, France, Spain as well as the UK. Our T24 subsidiary provide us with an e-money license in the UK for taking us against from any unwanted results of Brexit. Additionally, T24 will provide our ACS processing into the United States as well as our prepaid card platform while also becoming a distribution sales force for the Asia-Pacific region. As stated, the heart of this banking platform is of course our UEPS/EMV solutions, which will further include corporate card issuing, virtual card and new product named Paylink as well as independent biometric verification, an absolute must in any developing economy. DB4B, with the appropriate partners and licenses will eventually be in a position to offer money transfers from anywhere in Europe and the United States to any country in which we have a distribution infrastructure, such as South Africa, Nigeria, India, Korea and Mexico, specifically some of which are related to our Blue Label cooperation agreement. We are working to replicate this model in India through MobiKwik, and potentially Oxigen, as well once again through the Blue Label initiative. The scale in India through this few organizations alone, would give us access to a customer base of more than $70 million individuals and in excess of 1.5 million merchants. As highlighted last quarter, we are implementing a new management structure to ensure that we have the necessary resources, and attention to pursue these activities across regions. This focus and precise approach to deployment, using this new business model should ensure that we can scale rapidly and protect our business in the future against any form of this intermediation. Our South African operations continue to grow, and as we add additional distributors, we should be able to increase the number of new clients voted on our banking platform, which is called EPE, Easy Pay Everywhere. The expiration of our SASSA contract on March 31, 2017, would have provided us with additional infrastructure uplift, form of our mobile units that would increase our footprint resulting in further customer acquisition. This is probably a good point to address the latest developments on SASSA. But before I discuss the current stated events. It is painful not only to myself, but the thousands of employees at Net 1, and the millions of our customers that unbridled slander with no basis in fact is so easily disseminated by people who have their own political interests aided and abetted by certain sections of the media. We fail to make it effort to separate effect from picture. To that effect, I’d like to spend a quick moment to take certain of the facts. One, the constitutional court invalidated the tender awarded by SASSA to CPS. And I’d like to quote Judge Froneman. And I quote SASSA’s irregular conduct has been the sole cause for the declaration of invalidity and for the setting aside of the contract between it and CPS. Therefore SASSA was solely responsible for the administrative irregularities in the tender process with no blame assigned to CPS. Two, even today, certain parties slanderously posture that there was corruption involved that resulted in the award of the tender to CPS. The fact that this specific issue has been extensively addressed, while all three courts in South Africa. We dismissed these allegations with costs against the plaintiff, as well as the Hawks division of the South African police services, separate investigation by the SEC and JSE triggered by the malicious intent of our detractors all of which have been concluded that no action should be taken against that company. Three, the implementation of our UEPS/EMV system has not only financially included more than 10 million South Africans over the last five years. But also saved the fiscus roughly ZAR 10 billion over five years, which is significantly higher than the cost. The government paid to contract us to operate the system. We have therefore paid for ourselves with no extra burden on the fiscus whatsoever. There’s also been no shortage of social activists. Media and political persons, we’ve claimed to be standing for the rights of SASSA beneficiaries being subject to unauthorized deductions. Once again, here are a few facts that need to be addressed. A, the provision of financial services to beneficiaries was an integral part of that initial tender submission, it was accepted by SASSA. We are very proud of the fact that we provide the most affordable financial services to all of our customers, as it evidenced by the phenomenal popularity of our loans, insurance, products, and value added services. These are facts that cannot be denied. We have brought true financial inclusions to millions of South Africans over the last five years at the lowest possible cost to them. And we believe that all citizens if the right to conduct their financial affairs with absolute freedom of choice. B, we do not perform any Section 26A deductions out of our own choice, but through the facility created by the reserve bank with facilitate more than $15 million debit transactions per month through the South African banking system on behalf of approximately 1,300 service providers. C, while it is widely acknowledged that these are system-wide issue of unauthorized deductions. SASSA reported that 18,800 transactions we disputed during the 2015, 2016 fiscal year, which is far below the industry benchmark for disputed transactions and represents less than 0.01% of all debit transaction processed during the period. D, having said that, we recognize the need to protect our customers. In fact, we are one of the only institutions that recognizes that need for this system-wide issue and therefore have taken the leadership position by implementing biometric authentication, which will protect the customers and provide irrefutable validation and we have also approached the court for a declarative order for further guidance. It should be noted that all of that debit orders that they have been authorized via biometric verification, none have ever, ever been challenged or reversed. With that said, let me provide the current status with SASSA. After much posturing in the public domain over the last few weeks where SASSA has set the intend to extend our contract beyond April 1, 2017. Yesterday, we received an official request from SASSA to see if we would be willing and able to meet with them to explore, what they call the probabilities of assisting SASSA through a transaction. We have already provided a response accepting their offer to meet. We have spent time with numerous SASSA executives and committees over the last year, to make them away of each facets of our current solution. Unfortunately, these in-depth discussions are not shared with other treasury or members of the public, who do not really understand the enormous complexities and logistical challenges of what this job actually entails. This being said, we have put in place a continuation plan, which would accommodate a new contract with us if this prove to be required. We are of the belief that it is not feasible for anyone institution, or for that matter, a combination of providers to take over our activities by April 1, 2017. Any new solution would require 10 million cards to be reissued to all people, specifically those that live in deep rural areas and such new registration would require precise planning and probably more than 12 months to achieve from the time a new tender is issued and awarded. There are more than 10,000 pay points that need to be serviced monthly. And this simply cannot be achieved by any existing infrastructure, specifically in the rural areas where there are no ATMs, bank branches or post offices. SASSA continues to state that they wish to take the payment system in house, rather than to outsource it to a new contractor or contractors, as this outcome would simply recreate the current situation at a later point in time. We await SASSA’s final decision and will continue to assist them to achieve their goals going forward. It is inconceivable that government would simply throw out a system that has brought them massive savings and worked without any flaws for the last five years. To conclude the appropriate alignment of our management team, go-to-market strategy, and focused acquisition and investment strategies will help us drive our foreign currency top and bottom lines, advancing our diversification efforts in South Africa and reducing concentration risks, while increasing the group’s revenue and profitability. 2017 has been all about setting up Net 1’s globalized growth strategy. And we are confident that this will be reflected in our reported numbers starting in fiscal of 2018. I’d like to thank you very much for your attention, and over to you, Herman.

Thank you, Serge. I will discuss the key results and trends within our operating segments for the second quarter of 2017 compared to a year-ago. For Q2 of 2017, our average rand dollar exchange rate was ZAR 13.94 compared ZAR 14.12 a year-ago, which resulted for the first time in a long time in a negligible impact of currency fluctuations on our reported results. We continue to absorb our growth investments and manage through certain regulatory constraints in Korea, which in turn will help us drive improved growth in fiscal 2018. Revenue for Q2 2017 was flat in constant currency, while fundamental net income grew 15% and fundamental earnings per share by 2%, impacted by the dilution caused by the IFC share issuance. On a consolidated basis for Q2 2017, we reported revenue of $151 million, and fundamental earnings per share of US$0.43. Our fully diluted weighted share count for Q2 2017 was 52.6 million shares largely as a result of the issuance of 10 million shares to the IFC in May 2016, partially offset by share repurchases. By segment, South African transaction processing generated revenue of $60 million in Q2 2017, up 12% on a constant currency basis. Increasing segment revenue and operating income was primarily due to higher EPE transaction revenue as a result of increased usage of our ATMs, increased inter-segment transaction processing activities and modest growth in the number of social welfare grants distributed. Our operating income margin for Q2 2017 and 2016 was 26% and 23% respectively. Our fiscal 2017 margin includes higher EPE revenue as a result of increased ATM transactions, an increase in inter-segment transaction processing activities, an increase in the number of beneficiaries paid in Q2 2017, which was partially offset by annual salary increases granted to our South African employees. While the inter-segment transaction processing activities continue to make a meaningful contribution to the segment they all as always eliminated on consolidation. International transaction processing generated revenue of $44 million in Q2 2017 up 6% on a constant currency basis. The revenue increase in constant currency was primarily due to the inclusion of approximately $4 million from T24 and Masterpayment, partially offset by modestly lower contributions from KSNET as a result of the regulatory changes governing fees that maybe charged on card transactions. Operating income during Q2 2017 was lower due to a decrease in revenue in KSNET growth related expenses incurred by Masterpayment as it expands its staff to execute its expansion planning to new markets, and ongoing ZAZOO start-up costs in the UK and India, which was partially offset by a positive contribution by T24 and the $800,000 refund in Korea that had been repaid several months ago in connection with industry wide litigation that has now been finalized. Operating income margin for Q2 2017 and 2016 was 9% and 10% respectively. T24 and Masterpayment had performed well and both exceeded the anticipated targets. As we previously mentioned, we decided to accelerate the rollout of Masterpayments working capital finance product across Europe during fiscal 2017, which will likely result in operating losses for this business during the next year as we scale up our organization platform and infrastructure. We believe that our investment will result in a profitable contribution from this business in fiscal 2018 with exponential growth expected in 2019 and beyond. Starting in October 2016, Masterpayment hired several experienced executives across Europe, which will temporarily impact the profitability of this business until we achieve the commensurate increase in revenue later in the financial year. For Q2 2017, KSNET revenue declined 3% in Korean won to $38.4 million, while EBITDA margin excluding the $800,000 settlement received was flat at 25% compared to last year. As previously stated, recently enacted legislation in Korea has impacted all card issuers in Korean value added networks. We expect calendar 2017 to be a challenging period for KSNET and its peers as the full impact of the new fee rules become evident and based on our current information we expect the EBITDA margin to contract from the higher-20s to the mid-20s. Beyond calendar 2017, we expect volume growth to compensate for the lower fees and for KSNETs growth trajectory to resume. On the upside, the new legislation has significantly reduced the amount of CapEx incurred by VAN companies and KSNET overall cash generation has already improved substantially. Our financial inclusion in the applied technology segment revenue was $59 million in Q2 2017, down 11% compared with Q2 2016 on a constant currency basis. Segment revenue declined primarily due to the introduction of our new biometric linking feature for prepaid airtime and other value added services as well as fewer ad hoc terminal sales. The decline in segment revenue was partially offset by increased volumes in our lending and insurance businesses, and increase in inter-segment revenues and higher card sales. Prepaid airtime sales are low margin and hence the impact of our security features has a greater adverse impact on revenue, but accretive on margin. Operating income margin for the financial inclusion segment was 24% and 21% during Q2 2017 and 2016 respectively, and has increased primarily due to the improved revenues from our lending and insurance businesses, and an increase in inter-segment revenues and fewer low-margin prepaid product sales, offset by fewer ad hoc terminal and annual salary increases granted to our South African employees. Our gross lending book comprising of capital out and deferred service fees at the end of Q2 2017 was approximately ZAR825 million compared to ZAR831 million at the end of Q1. We continue to believe our financial services offerings will sustain the segments growth along with commensurate expansion of our branch and ATM infrastructures. Our insurance business under Smart Life insurance policies continues to sustain its momentum and the business is already profitable as we have already sold more than 290,000 policies as of February 7. The operating margin of this segment will continue to be affected by the relative contributions of the various businesses in the segments, and the adoption rate of our various financial services products. We expect our cost base for the segment to stabilize during fiscal 2017. Corporate and eliminations includes amortization of intangibles, transaction-related charges, stock-based compensation charges and reversals net, U.S. legal expenses and general corporate and overhead costs. Our corporate expenses have increased primarily due to higher corporate finance related expenditures of $1.2 million higher amortization costs and modest increases in U.S. dollar denominated goods and services purchased from third parties and directors’ fees. Our Q2 2017 net interest income increased to $4.6 million driven primarily by higher average daily South African cash balances and South African rand interest rates, and lower average debt balance in Korea partially offset by the lower interest earned on the U.S. dollar cash reserves that we converted from South African rand through distributions from our South African subsidiary. We expect our interest earned to reduce during fiscal 2017 due to higher balances held in U.S. dollars. We expect our interest expense to increase due to the interest components of our recently obtained ZAR1.4 billion loan facility partially offset by lower interest charge in Korea as a result of our unscheduled debt repayments in July 2016. Our proposed acquisition of a 15% stake in Blue Label Telecoms for ZAR2 billion has not been finalized as Blue Label has not yet completed its investment of 45% in Cell C. Capital expenditures for Q2 2017 and 2016 were $3 million and $10 million respectively, and have decreased primarily due to the acquisition of fewer payment processing terminals in South Korea and ATMs in South Africa. As I mentioned before, we expect our quarterly 2017 capital expenditures to be significantly lower due to a restriction placed on VAN companies in Korea from providing payment processing terminals to the majority of merchants operating in Korea. At December 31, 2016 our cash, cash equivalents and restricted cash was $199 million and includes $44 million of restricted cash related to amount held in escrow pertaining to the ZAR 2 billion guarantee issued to Blue Label. The decrease in our cash balances from June 30, 2016 was primarily due to the repurchase of shares of our common stock unscheduled repayments of our Korean debt payment of taxes, the investments in MobiKwik, C4U and Pros Software; a loan to Finbond and capital expenditures, which was partially offset by the expansion of most of our core businesses. We anticipate the closing of our 50% investment in Bank Frick during Q4. The purchase consideration will be settled in cash. Following the completion of our investment, we will probably equity account for this investment. More information about Bank Frick including the latest published financial statements for the six months ended June 30, 2016 is available on the bank’s website at bankfrick.li. We continue to fund the group’s operations and capital investments utilizing our cash reserves and cash generated from our business activities. However, if we complete the investment in Blue Label, we will be required to utilize our new working capital facility with Rand Merchant Bank to fund our operations for the next 12 to 18 months. Our effective tax rate for Q1 fiscal 2017 was 36.4% compared to 38.7% last year and was higher than the South African statutory rate as a result of nondeductible expenses and the tax impact of distribution from our South African subsidiary. We expect our effective rate for 2017 to be in the 33% to 35% range. Our weighted share count for Q2 2017 was 52.6 million shares. Our share count as of December 31, 2016 was 52.5 million shares. Given the recent share issuances and repurchases, we believe the weighted average share count for fiscal 2017 will be approximately 54.5 million shares, which includes the weighted impact of the 5 million shares sold pursuant to the share purchase agreement concluded in October 2016. To conclude, given the number of variables that will ultimately have an impact on our fiscal 2017 results, including the status of our SASSA contract and the potential financial impact of the Blue Label transaction, we anticipate our fundamental earnings per share for fiscal 2017 to be at least $1.69. In formulating our guidance, we continue to assume that our contract with SASSA remains in effect for the full year on the existing terms and conditions, a constant currency base of ZAR 14.38 to the dollar, an updated share count of 54.5 million shares, and a tax rate between 33% and 35%. For clarity, while our guidance does include the issuance of the 5 million shares in Q3, the potential interest expense related to the South African debt facility has not been included, as the disbursement of that debt is dependent on the conclusion of the Blue Label Cell C transaction and is hence a transaction related event. With that, we will gladly take your questions.

Thank you very much, sir. [Operator Instructions] Our first question is from Porter Collins of Seawolf Capital. Please go ahead.

How are you doing? I got a couple questions here. In terms of your MobiKwik, where are you - with your investment? There is a - made $15 million investment, but you also have a couple of other tranches. And there was an article recently in Indian newspaper about them raising capital at a $1 billion valuation. And can you remind us of where you stand there? That’s the first question. And then the second question is can you give an update on Blue Label? And the third question is can you given an update on the upfront cost load in terms of hiring people and where you are in that process of hiring and then subsequent revenues? So thank you.

Yes, thank you. So let me - I’ll do the first two and then I’ll hand over the financial one to Herman. On MobiKwik, it’s actually quite simple. I think we misunderstand that MobiKwik at the moment we do not control MobiKwik. In other words that it is up to the company to decide if they wish to go out to the market and sensitize the market and to see if in fact there is an opportunity for them to raise money. I think this is something which is typical in a lot of FinTech companies. We, to be totally honest, our business plan is not based on any of that whatsoever. Our business plan is based on the fact that MobiKwik, due to the changes in India, specifically the demonetization, which has really pushed many millions of customers to actually rather utilize a banking account or, slash, a so called wallet in order to transact, because cash became very difficult to obtain. We actually believe that the opportunity for MobiKwik to grow is therefore present and valid. However, we have also agreed that there are a number of things that MobiKwik has got to do in order for their business plan to remain sustainable. One of them we firmly believe is to come almost to follow the plan that are actually highlighted, namely for MobiKwik to become the frontend to a banking system. In other words, we firmly believe that all of the customers of MobiKwik should have a bank account either through a bank that MobiKwik would earn or simply through a bank that they would be working in association with, utilizing of course the UEPS technology as a banking platform. That would allow us to go not only in the deepest rural areas, but of course our banking platform would work equivalently as well in a so called urban, for the urban population. So we believe the plan is certainly this month - you will see that VCC, our virtual card, will be launched by MobiKwik to all of their customer base, which is quite a big launch, simply because it suddenly makes all online retailers available for MobiKwik’s customers to transact with, which I think is something that was missing, so they do not have to go out and signup every single retailer right now. They can make sure that all of these retailers can still sell goods utilizing the MobiKwik wallet. So that’s number one. Number two, of course, is the introduction of the bank. And we are working with two different banks in India at the moment in order to ensure that we become, for lack of a better word, the customer acquisition platform to that bank. And the mobile interface to that bank, knowing as well that we will not simply leave all of the economics in terms of financial services that are going to be sold to the customer base to the bank itself. I think that I made it quite clear that it is my view that in the future pure FinTech companies, and when I say FinTech, I’m talking about more mobile wallets for example, in my view the ones that are purely processes are never going to make any money. That’s my own view. Going forward they will not make money unless they are going to have this massive customer base, to which they can sell marketing material, in other words to get somebody out to pay them a fee in order to send these people a particular advert. I’m not a great believer in that, in terms of sustainability. I may be completely wrong, but it’s view. My view is that you want customer acquisition in order to be able to then provide them with what they really want, namely financial services. And in order to do that you want to make sure that that you are the one that is providing those services and not leaving all of the margin on the table for a third party to write-off the customer acquisition that we would have created. So that’s the play for MobiKwik. And together with our Blue Label cooperation and as you know, we announced that we would very, very possibly take us a percentage or 15% equity in Blue Label. And a lot of people have said, why the hell do you want to do that. Well, there are many reasons. The main reason is that Blue Label was meant to acquire 45% or still needs to acquire 45% of Cell C. We believe that we require a formal MVNO. In other words, we believe that part of the package that we sell our customers must include a mobile package, in terms of both voice and data. And we believe that this would facilitate this particular package offering, which of course is going to be much better than what would normally be offered by competitors. So that Blue Label link would help us, more importantly, outside of South Africa, Blue Label also own 60% of Oxigen, which is one of the major wallet players, focusing more on merchant acquisition rather than in fact funnily enough customer acquisition. And we believe that the two together, with a bank would provide us probably the best possible footprint in India, both in terms of customers, end-customers, as well as, of course, in terms of retailers. This is key simply because with the bank’s ability to receive first and foremost any income that these customers receive, in other words they do not have to make any sort of transfer from that account into any other wallet, which as we know is always, always a difficult thing for them to do. They would be able to operate directly from their banking account and then, of course, we would have 60 million or 70 million people that are all seeking exactly the same thing. A basic microfinance which at the end of the day is far more secured when one knows and has visibility over the banking account. So the play in India is no different to what we’ve done in South Africa, is no different to what we intend to do in Nigeria, and it’s no different to what we’re doing in Europe. I don’t know if that sort of answered the questions in greater detail. But I think, Herman, perhaps you could answer the question number three.

Thanks, Serge. Porter, maybe just to add on to the MobiKwik, just on the investment side, so you’re correct, the first investment tranche or $15 million was completed last year. The second and third tranches, which totals $25 million in expense over the next two years, are dependent on specific metrics and profitability being achieved. Those have been pre-agreed obviously. And I think finally also the valuation of those shares, of those share issuances, if the targets are achieved they’re already been agreed with the current shareholders and with the management team, so just…

Is that number public or no? What your valuation investment is?

That number isn’t public, but obviously it’s a lot less than a $1 billion.

Yes.

So that’s to answer the - just to complete the MobiKwik picture. On the question about the investments that we’ve currently made to-date, obviously, that mainly pertains to Masterpayment. In terms of hiring of new staff members and sales executives, we have employed a number of these across Europe through the Masterpayment management team. Over the last six months, primarily in Germany, we’ve obviously bolstered the team and we’ve also expanded our presence to Italy, France, Spain and the UK, and then also the U.S. We haven’t publicly disclosed the investment that we’ve made in the sales team. But obviously this is all part of an agreed expansion plan with the Masterpayment team in terms of which they presented us with a business case with the investment in sales staff will translate in - specifically in 2018, in fiscal 2018 into significant sales revenues, which we believe will become exponential going forward into 2019 and beyond. So although the - obviously, the upfront investment and the cost associated with that is quite painful. I think it’s also important to note that the original plan that we agreed and the original costs that we projected at the moment, the management team has done pretty well to remain below those initial costs that we agreed on. So we’re very happy with the way things are progressing. And we believe that the visibility of these new hires being translated into sales will transpire early in 2018.

Thank you.

Thank you. Porter, do you have any further questions you like to ask?

That’s it.