Lesaka Technologies, Inc. (LSAK) Q1 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Net 1 UEPS First Quarter 2018 Earnings Call. 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. Please go ahead, sir.

Thank you, Chris. Welcome to our first quarter fiscal 2018 earnings call. With me on the call today is our CEO, Herman Kotze. Our press release, Form 10-Q and a supplementary financial presentation are available on our Investor Relations website, ir.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-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 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 want to reiterate that we will have a question-and-answer session after our prepared remarks. However, given the current sensitivities, we are not going to 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. The short period of 77 days, since our Q4 earnings call, have been very eventful and transformational in many respects. We have spent a lot of efforts on analyzing our current businesses and group structure, consolidating some, expanding others, and embarking on exciting new endeavors. Under the ever-present backdrop of all the publicity in South Africa around SASSA, the future role of the Post Office, and by association the role of CPS, it is sometimes easy to forget that Net 1 is much more than any single contract or business. And that the some of our parts is far greater than our current market value. We are as always committed to the South African government and the country's most vulnerable citizens and are able and willing to assist whenever requested or required, as our unblemished track record in delivering grants on time and without failure to 10.7 million people over the last 68 months testifies. In parallel, we are focusing on the basics as far as our existing and new businesses are concerned, and creating new revenue streams in South Africa and internationally. For Q1 2018, we reported revenue of $153 million, which was down 2% in dollars and 8% in rands. While we had positive contributions from our South African transaction processing businesses including EasyPay and ATMs as well as financial services and non-Korean international businesses, these gains were more than offset by lower ad hoc hardware sales, fewer prepaid airtime sales and regulatory changes in Korea. We also reported $0.43 in fundamental earnings per share, which was adversely impacted by a higher share count, inflationary increases in costs and a higher tax rate. In my view, our financial performance over the last few quarters has been average as a result of a number events, including some exogenous ones and do not currently reflect the true potential of what we are capable of delivering and what energizes management, given the actions on multiple fronts that we have taken over the past six months. The board and I have actively reviewed and refined our group strategy with the appropriate structures in place, prioritize the group's key initiatives and businesses, rationalize redundant activities or those that do not have the potential to scale into meaningful businesses in their own rights or is a part of the consolidated offering. The strategic review of the business will also closely incorporate the need to optimize the long-term shareholder value and I would like to add this is a continuous process, not a one-time effort. Very quickly on our CFO search, we currently have a shortlist of candidates that are being considered by the board. And we expect to make an appointment in the near future. As you can imagine, finding the right person with the relevant experience has taken a little longer than expected. At the Money 20/20 conference in Las Vegas last month, Mastercard was quoted as saying and I paraphrase that there are 2.5 billion globally who are unbanked or under-banked. And while that there have been many advancements in financial technology across established players and new generation fintech players at current rates it would take 200 years to achieve financial inclusion. Broadly, we agree with this sentiment and this is precisely the opportunity for Net 1, given its products, solutions and expertise over the past few decades. What we need to capitalize on this opportunity is a dedicated effort for these emerging countries, driven by people with products and geographic experience and expertise and unwavering singular focus. I will come back to this in a few minutes and highlight why I have never been more excited about our future, international strategy and how we are going to accomplish this. Before delving further into the strategic discussions, I would like to spend a few minutes on SASSA. To recap quickly, 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 Con Court on September 15, SASSA submitted a second progress report to the court, highlighting the steps taken by SASSA to implement the plan to ensure the payment of social grants after the expiry of the 12-month extension and further steps taken along with timelines for the implementation of said steps. The intent is to incrementally transition towards a capable and well-capacitated SASSA that will deliver end-to-end grants administration and payment service to beneficiaries. SASSA has expressed its intent to work with the South African Post Office or SAPO during the interim period and subsequently receive the approval from the National Treasury to deviate from a competitive bidding process. SASSA also appointed the CSIR to perform a limited due diligence on SAPO's capabilities and those services that SASSA was unable to provide would be put out to a competitor during the process. After much debate between SASSA and SAP, and the various oversight committees, it was announced this past Wednesday that SASSA and SAPO will conclude a corporation agreement by November 17, which should shed some light on the project plan and process to ultimately enable SASSA to control the full grant distribution process. In addition to the aforementioned process, SASSA intends to take further steps including directly paying grants into commercial bank accounts owned by beneficiaries, of which they estimate there are over $2 million. SASSA also intends to take over the Regulation 26A deductions, which relate to payments for insurance premiums that are paid to before a grant is paid and is governed by the Social Assistance Act. Second, an expert panel comprising well-regarded industry veterans, regulators and legal experts was appointed by the constitutional court in early June to provide an oversight role and submitted their first quarterly reports to the Constitutional Court on September 12. Briefly, along with several initial recommendations, the panel expressed reservations around the plan, timelines and cost proposed by SASSA, the capabilities of SAPO and the absence of a contingency plan beyond April 1, 2018. Finally, earlier today, we received the copy of the directions issued by the Chief Justice of the Constitutional Court, instructing SASSA to provide the expert panel with all the information it requires, to also formulate the communication plan to inform grant recipients of the implications of a transition, and the benefits of receiving the grant via a bank account of their choice, and to file a report to the courts on the December 8, 2017 describing SASSA's plan to affect the uninterrupted payment of social grants, specifying methods such as definite roles and responsibilities, precise timelines, dependency, desired outcomes and risk mitigation measures, as well as SASSA's contingency plan if a seamless transition on April 1 is not realizable. Any shareholder wishes to read the detailed reports can get in touch with Dhruv. To conclude on SASSA, we are fully supportive of the process undertaken by SASSA and have repeatedly responded to queries from all parties including the expert panel while ensuring that we continue to distribute grants without interruption. CPS is a proud South African company that has saved the government more than ZAR 10 billion over the contract period, has paid taxes to the South African government of more than ZAR 1.5 billion due to its ability to run an efficient and profitable business, despite their fixed fee over the entire contract period. The infrastructure and technology established by CPS remains uniquely capable of providing transacting services in the rural and remote areas. And there are multiple applications for these capabilities beyond the payment of grants. The next update by SASSA and the expert panel is expected to be filed with the Court in mid-December. 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, we see continued growth in our EasyPay Everywhere offering and related services including ATMs and financial services with SmartLife and ATMs exceeding expectations and lending in line with expectations. We believe ongoing growth for EPE is also dependent on the further expansion of our physical branch infrastructure. Additionally, as we identify, implement, and scale new products through our initiatives with Cell C and DNI, we expect to drive further growth in our EPE offering. Second, our prepaid airtime and electricity products continue to the declining trend as a result of the biometric linking security features we introduced. The rate of decline is slowing, and the quality of the customer base is improving. We believe these products should stop declining after two more quarters, and return to modest growth thereafter. Keep in mind that as prepaid airtime grows, it will grow absolute profitability, but margins will likely decline given the margin profile of the product. As mentioned last quarter, our South African businesses, infrastructure, technology, products and distribution fixed directly into our recent investments in Cell C and DNI, which closed in early August 2017. I'll provide an update on both companies as well as the actions on progress we made, since we closed the transaction three months ago, and to reiterate strategic importance to the group. Cell C is the third largest mobile operator in South Africa with over 15 million active subscribers. Cell C has provided some updated financial information in the recent interim results with the first half 2017 revenue increasing by 11% to ZAR 7.7 billion, while EBITDA grew 17% to ZAR 1.6 billion. Active mobile subscribers grew 12% to 15.7 million indicating that Cell C doing well and increasing its market share. 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 unparalleled rural footprint. Though not published, DNI's financial performance is tracking well ahead of its initial projections and we therefore believe they will achieved their performance based targets agreed with us to qualify for the top-up payment in 2019. To summarize, what this transaction does is allow all of us make one Cell C and DNI to leverage common denominators of our businesses mainly overlapping customer characteristics as well as the pervasive adoption of mobile telephony to offer bespoke and disruptive products to the market. In a short period of time, we have made good progress towards the realization of anticipated synergies. Our initial focus was to identify and implement the obvious synergies between the organizations such as competitive procurement, processing services, deploying Cell C kiosks in our financial services branches, et cetera. This will start to bear fruit in the few quarters as volume starts to flow through these efforts. More importantly, we have now defined the lifestyle products I discussed on our last call being able to bundle airtime data, bank accounts, financing, insurance et cetera, in one attractively priced monthly package. Cell C has also committed a dedicated marketing budget and we expect to launch this lifestyle product into the market before the end of November. GNI as always will play an integral role in the distribution of these products. From a financial perspective, at this time, we are not revising the accretion and dilution guidance, we provided 10 weeks ago. Therefore, to reiterate for Cell C, absent any revenue synergies, which we update following some transactional history of the new initiatives and the effect of any fair value adjustments, we expect to the impact of interest expense on the debt and foregone interest earned on our cash to be mildly dilutive to fiscal 2018. Including synergies, we expect Cell C to start being accretive in the first half of fiscal 2019. For completeness to partially fund the Cell C investment, we took on date of approximately $94 million to be repaid within two years. And during the first quarter of 2018, we've already repaid our first $14 million. Similar to Cell C, I'll reiterate our guidance for DNI. We have equity accounted for our investments in DNI, and therefore will benefit from dividends distributed by DNI. During the first quarter of 2018, we already received our first dividend of $1.4 million from DNI, any new revenue streams will flow through our income statement going forward. Excluding revenue synergies, we expect the DNI transaction to be accretive to fundamental earnings in fiscal 2018 itself. By the end of three years, or to be more specific year three, through new revenue and profit stream is flowing through our income statement alone. We expect to achieve between $0.25 and $0.50 of incremental annual fundamental earnings per share 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. Lastly within South Africa, we are also accelerated our corporation with Finbond where in addition to deploying our ATMs in the extensive branch infrastructure, we are enabling them to become an issuer of UEPS/EMV cards. Finbond won the prestigious Company of the Year award at the Annual Sunday Times Top 100 Companies Award ceremony earlier this week. And we are very proud to be a substantial shareholder in this exciting business. I'll now shift focus to our international business and strategy. Net 1's international strategies thus far has relied on inbound requests, dependencies on third-parties like IFC and MasterCard, or investments and/or acquisitions. We have never really had a dedicated sales effort led by people who are intimately familiar with targeted economies. This is the reason why the Net 1 team is extremely excited about our new separate Net 1 international initiative, which will be led by Carl Scheible, who is an industry veteran having worked for Moneygram and PayPal in Europe, Africa and the number of other markets. We are very fortunate to have attracted and executive of Carl's caliber, and we welcome him as part of the Net 1 family. This business will focus exclusively on large scale financial inclusion opportunity in emerging markets and economies globally. A significant effort will be placed on targeting social welfare programs in these countries, using our proven biometric UEPS/EMV technology platform. Globally, there is a momentum to provide financial inclusion today, driven by three key themes. First, demographics with 2.5 billion people unbanked; second, partnership models particularly public private partnerships; and third, urgency, this is an issue that needs to be a bit now. The international entity will be structured of the JV with Net 1 being the majority shareholder and the balance held by management and the equity bankers. We believe this structure is necessary to be able to attract and retained best talents from leading companies and universities, and operate remove from any noise in South Africa. This entity will function as a business development and sales organization with technological support and operational implementation provided by Net 1. We've already commenced with the establishment of this initiative, and I expected to be operational in early calendar 2018. Carl has identified the team of season payment industry experts, who will join us over the coming months, and we will provide details of this interest strategy and focus areas during our next earnings call. Apart from this new strategic initiative, our revised strategic plan for our existing international businesses, excluding KSNET has been executed and relative structure enforced under the leadership of another payments veteran Mr. Philip Meyer, who historically founded and ran Transact24, and he is an expert veteran himself. Under this structure, we have consolidated our various E-Money licenses in issuing, acquiring, and payment gateway businesses, and related activities around our recently concluded Bank Frick investment. We'll also be able to realize some synergies due to the duplication of system operational and technical resources. We closed our investment of the 50% stake in Bank Frick on October 2, for approximately $41 million. We will equity account for Bank Frick, and expect the transaction to be immediately accretive. For the first six months of 2017, Bank Frick reported net income after tax of $2.7 million at current exchange rate prevalent on June 30, 2017, and NAV of roughly $86 million. Bank Frick is focused on enabling new financial technology products and applications, and recently became the first banking in southern country to launch a certificate in cryptocurrencies. In collaboration with Philip Meyer and our international transacting team, significant progress has already been made in defining new opportunities such as reciprocal expansion of the group's access to issuing and acquiring memberships of the global card schemes and associations, including Visa, MasterCard, ChinaUnionPay, WeChat Pay and Alipay, as well as the development of prepaid card technology focused on multicurrency and crypto currencies; and the provision of bank accounts and services to our expanding, acquiring and issuing client base. Meanwhile, Bank Frick is also supporting the financing of the expansion of our working capital products through Masterpayment. In India, our VCC project of MobiKwik is now live to users by invitation only. And is expected to have a full-scale launch in early December 2017. This is most likely one of the largest virtual, or even physical for that matter, card deployments anywhere in the world. The first phase of the launch will include MobiKwik's existing 65 million customers and over time we increase as they roll out the new partnerships providing access to roughly 260 million customers. We will provide further updates on this project on our next call once it is fully rolled out. Additionally, we have made further progress on our discussions with various local partners including banks in order for us to roll out our banking platform in India. Lastly, our teams in India are working with T24 Bank Frick and other partners to begin providing international remittances initially into India and subsequently into other corridors. Recent regulations enacted by the Reserve Bank in India will soon permit digital wallets such as MobiKwik to receive international remittances directly into the wallet for the first time. Meanwhile, MobiKwik itself has further grown to 65 million users and over 2 million merchants. We are also excited about the progress made by OneFi in Nigeria where we are 25% shareholder, with the launch of the PayLater mobile app that provides a seamless and paperless consumer lending service with the help of sophisticated credit scoring algorithms. The initial success of the app has exceeded expectations and the number of loan applications is growing exponentially, which is very encouraging in Africa's most populous country. Earlier this month, we also sold our XeoHealth business in the United States. The proceeds were immaterial to the group that further allows us to focus on our core competencies. Lastly, for KSNET in Korea, we are still working through the ramifications of the legislative changes, reducing interchange and the elimination of certain authentication requirements for low-value transactions. As it is an industry-wide phenomenon, there are multiple negotiations with the various parties affected in the value-chain. The negotiations are most heavily reliant on how much of the reduction the issuers are trying to pass on to the other participants further down the value chain. These discussions are taking longer than we initially expected. And we therefore conservatively believe KSNET will continue to feel the adverse impacts of these regulation changes for another four quarters. We therefore now believe that KSNET revenue and profits will be mid-single-digits lower in fiscal 2017 in the current year. On a volume basis, we have continued to pick up market share mostly at the expense of smaller players, and therefore are confident that we will revert to positive top and bottom line growth next year. This will further be supplemented by some of the newer products and value-added services KSNET has begun to roll out, particularly as they begin to scale. The other silver-lining for KSNET is, of course, the reduced CapEx which is also due to the effects of regulations. Our cash flow in Korea more than doubled in 2017, and has enabled us to pay off the Korean debt in full during Q2 of 2018, while also paying a dividend to the holding company. Before I conclude, I want to address the capital allocation for the business. Given the multitude of investments we have made over the past 18 months, we believe we have enough on our plates to work on for the next 12 months, and therefore, do not anticipate any further sizeable investments at this time. We are now actively are facing the allocation of our capital to our business units and investments and the returns on each unit to guide our future growth, capital allocation decisions and possible disposals. The bulk of our cash generation will go towards the repayment of the debt for Cell C, which has to be fully repaid within two years as well as internal investments required to drive future growth. We will however actively evaluate the need and feasibility of share repurchases on a regular basis. I appreciate that the opportunity to meet with a number of our shareholders in the U.S., Europe and South Africa over the past few months and look forward to hosting our first Investor Day in New York on the December 1. Further details will follow, but please save the date. 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, over to you.

Thank you, Herman. I will discuss the key results and trends within our operating segments for the first quarter of 2018 compared to a year-ago. For Q1 2018, our average rand/dollar exchange rate was ZAR 13.17 compared to ZAR 14.1 a year-ago, which positively impacted a U.S. dollar based results by approximately 6%. The rand/dollar exchange rates continue to be volatile and has weakened once again over the past few weeks. Revenue of $153 million in Q1 2018 was down 2% year-over-year in dollars and 8% in constant currency. Our fundamental earnings per share decreased 10% relative to Q1 2017. Our fully diluted share - weighted share count for Q1 2018 was 57.2 million shares, 7% higher than last year. Largely as a result of the sale of 5 million shares in Q3 2017 and partially offset by the repurchase of approximately 1.2 million shares late in Q4 2017. By segment, South African transaction processing reported revenue of $66 million in Q1 2018, up 15% year-over-year in U.S. dollars and 8% on a constant currency basis. In rand, the increase in segment revenue was primarily due to higher EPE transaction revenue, as a result of increased usage of our ATMs, increased inter-segment transaction processing activities, and a modest increase in the number of social welfare grants distributed. Operating income decreased primarily due to an increase in inter-segment charges, the impact of annual salary increases granted to our South African employees in October 2016, and increases in goods and services purchased from third parties, partially offset by higher EPE transaction revenue as a result of increased usage of our ATMs, increased inter-segment transaction processing activities and a modest increase in the number of social welfare grants distributed. Our operating income margin for Q1 2018 and 2017 was 19% and 24%, respectively. Our fiscal 2018 margin was adversely impacted by higher inter-segment charges, the annual salary increases and increases in goods and services purchased from third parties. We continue to expect our South African processing segment margins to be in the low to mid 20% range during fiscal 2018. The margin will be affected by the continued rollout of our ATMs during 2018, and inflationary pressures on our cost base in South Africa. Inter-segment transaction processing activities are eliminated on consolidation, but continue to have a meaningful impact on segment results. International transaction processing generated revenue of $46 million in Q1 2018, down 7% compared to Q1 2017. Segment revenue was moderately lower during Q1 2018, primarily due to the ongoing impact of regulatory changes in South Korea on KSNET's revenue, largely offset by increased contributions from Masterpayment and Transact24. Operating income during Q1 2018 was lower due to an increase in revenue - decrease in revenue at KSNET, losses incurred by Masterpayment as it grew its staff complement to execute its expansion into new markets, and ongoing operating costs in India, which was partially offset by a positive contribution by T24. Operating income margin for Q1 2018 and 2017 was 12% and 13%, respectively. For Q1 2018, KSNET's revenue declined 6% in Korean won to US$37.7 million, while EBITDA margin declined to 25% from 28% last year. As Herman stated, we expect the impact of changes in the Korean regulations to continue to have an adverse impact on our reported results in fiscal 2018 and return to revenue growth in 2019. Accordingly, we continue to expect the EBITDA margin to stabilize in the low to mid 20s in fiscal 2018. We expect CapEx to continue to remain lower in fiscal 2018, 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 working capital financing book in Europe has grown by approximately $30 million since June 2017. And as of September 2017, the total book was approximately $47 million. We have funded this growth through the utilization of facilities provided by Bank Frick. We are currently exploring opportunities with Bank Frick in order to maximize our return in this offering, but with lower exposure to the book. If we are successful in these negotiations, we would expect the book to decline in the next three to six months. However, we would still generate income from the arrangement in the future. Our financial inclusion and applied technologies segment revenue was $54 million in Q1 2018, down 20% compared to Q1 2017 on a constant currency basis. In rand, the revenue decreased primarily due to fewer prepaid airtime and other value-added services sales as well as lower ad hoc terminal sales, partially offset by increased volumes in our insurance businesses and an increase in intersegment revenues. Our gross lending book comprising of capital out and deferred service fees at the end of Q1 2018 was approximately ZAR 948 million compared to ZAR 942 million at the end of Q4 2017. We continue to believe our financial services offerings will sustain the segment's growth along with commensurate expansion of our branch and ATM infrastructures. At October 31, we had approximately 2.14 million EPE accounts. Our life insurance business SmartLife continues to sustain its momentum and we've sold more than 420,000 policies at the end of October 2017. Operating income margin for the segment was 26% and 24% during Q1 2018 and 2017, respectively, and has increased primarily due to fewer low margin prepaid product sales, improved revenues from our insurance business, and an increase in the inter-segment revenues offset by fewer ad hoc terminal sales and annual salary increases in South Africa. 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 our various financial services products. Corporate and eliminations have increased primarily due to higher transaction related expenditures and modest increases in U.S. dollar denominated goods and services purchased from third-parties as well as directors' fees. Our corporate expenses for Q1 of 2017 included a reversal of $1.8 million for stock-based compensation charges. Our Q1 2018 net interest income decreased to $2.9 million, with higher interest expense driven primarily as a result of the South African facility we obtained to partially fund our investment at Cell C, somewhat offset by a lower average long-term debt balance on our South Korean debt and a lower interest rate in Korea. And on the interest income side - interest income received from the loan provided to Finbond in October 2016, offset by lower average cash balances used to fund our investments. We recognized earnings from equity accounted investments of $2.1 million in Q1 2018 compared to $0.7 million last year. DNI contributed for two months during Q1 2018, given the transaction closed in August 2017. And because Finbond is listed under JSE, we only include its reported six months' results during our first quarter and fourth quarter. In October 2018, we acquired a 30% interest in Bank Frick for approximately $41 million, utilizing surplus cash reserves. Bank Frick generated net income after tax of approximately $3 million during the six months to June 2017, and therefore we expect the investment to be moderately accretive to our fiscal 2018 results. Extrapolating the $3 million achieved by Bank Frick for the six months to June 2017, we expect a contribution of approximately $1.4 million to our fiscal 2018 earnings from October 2017 onward before the impact of any interest foregone. And we had already factored this into the impact on our guidance for 2018, which we provided at the end of Q4 in August. Capital expenditures for Q1 2018 and 2017 were $1.5 million and $3.4 million respectively, and have decreased primarily due to the acquisition of fewer payment processing-terminals in South Korea. We continue to expect our quarterly 2018 capital expenditures to be significantly lower than in 2017. At September 2017, our cash balances were $138 million, and the decrease in our cash balances from June 30, 2017 was primarily due to the investments in DNI and Cell C scheduled repayment of our South African long-term debt and capital expenditures, which was partially offset by cash generated by most of our core businesses. We converted some of our U.S. dollar reserves to Swiss Francs in mid-September 2017 in order to settle the investment consideration related to Bank Frick transaction in early October 2017. We also utilized our short-term facilities from Bank Frick to grow our working capital financing offering in Europe during the quarter. As of September 30, 2017, we had utilized approximately $46 million out of our $68 million facility off from Bank Frick. Apart from these lending arrangements, we continue to fund the group's operations and capital investments, utilizing our cash reserves and cash generated from our business activities. We expect the majority of our cash generated in fiscal 2018 to go towards repayment of the principal and interest under our South African lending facilities and to fund our internal growth investments. At this point, I will again like to briefly summarize the cash outflows related to the South African facilities for the remainder of fiscal 2018. One, quarterly principal repayments of ZAR 187.5 million, which is approximately US$13.3 million at current rates, are due at the end of each fiscal quarter. And, two, quarterly interest payments are due and the quantum of the interest payable is based on the balance outstanding during the interest period, multiplied by the interest rate, which is JIBAR plus a margin of approximately 2.25%, which equates to around 10%. In October 2017, we utilized our surplus cash reserves in South Korea to settle our outstanding long-term facilities in full. The repayment of these facilities provides us with greater flexibility to utilize surplus cash generated in South Korea for our international expansion activities. Our effective tax rate for Q1 2018 was 37% compared to 31% last year. Our Q1 2018 effective rate was higher than the South African statutory rate as a result of non-deductible expenses including transaction-related expenditure and non-deductible interest on our South African long-term facility. We continue to expect our effective rate for 2018 to be in the 34% to 36% range. Our weighted share count for Q1 2018 was 57.2 million shares, while our actual September 30 share count was 56.9 million shares. 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, which was only partially - which only partially impacted our 2016 weighted share count. I will now hand the call back to Herman for closing remarks, before we open it up to Q&A. Herman?

Thanks, Dhruv. To conclude on guidance, reiterating what we said last quarter. We expect the funding of our Cell C and DNI investments 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 from fiscal 2019. We therefore anticipate our fundamental earnings per share for fiscal 2018 to remain at, at least $1.61. Our guidance assumes no significant disruption in any of our key business units, a constant currency base of ZAR 13.62 to the dollar, a share count of 56.6 million shares and a tax rate of between 34% to 36%. We look forward to meeting many of our shareholders in New York next month and also introduce you to the expanded Net 1 management team. With that, we will gladly take your questions. But as Dhruv mentioned at the onset, are unable to take any questions related to SASSA or CPS at this time.

Thank you very much, sir. [Operator Instructions] Ladies and gentlemen, it appears that we have no questions. We will then conclude this conference call. And you may now disconnect your lines. :