Lesaka Technologies, Inc. (LSAK) Q4 2017 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to Net1’s Fourth Quarter 2017 Earning Conference Call. All participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. [Operator Instructions] Please 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, Judith. Welcome to our fourth quarter fiscal 2017 earnings call. With me today is our CEO, Herman Kotze. Our press release and Form 10-K are available on our website, www.net1.com. As a reminder, during this call, we will be making forward-looking statements and I ask you to look at the cautionary language contained in our press release and Form 10-K 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-K 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. Before I hand the call over to Herman, I just wanted to state that we will have a question-and-answer section following our prepared remarks. However, given the current sensitivities, we will not be taking any questions about SASSA or CPS. With that, let me turn the call over to Herman.

Thank you, Dhruv. Good morning to all of our shareholders. It is my privilege to address you as Net1's CEO for the first time. A lot has happened with Net1 since our last earnings call, and I would thus like to focus my discussion today addressing the various key developments articulating our group strategy and expressing my commitment to honor Net1's strong legacy and foundation and how we intend to build on that to create a larger, more diversified and sustainable growth company. But first I would like to thank Serge Belamant, the founder of Net1 and our CEO until this past May, for his contributions over many years of service. We wish him all the best with our gratitude and the peaceful retirement. Back to our results. For Q4 2017, we reported revenue of $155 million which was up 3% in dollars but down 10% in South African rand, while we had positive contributions from our South African transaction processing business including EasyPay and ATMs as well as financial services. These gains were more than offset by lower ad hoc software sales, fewer prepaid airtime sales and regulatory changes in Korea. We also reported $0.41 in fundamental earnings per share, which was adversely impacted by a higher share count, a provision for receivables and a higher tax rate. Together with the board, I am actively reviewing and refining our group strategy, putting the appropriate structures in place, prioritizing the Group's key initiatives and businesses, rationalizing redundant activities or those that do not have the potential to scale into meaningful businesses in their own right or as part of the consolidated offering. The strategic review of the business will also closely incorporate the need to optimize long-term shareholder value. We are currently in the advanced stages of actively recruiting a new CFO for the Group and expect to be able to announce the appointment shortly. I would also like to welcome to Mr. Alfred Mockett as an independent non-executive director to our board. Net1's mission continues to remain being a leading emerging markets payment company focusing on underserved individuals and small businesses. We intend to be an active participant and in some instances, the leader in the global shift towards mobile payments by leveraging our technology and infrastructure to add new products, solutions and markets in turn driving sustained top and bottom line growth. Before delve in further into the strategic discussions, I would like to spend a few minutes on SASSA. As you are aware, with no shortage of publicity, the constitutional court extended our contract with SASSA for 12 months to March 31, 2018 on terms and conditions that are substantially the same as our 2012 agreement with a few non-financial amendments. As required by the Court, on June the 19th, SASSA submitted its first progress report to the Court presenting a plan to prepare government to become Paymaster starting in April 2018. In its report, SASSA indicated a preference to use the South American Post Office to distribute grants where applicable and issue fresh tenders where required. In addition, an expert panel comprising well-regarded industry veterans, regulators and legal experts was appointed in early June. While Net1 has offered its unwavering support to SASSA, South African citizen and government, we are also available to the expert panel to whom we have provided information at its request. The next update by SASSA and the expert panel is expected to be filed with the Court in mid-September. We will continue to monitor the progress and provide updates to our shareholders. Next, I want to discuss the developments in our existing South African businesses. First, our ability and the whole industry's for that matter to perform debit orders was challenged by SASSA and certain NGOs. As a result, we filed for a declaratory order with the High Court in May. The High Court ruled in our favor and denied SASSA and the NGO subsequent appeal. They have subsequently approached the appeals court in an effort to set aside the High Court's decision. We do not have any visibility on whether the appeals court will entertain the approach or if the matter will proceed any further. We do however firmly believe that we are fully compliant with the rules and regulations in effect. Second, we are pleased to have received financial service provider or FSP licenses for Moneyline and Net1 mobile solutions in their own right, which means we are no longer dependent on any third-party institutions. And lastly, despite very challenging economic conditions and limited growth in South Africa, our Moneyline EasyPay Everywhere, SmartLife and EasyPay businesses continue to perform in line with our expectations while our ATM rollout continues to exceed expectations. Our South African businesses, infrastructure, technology, products and distribution now fixed directly into our recent investments in Cell C and DNI. I will discuss both of the companies including deal terms before them outlining how and why they tie into Net1, and why we believe, they are strategically importance to the Group. Cell C is the third largest mobile operator in South Africa with over 15 million active subscribers. Over 90% of the country's mobile subscriber base is prepared, which also coincides with our key customer focus. Net1 also has the right to nominate two directors to the Board of Cell C. The transaction which also included Blue Label Telecoms, facilitated a major recapitalization of Cell C, which brought their debt down from ZAR23 billion to less than ZAR6 billion. What this transaction does is allow all of us make one Cell C and DNI to leverage common denominators of our businesses, namely similar customer characteristics as well as the pervasive adoption of mobile telephony to offer bespoke and disruptive products to the market. Let me provide some examples of how we intend to capitalize on this opportunity. First, we can competitively manufacture and supply all or some of Cell C's SIM card requirements, which number in the tens of millions annually. Second, we can leverage our and DNI's distribution to cross-sell Cell C's starter packs, creating a new annuity-based revenue stream. Third, we can leverage our EasyPay platform and Net1 financial services branches to provide convenient recharge and other value-added services to Cell C's customers. Fourth, we can provide a number of financial and other services to Cell C's customers, further reducing our dependency on any single or government dependent contracts. And fifth, we can develop cutting-edge mobile banking and payment products that in turn can be deployed in other markets. Let me address some of the financial metrics and implications of the Cell C transaction. We have acquired a 15% interest in Cell C for ZAR2 billion. For the year ended 31, 2016, Cell C reported revenue of ZAR14.6 billion or $1.1 billion, an increase of 11% in constant currency. For the same period, it reported EBITDA of ZAR3.1 billion or $234 million, an increase of 59%. Cell C's results in 2017 are currently tracking above 2016. We intend to account for Cell C at the purchase consideration paid on our balance sheet for the first year. Thereafter, we will record at fair value which may or may not result in a non-cash gain at the time. We do not anticipate earning any equity or other income directly from Cell C for the foreseeable future. However, any new revenue stream that I just discussed will flow through our income statements. Viewed simply, absent any revenue synergies, we expect the impact of interest expense on the debt and forgone interest earned on our cash to be dilutive to fiscal 2018. Including synergies, we expect Cell C to start being accretive by the first half of fiscal 2019. Let me now discuss our DNI transaction. We have acquired a 45% stake in DNI for ZAR945 million. We are obliged to pay DNI an additional amount, not exceeding ZAR360 million, subject to DNI achieving certain performance targets. We also have a two-year option to acquire a further 10% in DNI and have appointed two directors to the Board. DNI is the leading distributor of mobile subscriber starter packs for Cell C while also distributing prepaid airtime through its extensive network of over 2,000 field operators and sales agents. DNI's extensive urban footprint is highly complementary to our unparallel to rural footprint. For the uninitiated a starter pack is the origination of a customer for a mobile operator as it facilitates the first time sale of a SIM card to a user. The originator of a starter pack then earns the portion of any recharges done on that SIM card for as long as it is in use. DNI therefore is a highly cash generative annuity business and pays out a substantial portion of its earnings as a dividend. Here are some examples of the potential synergies between us and DNI. First, we can cross-sell Cell C and DNI starter pack to our distribution network and also sell our products through DNI's 2,000 agents and 5,000 points of presence. Second, we can provide handset finance through our combined distribution network. Third, DNI has developed a micro-jobbing platform that could be utilized by our customer base. And fourth, we and DNI can facilitate the establishment of mobile data infrastructure in rural areas. Similar to Cell C, I will now provide some financial and other metrics for DNI. For the 12 months period ending June 2018, DNI expects to generate revenue of ZAR1.6 billion to ZAR1.8 billion, which is $121 million to $136 million. For the same period, it also expects to generate net income after tax of at least ZAR220 million or $17 million. DNI is currently tracking ahead of its prior year results, its current year budgets and the level of earnings needed to achieve its performance based August. We intend to equity accounts for our investment in DNI and therefore will benefit from dividends distributed by DNI. Any new revenue streams will flow through our income statement. Excluding revenue synergies, we expect the DNI transaction to be accretive to fundamental earnings interest for 2018 itself. For clarity, starting in first fiscal 2019, we expect the new revenue and profit stream flowing through our income statement to contribute between $0.25 and $0.50 incremental fundamental earnings per share per annum at current exchange rates as a result of these transactions. To be clear, this excludes any benefit we would receive from our ownership stakes including any equity income or dividends from other organization. I will now shift focus to our international business and strategy. KSNET remains our largest and most valuable international assets. It is one of the three leading value-added networks in South Korea, serving more than 235,000 merchants and processing in excess of 1.7 billion transactions this year. In fiscal 2017, KSNET’s cash generation was more than double than fiscal 2012, which was the first year of our ownership. We are still working through the ramifications of the legislative changes, reducing interchange and eliminating certain authentication requirements for low-value transactions. As it is an industry-wide phenomenon that is still looking its way through negotiations between all parties and the value chain, we believe the impacts of these changes will be felt through fiscal 2018 though at a diminishing rate as we move through the year. KSNET has also implemented various initiatives and increased focus on certain areas not specifically impacted by the regulatory changes and these efforts are beginning to show favorable trends to the point where we believe overall revenue should return to positive growth later in fiscal 2018. One other key point to note is that even though our revenue has been adversely impacted as a result of the negative pricing adjustments, we have continued to sustain positive volume growth throughout this period. Outside Korea, while our aspirations are still very much to be a global payment solution company in the emerging markets, focused on delivering financial inclusion, the reality is that we need to prioritize our efforts, consolidate our operations where possible and ensure that the selective opportunities we do want to pursue in the short-term received unequivocal and unwavering support to ensure their success. We currently just do not have the scale to do everything everywhere. Make no mistake, international expansion remains an integral part of our strategy and the long-term vision of the Company, but we need to address our core opportunities to generate the highest potential return on investments. ZAZOO South African mobile initiatives have been consolidated into the Group’s South African infrastructure and certain international opportunities will be pursued by regional executives with centralized support from South Africa and our other regional delivery support centers. To that effect, we will consolidate all our international e-money acquiring and issuing businesses, most notably T24 and Masterpayment to enable us to provide end-to-end solutions and address the issuing acquiring, banking and financial needs of SMEs. This will allow us to eliminate any duplication of efforts, coordinate our businesses and take advantage of our global capacities and capabilities. As an example, we will soon be able to leverage our businesses and merchant relationships internationally to start accepting Chinese payment instruments such as UnionPay, Alipay and WeChat Pay. Our eminent investment in Bank Frick will provide us with access to funding lines, simplify our membership of the major card organizations and currently conversion operations. In India, we invested a further $11 million as part of our regional $40 million investment announced last year. To date, we have invested approximately $26 million in MobiKwik which gave us a 13.5% stake in the Company as of June 15. Earlier this month, MobiKwik raised the further $55 million from a new strategic Indian investor at a 90% premium to our investment. And post this transaction, we currently own 12% of MobiKwik. As we have stated previously, our decision to invest in MobiKwik was strategic allowing us to introduce our products in a large new market through their captive and growing customer and merchant base. We are currently in the final stages of testing in order to launch our virtual card across the entire base, potentially making it the largest virtual card deployment worldwide. Equally important is that we now have an exclusive agreement with them to provide our banking platform which will give us critical mass in India to address the opportunity provided by government strong emphasis on financial inclusions and to leapfrog to a digital ecosystem. It also affords us the opportunity to launch additional products such as working capital finance and remittances. This thus forms a prime example of how we intend to focus our resources and efforts on specific international opportunities to ensure success and build large long-term sustainable businesses. Our investments in Finbond and One Finance Nigeria continue to track well and provide multiple opportunities for the sharing of infrastructure and technology. As examples, Finbond has expanded its branch network in North America to over 200 branches to provides us with an opportunity to provide T24 services including ACH, while One Finance has developed a mobile-based microfinance applications that utilizes a number of innovative algorithms and machine learning to calculate credit worthiness and reduces the need for brick-and-mortar branches in developing economies. Before I conclude, I want to also highlight the few other points I believe are worth noting. I am particularly proud of the active role that Net1 plays in community developments and our corporate social responsibility projects. It is a little known fact that we actively reinvesting our communities, and in fiscal 2017 alone, we spent ZAR54 million on our corporate social responsibility and community projects. In addition to our search for our new CFO, we are also in the process of expanding our executive team to include a Chief Communications Officer and investing in growing our business development teams. I am excited to lead the next chapter in the evolution of Net1 or Net1 2.0 when in which we capitalize on our existing activities, consolidate and coordinate our international efforts, focus on great engagements with our shareholders and create long-term value for all our stakeholders. Dhruv will now go over the financial performance and metrics in more detail, and then I will circle back to provide guidance and closing remarks before opening it up for Q&A, Dhruv?

Thank you, Herman. I will discuss the key results and trends within our operating segments for the fourth quarter of 2017 compared to a year ago. For Q4 2017, our average rand/dollar exchange rate was 30.19 compared 15.02 a year ago, which positively impacted a U.S. dollar based results by approximately 12%. The rand/dollar rates continue to be volatile, but for the past few months have traded between 12.80 and 13.50. Revenue of 155 million in Q4 2017 was 3% higher than the prior year, the 10% lower in constant currency. Our fundamental earnings per share decreased 20% relative to Q4 2016. Our fully diluted weighted share count for Q4 2017 was 57.2 million shares, 12% higher than a year ago. Largely as a result of the sale of 5 million shares in Q3 2017 and the full impact of issuance of 10 million shares to the IFC in May 2016 offset by buybacks during 2017 and marginally offset by the repurchase of approximately 1.2 million shares late in Q4. In addition to the share count dilution I just referenced, our 4Q 2017 fundamental EPS was also adversely impacted by higher taxes and the provision we took in Q4 pertaining to the growth in Masterpayment working capital finance business. Excluding the impact of the provisions, 4Q fundamental EPS would have been $0.07 higher. By segment, South African transaction processing segment reported revenue of $67.7 million in Q4 2017, up 26% year-over-year in U.S. dollars and 11% on a constant currency basis. In rand, the increase in segment revenue and operating income was primarily due to higher EPE transaction revenue, as a result of increased usage of our ATMs, more low margin transaction fee is generated from cardholders using the South African national payment system, increased intersegment transaction processing activities, and a modest increase in the number of social welfare grants distributed. Our operating income margin for Q4 2017 and 2016 was 22% and 24% respectively and was lower primarily due to the annual salary increases granted to South African employees, but partially offset by an increase in ATM transactions and intersegment processing. We continue to expect the South African processing segment margins to be in the low-to mid-20% range during fiscal 2018. The margin will be effective by the continued rollout of our ATMs during the year and inflationary pressures on our cost base in South Africa. Intersegment transaction processing activities are eliminated on consolidation, but had a meaningful contribution to the segment this quarter. International transaction processing generated revenue of $45 million in Q4 2017, down 5% compared with Q4 2016. Segment revenue decreased primarily due to a lower contribution from KSNET due to the regulatory changes implemented by South Korean regulators. This decrease in revenue was partially offset by higher contribution from both Masterpayment and Transact24, compared with Q4 2016. Operating income for the segment during Q4 2017 was lower due to the lower revenue at KSNET, losses incurred by Masterpayment as it grows its staff complement to execute its expansion plan into new markets. And then allowance for credit losses of $3.8 million and ongoing start-up costs for ZAZOO in the UK and India, which was partially offset by a positive contribution from T24. Operating income margin from Q4 2017 decreased 4% compared to 17% in Q4 2016 and 5% in Q3 2017. Excluding the provision we took during the quarter, segment operating margin in Q4 2017 would have been 12.9%. For Q4 2017, KSNET's revenue declined 10% in Korean won to $38.4 million while EBITDA margin declined to 29% from 32% last year. As Herman stated, we expect the impact of changes in Korean regulations to continue to have an adverse impact on reported results in fiscal 2018 and return to revenue growth towards the end of the fiscal year. Accordingly, we continue to expect the EBITDA margin to stabilize in the low-to-mid 20s in fiscal 2018. We expect CapEx to remain lower in fiscal '18 which will result in lower depreciation charges going forward, so the impact on operating income margins will be much less pronounced than on EBITDA margins. Our financial inclusion and applied technology, revenue was $56.2 million in Q4 2017, down 20% with Q4 2016 on a constant currency basis. In Rand, the revenue decreased primarily due to through fewer prepaid airtime and other value-added services sales as well as fewer ad hoc terminal sales, partially offset by increased volumes in our lending and insurance businesses and an increase in intersegment revenues. Similar to Q3 2017, in Q4 lower ad hoc terminal sales and managerial services contribution had a $70 million adverse year-over-year impact on segment revenue. Our gross lending book comprising of capital out and deferred service fees at the end of Q4 2017 was approximately ZAR942 million compared to ZAR863 million at the end of Q3. We continue to believe that our financial services offerings will sustain the segment growth along with commensurate expansion of our branch and ATM infrastructures. At July 31, we had approximately 2 million EPE accounts. Our life insurance business SmartLife continues to sustain its momentum and we sold approximately 380,000 policies as of the end of the July 2017. Operating income margin for Q4 2017 was 26% compared with 22% in 2016 and has increased primarily due to the improved revenues from our lending and insurance businesses and an increase in intersegment revenues and fewer lower margin prepaid product sales, offset by fewer ad hoc terminal and annual salary increases granted to our South African employees. The operating margin of the segment will continue to be affected by the relative contributions of the various businesses in this segment and the adoption rate of various financial services products. Corporate eliminations include amortization of intangibles stock-based compensation, the retirement package awarded to our former CEO, transaction costs, U.S. legal expenses, and general corporate and overhead costs. In the U.S. dollars, corporate expenses increased primarily due to the cost associated with the separation of our former Chief Executive Officer, which included an $8 million separation payment as well as an additional stock-based compensation charge of approximately $1.6 million related to the accelerated vesting of restricted stock. We also incurred approximately $1.8 million of transaction related expenditures, higher amortization cost and the modest increase in U.S. dollar denominated goods and services purchased from third-parties and director fees. Our Q4, 2017 corporate expenses include a fair value gain on the re-measurement of previously held interest related to the T24 acquisition and again resulting from the change in accounting for Finbond. Our Q4 2017 net interest income increased to $4.7 million driven primarily by higher average daily rand cash balances and rand interest rates. Interest earned on our loan to Finbond and lower average debt balance in Korea partially offset by expensing in full the $1.2 million guarantee fee related to our October 2016 facility agreement, related to our original proposed Blue Label Transaction. Capital expenditures for Q4 2017 and 2016 were 2.7 million and 7.1 million respectively and have decreased primarily due to the acquisition of fewer payment processing terminals in South Korea and ATMs in South Africa. We do not expect our quarterly 2018 capital expenditures to be significantly higher than in 2017. At June 30, 2017, our cash balances were $259 million and the increased in our cash balances from June 30, 2016 was primarily due to the sale of 5 million shares of common stock and the expansion of our core businesses, which was partially offset by the repurchase of shares of our common stock, unscheduled repayments of our Korean debt, payment of taxes, the investment in MobiKwik, Malta and Pros Software, a loan to Finbond and capital expenditures. We have used approximately 72.4 million of these cash reserves to acquire 45% of DNI in July 2017 and used 57.5 million of cash or 37.5% of the 153 million paid to acquire our 15% investment in Cell C, all amounts translated at rates applicable as of June 30, 2017. The balance of the Cell C investment was funded through a lending facility from two South African banks. In addition to the funding discussed above to acquire a stake in Cell C, we’ve also arranged short-term facilities from Bank Frick to grow our working capital financing product in Europe. As of June 30, 2017, we’ve used approximately $16 million out of the $21 million facility. Apart from these lending arrangements, we continue to fund the Group’s operations and capital investments using our cash reserves and cash generated from our business activities and expect to use the majority of cash generated in fiscal 2018 to repay the principal and interest under our new South African lending facilities. At this point, I would like to briefly summarize the cash flows -- cash outflows related to the South African facilities. One, quarterly principal repayments of a ZAR187.5 million which is approximately $14 million are due at the end of each fiscal quarter for 2018. Two, quarterly interest payment that due commencing at the end of September 2017 and the quantum of interest that is payable is based on the balance outstanding during the interest period multiplied by the rate, which is JIBAR plus a margin of approximately 2.25%, which is roughly 10%. And finally, three, a non-refundable deal origination fee of approximately ZAR6.3 million which was paid in August 2017, this fee will be amortized over the loan period. Our effective tax rate for fiscal 2017 was 37% and for Q4 was 52% and will higher than the South African statutory rate as a result of non-deductible expenses, including consulting and legal fees and the tax impact attributable to distributions from our South African subsidiary. Our Q4 tax rate was also impacted by the effect of higher expenses in the U.S. specifically related to the superstation payment bank and reduced the amount of foreign tax credits carry forward that we could have utilized. We expect our effective rate for 2018 to be in the 34% to 36% range. Our weighted share count for Q4 2017 was 57.2 million shares versus our actual June 30 share count of 56.3 million shares, and our weighted count was only partially impacted by the 1.2 million repurchase of shares from our former CEO. Compared with Q4, our weighted share count was higher due to the inclusion of 5 million shares sold in Q3 2017 as well as the full impact of the 10 million shares issued to the IFC in 2016, of which, only partially impacted our 2016 weighted share count. Let me now hand the call back to Herman for closing remarks before we open it up to Q&A. Herman?

Thanks, Dhruv. To conclude, the funding impact of our recently concluded Cell C and DNI transactions to be dilutive to our fiscal 2018 fundamental earnings partially offset by DNI's equity accounted earnings but to be accretive on a combined basis on fiscal 2019. We therefore anticipate our fundamental earnings per share for fiscal 2017 to be at least $1.61. Our guidance assumes that our existing contracts with SASSA remains in effect for the full year on the existing terms and conditions and updated constant currency base of ZAR13.62 to the dollar a share count of 56.6 million shares and the tax rate of between 34% and 36%. We will obviously update our guidance, if there is a material change in any of these assumptions. We look forward to visiting our U.S. shareholders during the week of the Labor Day. With that, we will gladly take your questions. But as Dhruv mentioned at the onset, we are unable to take any questions related to SASSA or CPS at this time.

Thanks very much gentlemen. [Operator Instructions] The first question comes from David Koning of Baird & Co.

I guess my first question, some of that I guess the financial metrics that have changed the most, the financial inclusion segment you've explained why it continued to get a little worse the ad hoc sales and prepaid. But in the prepaid card specifically, what are the consumers deciding to do that's basically came from the big chunk of revenue away from you? Are they deciding to go through other channels? And then I guess the corollary to that question is, with the Cell C partnership, are a lot of those consumers going to come back to you? Is that kind where you're seeing the accretion from?

Yes, I think that's an accurate assessment. The drop-off in volumes is firstly attributed to a change in the security features that we've incorporated in the mobile platform that is being used today to buy prepaid airtime in micro amounts. As we tighten the rules and the security around it, obviously, we’ve removed access to the platform by sort of quite a few of the previous customer base, that’s resulted in the decline that you’ve seen. But moving forward, we obviously believe that our sort of push into the sale of Cell C starters packs and our further association with DNI expanding our distribution base will be able to regain some, if not all or more, of the declines that you’ve seen over the last three quarters or so. In terms of hardware sale that’s obviously a bit more difficult to project. Those sales are quite lumpy and they are ad hoc. They’re largely reliant on terminal replacement cycles from our larger customers and in South Africa those are mainly the banks. So as the banks go through their terminal replacements programs, we see those sales fluctuate quite significantly. And I think the last cycle really came to an end earlier last year probably in the next year to 18 months, I think we will see a resumption of the terminal rollout and then the commencement probably of another terminal replacement program by the South African banks that we service.

And secondly, when you said by fiscal 19, I think you said $0.25 to $0.50 of EPS accretion just from that one revenue generated from your two investments. Is that -- am I getting this right, that’s probably a 100 million to 200 million of incremental revenue at about 20% margin gets you to $0.25 to $0.50 accretion? Is that kind of the right amount of revenue in margin to come on?

I think so. We obviously would try to target their margin, a blended margin rate that’s better than the 20% level, the mix of the various products and services that we have outlined very significantly. Obviously, the commission that one earns on the sale of airtime and/or on the starter packs are at the low end of the scale, sale of SIM cards similarly is not a hugely so profitable or lucrative business when it comes to margin, but obviously it’s a very high volume business. Whereas the financial services that can be layered on top of the sale of starter packs or really blending it as a lifestyle package is what then really improves the margin. But I think working at a 20% margin for now seems reasonable. And so, if you do the math and the reverse math, and obviously assuming the share count remains the same, I think that, ballpark, your numbers sound about right. But obviously, when we say $0.25 to $0.50 that means that we’ll start ramping up from the $0.25 level over the next year or two after that.

And one, I guess one last one just you gave good EPS guidance with a lot of metrics, but revenue guidance for fiscal ’18. It seems like it’s probably flattish on a constant currency basis declines in the first half growth in the back half. Is that the right way to think of it?

Yes. I think that’s accurate. Obviously, the impact of the DNI and Cell C investments are twofold. So because the equity account for DNI, the impact isn't clearly seen on the revenue line. But obviously on the earnings per share line, and the other key drivers for us in South Africa obviously we have some growth in the beneficiary base that's always been there and that will increase our ATM rollout, continues at a pace that we are comfortable with as well as the adoption of the ATM real estate by our cardholders I think that will drive our revenues. So in terms of the South African revenues, we are targeting a growth but we certainly not looking at double-digit growth, it will be lower single digit growth. On the international side, of course, we have the impact of the new regulations in Korea, which clearly has a pricing implication on KSNET, but we are trying our best to make up for the pricing pressure by the improvements or increasing the volumes. So as far as that concerned, we also think we will be able to paying at least a stable or a flat growth rate with up to the lower single digits.

Thank you. [Operator Instructions] Ladies and gentlemen, there are no questions. On behalf of Net1, that concludes this afternoon's conference. Thank you for joining us. You may now disconnect your lines.