Good day, ladies and gentlemen and welcome to the Net 1 UEPS Quarter Four of 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the conference over to Mr. Dhruv Chopra. Please go ahead, sir.

Thank you, Juliet. Welcome to our fourth quarter 2019 earnings call. With me on the call today is our CEO, Herman Kotze and our CFO, Alex Smith. Our press release and supplementary investor presentation are available on our Investor Relations website, ir.net1.com. We expect our Form 10-K with the audited financial statements to be filed on Monday, September 30th. 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 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 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. We will have a Q&A session following our prepared remarks. And with that, let me turn the call over to Herman. Herman Kotzé : Thank you, Dhruv and good day to everybody. This morning, I will review our fourth quarter highlights and specifically the progress on the key focus areas we highlighted on the last call as well as where we go from here in fiscal 2020. Net 1 went through transformational changes during fiscal 2019 as we implemented a comprehensive restructuring of our business and cost base, following the expiration of our SASSA contract, and more importantly, the auto-migration of a substantial portion of our EPE customer base. We have been focused and nimble and…

Thank you, Herman, and good day to everybody. I’ll discuss the key results and trends within our operating segments for the fourth quarter of 2019, compared to a year ago as well as to the third quarter of 2019, as sequential comparisons are more relevant today given the changes endured by the Group over the past year. For the fourth quarter of 2019, our average rand-dollar exchange rate was ZAR 14.29 to the $1 compared to ZAR 11.45 a year ago, which adversely impacted our U.S. dollar based results by approximately 25%. Our fundamental earnings per share declined to a loss of $2.45, which includes the $2.21 non-cash negative impact of the fair value adjustment for Cell C and $0.24 for impairments of goodwill and the Cedar Cell note. Operationally, the breakeven position at a fundamental earnings level reflects the work we’ve done in rightsizing the South African business. Our fourth quarter 2019 revenue and operating loss did not include any contributions from DNI as that business was deconsolidated at the end of the third quarter, following the sale of our controlling interest. DNI was equity accounted during the fourth quarter of 2019, with a further 8% being disposed off in May 2019. By segment, South African transaction processing reported revenue of $18.9 million in the fourth quarter of 2019, down 63% compared with the prior period, but up 10% from the third quarter 2019 on a constant currency basis. The year-over-year decrease was primarily due to the termination of the SASSA contract, including those with SASSA Grindrod cards and to a lesser extent the reduction in the number of EPE accounts. These decreases in revenue and operating income were partially offset by a higher transaction revenue, as a result of increased usage of our ATMs and double-digit growth with…

Thank you very much, sir. [Operator Instructions] The first question comes from Allen Klee of Maxim Group.

Yes, hello. For your three main segments for fiscal 2020, can you go through your thoughts on revenue changes -- percentage change and operating margins that we should think about? Thank you.

So Allen, in terms of the three segments that we are disclosing, the South African transaction processing business we would expect to see some revenue growth and a return to profitability, but probably relatively small profitability at this point. It is after all a scale business. In terms of revenue growth in there, we’re probably looking at in the order of the high-single digits. In international transaction processing, the revenue growth will be largely dependent there on the success of the IPG strategy and their new product rollout, but that’s a little bit more difficult to call. Certainly in Korea, we’re looking -- we’re probably looking at some revenue decline in the short term because of the elimination in some of the underperforming agents in our portfolio, but we are looking to see an enhanced profitability position, and certainly at the operating margin level we would expect to see an uplift in the operating margins in the international transaction processing space. Financial inclusion and implied technologies, which would contain our financial services businesses in South Africa, the continuing component of that we would expect to see some good growth in there as we plan on expanding, in particular, our loan book, and we should see a return to profitability in that component too.

Allen, this is Dhruv. Just to add one clarification point for Alex, when we’re talking about the growth Alex alluded to in his remarks, that we’re using Q4 as the baseline, so we’re not looking -- we’re not talking about a year-over-year improvement, but use Q4 as your base from where you start.

Okay, thank you. And then a couple of other items, housekeeping, for fiscal 2020 what are your expectations for depreciation and amortization, CapEx, intangible amortizations, stock-based comp, and tax rate?

So, let me work backwards; tax rate, we should be starting to move more into line with somewhat normal 30%. We should get some benefit out of some of the loss the deferred, not having recognized the deferred tax assets. But I think work on around about a 30% kind of tax rate. CapEx should be largely similar to this year, in terms of the CapEx position, obviously you would have to strip out a little bit than what would have been incurred in DNI, but that wasn’t significant. But, we wouldn’t expect to see a significant change in the CapEx position. Then, depreciation and amort, that is coming down, it was on a downward trend because our replacement CapEx levels have come down effectively. So I’d expect to see that drop a little bit. What was the other thing, Allen?

Just intangible amortization and stock-based comp.

Intangible amort, we would expect to see a decline in this coming year, a number of intangible assets have been fully amortized in the course of this year. So, we’d expect to see a decline in that space. And then stock-based comp has been lower this year because of some reversals, we’d expect to see that move back into line with where it’s been historically.

Okay. And then in terms of Bank Frick and your decision to potentially increase your position, how do you think about the return on capital that Bank Frick should be generating longer term? Herman Kotzé : Allen, we obviously are in the process of analyzing the options available to us. There are a number of considerations that we take into account when we will arrive -- before we arrive at our decision. The key for us obviously is the availability of liquidity to be able to exercise the option, which needs to be done in the next couple of weeks and payment then will follow in the next six months or so. So, those are the key considerations that will influence our decision, but as a standalone entity, of course we are still a 35% shareholder in Bank Frick. The returns that have been generated -- return on equity generated by the bank over the last few years have been quite low. But very good reasons over the last few [ph] years, we have effectively doubled the workforce in the bank from roughly 60 to 120 employees, and that was with specific intent to scale up the knowledge base within the bank on the blockchain and crypto initiatives. The last two years have been quite intense from a learning curve perspective but I do believe that during the next two quarters we will see substantial improvement and actual deal flow emanate from the investment that we have made over the last two years. And so going forward, whether or not we are a controlling shareholders in Bank Frick, we would expect the bank’s return on equity numbers to return to a respectable sort of 12% to 15% number.

Okay, thank you. And then can you help us understand for your EPE business and growing customers where that’s been stable like 1.1 million recently, to what extent do you still have to interact with SASSA to get any of those customers process? And do you feel comfortable -- like to what extent can they hinder your ability to grow or do you feel comfortable that that’s not an issue? Herman Kotzé : So, there is no direct interaction between us and SASSA regarding this matter any longer. The only part where SASSA would play a role is where a customer also receives a social welfare grant decides to open one of our new accounts. If that person wants his social grants to be paid into account, they need to inform SASSA, and SASSA needs to change the bank account details on their bank end system. This is the infamous Annexure C form that needs to be submitted by the customer to SASSA and they have to then process it. And I have to say after the initial troubles that we had in September, October, November last year, I think SASSA have streamlined the process and we now have very little delay in then processing those forms as and when they are presented to them. But other than that there is no other interaction required between us and them, we offer these accounts not only to social grant recipients but to the public at large. And so anybody who decides that they like the pricing, they like the bundle that comes with it is more than welcome to apply for these cards.

Okay, thank you. I’ll get in the queue to ask more questions later. Thank you. Herman Kotzé : Thanks.

Thank you very much, sir. The next question comes from Scott Buck of B. Riley FBR.

Good morning, guys. I am hoping that maybe you can give us a quick kind of step-by-step overview here of what the remaining steps are to complete the recapitalization of Cell C? And maybe give us a sense of timing of when that could be complete and what value you think you will be able to realize post re-cap? Herman Kotzé : Sure. Hi, Scott. So Cell C is currently finalizing the network sharing arrangement with MTN as we said and that will have a material impact on the business model and the financial performance and obviously the debt carrying capacity of the business. So Cell C is currently engaged in discussions with various -- of the stakeholders around the re-cap and the value post will largely depend on the ultimate structure that the recapitalization will take in and that obviously is, will be heavily influenced by the outcome and the commercial substance of the network sharing deal. So, a bit early for us to speculate on that, but the discussions of all the various stakeholders obviously taking place on the daily basis. So, we expect some movement and some announcements around that to slow in the next quarter.

That’s great thanks. On the EPE card accounts, where is the incremental growth coming from? Are these post office account holders that are coming back to you guys for a card, or are these new kind of first time customers? Herman Kotzé : I would say a fair amount of them are former clients, so people that are coming back to us, who simply need to have access to the financial services that they enjoyed before. Remember, the post office account is very restrictive in terms of its ability to handle debit orders. And so, we find that I would say probably more than 70% of our new clients are return or repeat customers, coming back to open these accounts.

That’s helpful. Prior to all the disruption a year ago, how many accounts were you opening on average during a quarter?

Yes, so well initially, when we were in full launch mode two and half, three years ago, we peaked at opening roughly about 120,000 accounts a month, and yes that scaled down after the initial period I would say to an average of about 50,000 a month. And so going forward, we’ve set ourselves some pretty conservative goals. As we’ve said over the last -- over the next year we would like to grow the account base by 10%. But, to the extent that we are able to scale back-up the operations and obviously that’s largely also determined by the liquidity position of the Group, in terms of being able to provide all of the other services around an account being opened. So, typically there is accompanied where they request for a -- with a loan application, we hope to increase those numbers substantially over the next two to three years and, we’ve set ourselves the medium term goal of getting back to around 3 million customers.

Great, thanks for that. Last one, you mentioned some of the ongoing SASSA issues, could you remind us what the potential liability is on the 2014 bulk registration suite? And then, what the figures are around the fees payable for the last six months?

Sure, they are largely the same, coincidentally the same. The claim against us for the fees paid in 2017 amounts to roughly ZAR 300 million. So call it $20 million at today’s exchange rates. That number may increase obviously to the extent that in interest is levied on the payment of the amount. Conversely the amounts owing to us for the last six months of the contract also amounts to roughly ZAR 300 million, so $20 million, and potentially also could be an interest bearing liability for SASSA. So, the two are pretty much the same size and magnitude.

Okay, appreciate that. Thanks, guys.

Thank you. [Operator Instructions] The next question comes from Paul Gordon of Gordon Capital.

In the light of the restructuring going on the allocation of funds in many different directions, not well use the funds to the area that we know best are undervalued stock as oppose to going with Bank Frick and other places where we’re dealing with decisions that may or may not worked out, our under-value stock is clear and unmistakable, certainly management feels that way they bought stock about over a year ago. Herman Kotzé : Yes, fully agree. We are -- over the last year or two years, I think there have been substantial purchases by insiders. As I said, looking at the -- our capacity to buyback stock going forward, we have more than adequate headroom left on the authority that we've -- that we sought a year ago, I think there's $100 million authority that we put in place and we utilized a little bit of it. So from that perspective, we do have the ability to do so. Right now, all of our decisions whether it's to allocate capital to the exercising of options or to acquire controlling stakes whether it’s Bank Frick or in Finbond or increasing the size of our lending book, those are all impacted by the short-term liquidity needs of the business. And so as soon as we unlock enough liquidity to be in a position to consider significant investment in buybacks or any of the other opportunities for asset will be a simple decision of ranking them in terms of the appropriate returns.

Thank you. Operator Right, ladies and gentlemen, fortunately that was the final question. On behalf of Net 1 that concludes today's conference.