[Indiscernible] ladies and gentlemen and welcome to Net1's UEPS Quarter Four of 2021 Earnings Call. [Indiscernible] and the attendees will be in a listen-only mode. There will be an opportunity to ask questions in prompt. [Operator Instructions]. Please note that this event is being recorded. I will now hand the conference over to Dara Dierks. Please go ahead, ma'am.

Thank you, Operator. Welcome to our Fourth Quarter 2021 earnings call. With me today are Chris Meyer, Chris CEO, Lincoln Mali, South Africa CEO, and Alex Smith CFO. A press release and supplementary investor presentation are available on our Investor Relations website at ir. net1.com. As a reminder, during this call, we will be making forward-looking statements and I ask you to look at cautionary language contained in our Form 10-K regarding the risks and uncertainties associated with forward-looking statements. Also, we will discuss our results in the South African rand, which is non-GAAP. we analyze our results of operations and our press release and in rand to assist investor's understanding of the underlying trends in our business. As you know, the Company's results can be significantly affected by the currency fluctuations between the U.S. dollar and the South African rand. Chris will start this call with an update on strategy, then Lincoln will provide an update on the turnaround of the South African operations, and finally, Alex will go through the results of the fourth quarter. Therefore -- thereafter, we will have a Q&A session. So with that, let me turn the call over to Chris.

Thank you, Dara. If you can hear me okay. Good morning. Good afternoon. And thank you, everyone, for joining us for our fourth-quarter earnings call today. [Indiscernible] I want to recognize that this is our first earnings call since the tragic passing of our former Chairman, Jabu Mabuza. Jabu played a critical role in Net1's journey of change and renewal, including the appointment of high-quality non-executive directors, the appointment of new senior executives, rebuilding Net1's relationships with key stakeholders. And lastly the conclusion of the strategic review last year. We're fortunate to have Kuben Pillay has just become our Chairman in August, following Jabu's passing. Kuben joined the board in June 2020. And as part of the various changes that I've just mentioned, that occurred during Jabu's tenure. And Kuben is providing strong continuity on that journey. So this is my first earnings call at Net1. And I've been in the role as Group CEO just on two months. The opportunity to take on the role of Group CEO was presented to me earlier in the year and it was very quickly apparent that the mix of people, capabilities, and mission is unique. Simply put, the opportunity to be part of unlocking Net1's potential was too important to ignore. I'm a proudly South African, and I've spent much of my career building businesses outside of the country, in the UK, and elsewhere. I'm tremendously excited by the opportunity to reposition the Net1 platform for growth. And see it as an opportunity to make a real difference in our country. Our mission of driving financial inclusion for underserved consumers and merchants in South African has a deep personal meaning for me, and there is no one better positioned in the market than Net1. Our Company has incredible assets and capabilities in…

Thank you, my brother, Chris. It's certainly been an incredible 2 months working with you, partnering with you, as we try and work on the business together with our colleagues. I personally joined Net1 in May and can sincerely say that it's been a huge honor to be part of the Net1 family at this critical time. For a while, this was an organization under siege, but now there is a new mood. There's new energy across all our teams and we're reengaging with all our stakeholders under the stronger commitment to our financial inclusion purpose. I'd like to take you through some of the key developments over the last few months and some of the plans for the coming months. My first step in my new role was to ensure that we have the right team. And we have the right culture to execute our growth ambition. I found many highly competent people already within Net1, especially in the operational areas. However, I also found the need to add many new skills into the business, especially into the senior management ranks for product and commercial ownership. To that end, we've appointed several high-caliber, experienced, and well-regarded individuals regarded individuals to our management team within the last few months. We've included a page with [Indiscernible] buyers in the supplementary investor presentation, posted on our site. Suffice to say that we have significantly strengthened our team over the last quarter. And we are humbled by the number of people showing an interest to join Net1. On charter, Net1's focus has historically been on the technology, logistics, and operations that enable it to successfully [Indiscernible] up to 10 million [Indiscernible] every month with SASSA as their main client. The task at hand now, however, requires all of that. But in addition to…

Thank you, Lincoln and Chris. And I wanted to take the opportunity to extend an official welcome to you both on your first earning's call. It's been an exciting few months since your arrivals, and then all of our people are looking forward to our future under your leadership. Now, onto the financial and operational highlights. Total revenue for the quarter was $34.5 million, which was a 41% increase year-over-year in U.S. dollar terms and a 15% increase in rand terms, primarily due to higher volume-driven transaction fees, improved lending revenue, and hardware sales. The U.S. dollar was 18% weaker against the rand during the fourth quarter of 2021 compared with the prior period, which also impacted our reported results. We reported an adjusted EBITDA loss of $8.2 million, which was 31% better than the $11.9 million EBITDA loss reported for the fourth quarter of 2020. This was mainly as a result of the closure of IPG, which had? should note? a loss of $4.2 million in the prior period. The core South African operations, so EBITDA losses for the quarter of $7.8 million compared to the $5.9 million in the prior period, primarily due to weaker profitability in the financial services segment linked to increased insurance clients related to the COVID pandemic. Otherwise, the cost base remains stable, and we have significant available capacity. The fourth quarter of 2021 fundamental loss per share was $0.18 compared to $0.21 per share a year ago. Corporate costs were $4.6 million, which was significantly higher than Q4 2020, primarily due to an allowance for doubtful loans receivable of $4 million, which we have excluded from adjusted EBITDA and fundamental earnings. This was partially offset by the net reversal of stock-based compensation charges of $500,000. In South Africa, our consumer bank accounts EPE…

Thank you very much, sir. Ladies and gentlemen, at this time you can ask a question. [Operator Instructions] We'll pause a moment as we wait for the question queue to build. The first question comes from Raj Sharma of B. Riley Securities.

Hi, Hi, good morning. I have a -- I have a few questions about -- I'll start with welcome aboard, Chris and Lincoln. It's a pleasure to hear you on the calls. To Chris, I know that you've set -- you stated that you set a high bar on any sort of numbers going forward. But any indication of what that bar is? I know you took off the number of accounts that are going to be added by the end of the fiscal '22. It seems like there's a lot of addition to the staff, and a lot of addition to the right players in your local geography. But any sort of indication on what is your target for account adds for the year.

Raj, Hi. Can I -- you mentioned you've got a few questions, but let me comment and just try to respond to that, and if you have follow-ups --

Yes.

So firstly, thank you. Thank you for the welcome. We, both Lincoln and I are very excited to be part of this business. Early days in the journey for us, but tremendously excited about what we're seeing. In terms of forwarding guidance, and the bar if you like. I think as I said, at this point, we're not in a position to provide guidance. We are very focused on being transparent and providing guidance and indications that we can achieve as a business. We -- I hope that you can appreciate having been in the seat just for 2 months, that it is early days and we're looking through the underlying momentum in the business and really want to form very clear views around more formal guidance before we come off. And that's what I mean by a high bar, it's your own clarity. So as we said on -- in our few remarks, we can see the momentum. The momentum is clearly building in terms of the EPE account growth. The August numbers were a significant step-up from July and June. And we're very hopeful and around that momentum, continuing to build. I think what I would also say is and maybe underline is a lot of work, as Lincoln was saying, has gone into hiring and replacing senior sales execs across the country. The way I framed this is in many ways, Net1 was a logistics business. It was a business that was focused on delivering -- of moving cash from point A to point B and ensuring grants were paid. Our challenge has been to reposition this business, to recognize that not only do we have a cute relationship with SASSA, but each one of our million-plus customers is a customer. And we need to change the culture in our organization to be really client-focused -- client's acquisition focused and solutions-driven, and that's a big shift, and that's what's been going on over the last 2 months. And that's what we're looking for in the data to see that starting to come through and allow us to therefore give you much clearer and confident numbers and guidance. So I hope that answers the question. I hope that gives you a sense of where we're focusing. And we will in the future come back and give you targets and numbers that we would want to be held accountable to.

Right. So it's very encouraging to see the account growth. But these -- there's -- and also I see that there have been great additions to the team. Does this mean that the infrastructure is expanding or the costs are -- should we assume that the costs will be -- are going to be higher as well. I was looking for some sort of referencing around that.

So, I think a few points to make on costs. So no, you shouldn't expect the cost base in this financial service business to increase. We are focused on reducing costs in the financial services business. And we have a number of leavers already being acted upon and focused on. The investments in new people, to a large degree, is the replacement of some roles, is an investment required to really shift the, as I've said, the culture of the organization to one of the sales. It's an investment in sales to really drive account growth and activation. But within the context of, you should not expect to see the cost base in that financial services, business increase. To the country, we are committed to seeing it reduced.

Got it. Thank you, that helps. In CapEx, if I can move on to the possible acquisitions that you are referring to in -- on the merchant side in the informal space, is there any sort of indication on what possible size would that be? Or if you have already identified candidates in sort of a timelineOpera Is it -- when could we expect something? Any sort of color around that thinking?

Sure. Yeah So as I said in my remarks, we have a number of opportunities that we are evaluating. We have spent a lot of time looking at the markets and cross-referencing what's out there to our capabilities in those gaps that I was discussing in our capabilities. So we have a very good handle, I believe, in terms of potential targets. And we're looking through a few business cases in that regard. We can't say more than that at this point but as soon as we have something, if we have something to announce, we will bring that to the market.

Got it. And then just moving on to the SASSA accounts. There was a -- SAPO, the post office has become in search for a reputable quote-unquote card scheme to issue cards over the next 5 years. And they say they need to issue about 12 million cards that need to be replaced for a big cost. Is there -- does this recruitable card scheme assume Net1 would be a big contender.

I'm going to ask Lincoln to come in on this question in particular, if you mind, Raj.

Sure.

I think what's important to us here, we'll give you a good sense of how we're working with SASSA and how the relationship with SASSA has been repaired as Lincoln was referring to earlier. But I think Lincoln is best placed to provide a little bit more detail and color. Lincoln, if you want to take that.

Thank you, Chris. Raj, we applied our minds to the tender. We looked at the tender in quite a lot of detail. and in the end, we decided not to participate further in the tender because we felt that the commercial terms of the tender were not acceptable to us. And we felt that we could still go on with the momentum that we've got to try and grow the customer base organically without having to go through a procurement process for a deal that we thought did not make a lot of commercial sense for us. So we're able to go back to the policies and politely declined to participate but we've indicated that we are available to help whatever way but they -- we couldn't see ourselves participating in a module that did not make commercial sense. And therefore, we deleted that. But on the other hand, as Chris was saying, we've spent a lot of time rebuilding our relationship with SASSA. At all levels from the NASA leadership to provinces, to local. And it's done on a transparent basis, competitive basis, like everybody else, because they want clients to have a choice. And we also want clients to have a choice. If there are other organizations that can offer better services than us, and that's fine. We think that we can offer good services, and that's why we see our customers coming back to us. So we didn't pursue that tender at all.

Got it. So there is still a -- still, the same opportunity available to Net1 to get back a lot of the SASSA accounts as your customers.

Yes, indeed. So that's exactly the opportunity we saw that many of those clients still do come to us for their transactions and our staff is now engaged in more conversations than in the past. As Chris was saying, in the past they would have just paid the grant and not engage in the conversation. Now they are able to be engaged in a conversation and give a sense of our capabilities. And most of those clients had been with us before. They know what Net1 is capable of and they are now coming back on the basis of developer positions that we have and the service that our staff has continuously given through all the difficulties. We've had men and women who've been in this business for 15, 20, 25 years and they've always given the best to the customer. And those are the people that are now benefiting from our customers coming back.

Okay, Perfect, thank you. I'll get back in the queue and take this offline. Thank you so much for answering my questions.

Thanks very much.

[Operator Instructions] The next question comes from Jeff Jokri of Unicom Capital.

Hi, guys, it's Jeff Jokri. Welcome, Chris and Lincoln, it's great to have you on the call, as well. Congratulations on the recent pickup in EPE accounts. I was curious, Alex, if you could maybe? upsell? a little bit on Roger's question, but could you provide a sort of a general view as to what breakeven would be in terms of EPE accounts? Just so we can get that tapping in business to sort of back the -- to breakeven?

Yeah. Hi, Jeff, the numbers on maturity are different from what we've indicated in the past, in terms of the number of EPE accounts to get to break even. So I think we've previously got it to 1.4 million, 1.5 million for South Africa as a whole to get back to break-even. I don't think we see that significantly differently at this point. But as Chris mentioned, we're going through a whole new system. So we'll certainly come back and give perhaps clearer guidance around that in due course.

Okay. The second question I had is, and this might be one for Lincoln, there was a couple of press reports related to -- recently related to the COVID relief grant suggesting that SASSA confirmed the bank account method as the most convenient and quick est way to receive the grant. It also suggested a period, I believe it was September 3rd to the 10th as the window to change the method. I was wondering if you saw this affect your recent account ad and whether you think this is a shift in attitude thinking it's better at SASSA that will make opening new accounts easier or is it more temporarily related to COVID? Thanks.

I think broadly the sinking within SASSA and the sinking amongst financial institutions are starting to align. That we need one another to solve an intactible South African problem. And I think if anyone of us needs a reminder of how deep these problems are, the riots kind of gave us that picture. So we now have more regular engagements with SASSA as part of the other financial institutions. So what SASSA has done is that it started to digitize the grant approval process. So today, for new grants, you can actually apply for a grant in the SASSA portal without going to a SASSA branch. What our staff is doing for those clients, mainly in the rural areas, we are now using that opportunity to help our clients apply. And therefore those clients are able to apply and get the bank account. And that is all done in the 3 to 4-day turnaround time. So that's a first positive for us. We think that if that's done for new clients, it could also be done for other clients who want to change bank accounts. Secondly, for the 350 grant, SASSA did it in a way where everything was done digitally. All their applications are done digitally. So you can see the swing from SASSA, which is aligned to our interest as well, to do everything digitally. And so we participated in that as well. And we're starting to see some of those applications from the 350 grant. So I think directionally, we see more and more of SASSA going more digital. And we are also gearing ourselves from our IT side to be able to do that with SASSA. And that would also help us with activation of accounts, so that if we've opened an account there must be money flowing to the account. And that's something that's going to be good for us. And is one of the variables in looking at when the financial services could be turning around and get to break-even. So these are all the variables we're working on. As Chris was saying, that at the right time, we'll be able to give better guidance. But these are good inputs into what we are trying to solve. And so the stars I think are aligned much more now.

That's very encouraging. I guess just in the last follow-up would be related to the increase in August. And it's a pretty significant uptake in new accounts. And so how much do you attribute to -- you can give some color on this, how much do you attribute to sort of the marketing campaign, for the new staffing and then just sort of the digitization they just talked about from SASSA, sort of how much would you put in each of those sorts of buckets in terms of the new accounts in August? Thank you very much.

It's probably early days yet. We are reporting through the data to give us those answers. But certainly, the new leadership in all the provinces is playing their role. We are repurposing our marketing using more digital marketing, using our own infrastructure that we've got, our ATMs, our branches, and all of that, to market. Our own staff's confidence is getting better. And then obviously, the relationship with SASSA is also improving. And we have the digital play also from SASSA. So in our mind, it's all of these contributors. It's still very early days for us to be able to pinpoint specifically which ones are more -- we can attribute more to. And we want to build more If we want to build more understanding, and we're trying to get to understand more of that. And we're spending a lot of time in the field, and just again this morning I was with a couple of branch managers to get feedback from them about what do they see on the ground, what's improving. And that's also a big difference in the culture. we're changing in their organization, that we spend a lot of our time in the field with our clients, with our staff, in our provinces, to get the pulse of what's going on and engaging with SASSA and all players, and that makes a big, big difference.

Jeff, does that conclude your questions?

Yes. Thank you very much.

Thank you. Ladies and gentlemen, I will now hand it over back to management for closing comments.

Thank you very much, Operator. So just to conclude, again, thank you very much to everybody for joining us on the call. Thank you for the questions. And thank you for the interest shown in our business. I think to -- hopefully, you heard in those closing remarks from Lincoln, the activity -- the levels of activity momentum that is going on in our business, the excitement that we're starting to feel across our branches and across the country as we make this shift from a more reactive, operations-focused business to one that is really focused on building momentum, building client acquisition, and building the leading South African Fintech platform focused on underserved consumers and merchants. We are all very committed to this, and we look forward to sharing more on the journey in future calls. Thank you very much for joining us.

Thank you. Ladies and gentlemen, that concludes today's event.