Good day, ladies and gentlemen, and welcome to the Net 1 Ueps Q4 and Full Year 2015 Earnings Call. [Operator Instructions] Please also note that this call is being recorded. With that, I'd like to hand the call over to Dhruv Chopra. Please go ahead.

Thank you, John. Welcome to our fourth quarter fiscal 2015 earnings call. With me today are Dr. Serge Belamant, our Chairman and CEO; and Herman Kotze, our CFO. Both 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. So with that, let me turn the call over to Serge.

Thank you very much, Dhruv. Good morning to all of our shareholders. As I said in my quote last night, I'm thrilled with our fourth quarter and full year results, as they continue to demonstrate the quality, sustainability and momentum of our business model. We achieved USD 164.3 million in revenue and USD 0.58 in fundamental earnings per share, which, excluding the once-off SASSA recovery fee in quarter 4 of 2014, translates into 22% and 50% year-over-year growth in rands, respectively. We have made tangible progress in the transition of our business model through strong execution in our new initiatives like EasyPay Everywhere and ZAZOO, which are the pillars that will drive our company forward in the years to come. Herman will provide the details of our financial performance, while I want to focus on key strategic areas and the progress we are making in each of them. The first thing I want to highlight is that we now view our businesses across 3 distinct verticals, namely: cloud-centric solutions, which are driven primarily by UEPS/EMV biometrics smart-card technology, such as EasyPay Everywhere, our WFP MasterCard and SASSA; the second is our mobile-centric solutions, which focus on deployment of our various mobile products such as MVC, variable PIN and value-added services; and finally, transaction processing, which includes KSNET, EasyPay, FIHRST and other processes. These verticals are capable of operating independently of one another, but frequently supplement one or more of the others. More importantly, each vertical has a specific set of opportunities and go-to-market strategy. I will now spend a few minutes to elaborate on each of these. Our cloud-centric solutions leverage on our proven scalable and interoperable UEPS/EMV solution to address the fundamental emerging economy issue of financial inclusion. Financial inclusion, which essentially is to provide easily accessible and affordable…

Thank you, Serge. I will discuss the key results and trends within our operating segments for the fourth quarter of 2015 compared to a year ago. For Q4 of 2015, our average rand-dollar exchange rate was ZAR 12.04 compared to 12 -- to ZAR 10.42 a year ago, which negatively impacted our U.S. dollar-based results by approximately 16%. We continue to face significant currency headwinds in our operating geographies. The U.S. dollar, which is our reporting currency, has continued to strengthen significantly against the emerging market currencies, and the South African rand yesterday traded at its lowest point in 13.5 years at ZAR 13 to the dollar and is currently trading at around ZAR 12.95 to the dollar. The South Korean won has also weakened by approximately 9% over the last 90 days and is currently trading at its lowest point in more than 3 years at KRW 1,194 to the dollar. As predicted, the stronger dollar progressively had an adverse impact on our fiscal 2015 results, and particularly on our Q4 results. We expect the adverse impact of the stronger dollar to continue in fiscal 2016, with our average operating currency exchange rates for the first half of Q1 2016 already significantly worse than the Q4 rates. Due to the fluctuations caused by the volatile exchange rates in our operating currencies, we provide constant currency comparatives in order to analyze the core operating trends in our businesses. We ended the year with a particularly strong quarter, and I am very pleased with the momentum demonstrated throughout fiscal 2015. You will recall that our prior year or Q4 2014 results included the $27 million pretax or $19 million after-tax recovery from SASSA related to our implementation expenses incurred in fiscal 2012 and 2013. On a consolidated basis, for the fourth…

[Operator Instructions] Our first question comes from Dave Koning at Baird.

Yes, and I guess my first question, just when we look at fiscal '16, there are so many good things happening right now, but if we isolate to the two things that I think are going to be the big profit drivers this year, kind of materially contributing to kind of the guidance growth, are the Smart Life platform that generated 0 revenue in fiscal '15, and then the EasyPay Everywhere account. So first, just on the Smart Life part, it was 0 really in fiscal '15, right? And then what kind of a potential estimate for revenues in fiscal '16 from that?

As far as Smart Life is concerned, I'm not sure that I'd put it in the top 2 in terms of what will drive the guidance in terms of our fundamental earnings per share for the next year. It certainly is a significant future contributor for us. But for the next 3 quarters or so towards the end of fiscal 2016, we're obviously going to scale up our activities quite significantly. You will appreciate that during the last 2 years of the business largely having been in limbo, we didn't employ all of the required support structures. In fact, we had to let some of them go in anticipation of the upliftment. So over the next couple of quarters, we obviously are going to spend quite a bit of money making sure we've got all the required support structures in place. We will obviously also spend quite a bit of money on marketing initiatives. We are going to scale up on the sales side quite significantly. So what we expect to see is the scaling of the number of polices sold specifically over the next 3 quarters. I think that's going to be the most important measurement for us. In terms of fixed contribution to our profitability, I don't expect to see that until the end of fiscal 2016, so probably the third to the fourth quarter after we've invested into the cost structures we need, as I've indicated. We obviously also need to establish the relevant underwriting and insurance reserves as we scale up on our book. So as far as Smart Life is concerned, I think the most important measurement likely is going to be the uptake of the policies over the next year or so. In terms of what should be in the top 2, to get back to your initial statement, EPE obviously is a very important component and then certainly it should be right at the top. And I think second most important is what we think we can achieve through all of the various ZAZOO initiatives in fiscal 2016.

Okay, well, that was really good color. Maybe than what you could do is, I know you said 150,000 accounts per month from EasyPay Everywhere. How much revenue per account do you think those can generate?

We don't really disclose the revenue per account. It obviously will be a combination of the product mix that our EasyPay Everywhere clients will take up. That is the moving average at the moment. So depending on the transaction profile of our specific clients, which by the way, also differs from whether they're rural or whether they're urban customers in terms of their usage of ATMs, point-of-sale devices and the uptake of value-added services, we will, I think, need another quarter or 2 before we have a trend that is more predictable in order for us to give you a number that we're comfortable with.

Dave, perhaps to give you a little bit more information. You must remember that the focus that EPE is not the same as what it were in the days of the SASSA contract. In other words, we are not targeting only people that are in the lowest income group, we are targeting people that are certainly a little bit more top of the food chain. So the differentiation between the 2 is that the people that have a little bit more disposable income tend to want other products or different types of products that, in fact, the low income groups simply can't afford. So by definition, if you work on the point of focus [ph] that the SASSA account used to generate around ZAR 16 or whatever it was, ZAR 16.44 per month per person, we obviously believe that as we're going up the food chain, the generation of the amount that can be generated by the next group of EPE clients is going to be substantially higher than that.

Yes, yes. That makes sense. Good. And then I guess the last thing, free cash flow, as you said, pretty good in Q1. I mean, you could end Q1 with over $2 per share of cash flow, and you did mention buybacks in your uses of cash kind of commentary towards the end. Is that something -- it just seems like at the current stock price, even with the big move, it's so accretive to buy back even a modest amount of shares.

Well, Dave, certainly from our perspective, we have an approved repurchase program in place. So we can act whenever we feel it's the appropriate time to do so. We are going to be focusing in Q1, obviously, very specifically on spending quite a bit of money on the marketing and rollout establishment costs for EPE and Smart Life. And as Serge indicated, there are also 1 or 2 other opportunities that we are exploring at the moment that we believe may add quite a bit of capacity to our existing initiatives or creates opportunities for us in terms of how we distribute specific products. An example of that would be VCpay, where it's quite important for us to try and identify the most appropriate method of issuing these cards without paying away a significant chunk of the transaction economics to the only established players in the market. So those are going to be the primary uses of our cash. We have a debt repayment due in April 2016, but we also just need to bear in mind that, to the extent that we have surplus cash available, we will certainly be doing some opportunistic share buybacks when the opportunity presents itself.

And Dave, we've never been very good at doing share buybacks, as you know, in the past. And the fundamental reason for that is because we believe on the one hand, doing a share buyback might somehow fictitiously increase our earnings. But that's not who we are, we don't have to be fictitious about it. We can increase our earnings without doing share buybacks. So I would rather invest the money, whereby I know that I can get a far better return on that investment than simply doing a share buyback, which gives you a temporary uplifting something, while we can actually get a continuous uplift by investing the money correctly. So I know lots of people won't agree with me, but it's always something that until we reached the stage whereby we no longer believe we can grow our EPS, then we will start doing what everybody else does and then we'll start doing the share buybacks.

Our next question comes from Gotham Holdings, Russell Anmuth.

So where do we stand with the Hawks [ph] at this point?

Russell, we are still very much in contact with vendors often as we are able to contact them because they're supposed to contact us. And the very last thing we heard is that they were concluding the investigations, and we were hoping, in fact, that by this call, we could have come forward and said they've concluded the investigation and this is the report that has been issued. Every time we do that and every time they come back, they keep on telling us that there is something else which they're busy looking at, which has absolutely nothing to do with us. And that they also tell us, it has nothing to do with us. But they still have to have the full file ready for the prosecutors to actually come out with their conclusion, which, of course, on our side, we're only interested in one conclusion, and that is the one that's going to clear us. But because of there are a number of other parties involved in this particular case, we can't say if it's going to clear everybody else. And I think they can't come out and clear us without actually clearing everybody else or not clearing everybody else. So I think they are waiting to conclude what they're supposed to do. And why it's taking so long? I do not know, but there, again, the DOJ is exactly the same, if you think about it. So it sounds to me that these organizations have got very specific ways of going about their business, which obviously we don't understand because we're business people. But at the end of the day, I actually think that the result is not going to be any different to what we were expecting and are more and more confident that, in fact, we will get a clear bill of health from them.

Okay, okay. Thank you. All right. To get down to business. With MasterCard, are you still pursuing jointly with MasterCard countrywide deals that you've spoken about in the past?

Of course, of course, we haven't given up. MasterCard is a very, very large organization with basically lots of people to talk to before you can get any decisions. We're lucky, we have a very flat management structure and we can make decisions in 20 minutes. They can do the same thing probably in 20 months. So one thing we must understand is that we are working with them. In fact, we have what we believe is an ever-increasing relationship with them. We get along very well, we talk about different things. We're just about to certify new EMV/UEPS pass which is going to have contactless, in other words, your typical sort of pay pass functionality. They're already prepared to help us to fund with the replacement of our cards because they want to introduce their product. So there is no doubt there is a lot of stuff going on with MasterCard. What actually is going to be the big benefit for us is, for example, with the World Food Programme, to have a world tender, whereby together with them I think we have a better than average, I would think, better than average, like 90% chance that we could win that program. And as you can see, if we can then replicate what we've done here, what we're doing in Nigeria, what we're likely to do very soon in Uganda, and we can replicate that model, let's not dream but replicate it in 80 countries, then intendedly [ph], I think we could become quite a brand on the worldwide basis, and I think that's where MasterCard and people like the IFC are going to be able to assist us to achieve that goal.

80 countries. Is -- that would obviously will be over a multiple of years. And again, would that -- that would not encompass boots on the ground.

Well, at the moment, those 80 countries represent more than 50 million people that are receiving grants. Now if we -- like the first one, which unfortunately, I can't give you the name because I told you not to give you the names, so I'm not going to give it to you. But there is one country we're going to start probably the next month or two, which now all the terms have been agreed, and in that particular country, we have been asked to actually go in and to actually do the operations because a lot of people have got things on spreadsheets and papers and sheets of papers and verbal things, but they're not very good at actually doing it. We're not very good at marketing it, but we're very good at doing it. So I think they've decided that initially to make sure this project has the best possible chance of success, they've asked us to go in and to actually do it as well, which I think is a good idea. On top of it, they pay for us to go ahead and to do it. So we want to do the implementation of the operations, then hand over to a local team after we've trained them and we've given them the blueprint of what needs to be actually done and how it should be done. Our job will then simply become a question of monitoring that, in fact, the procedures that we've set and the processes that we've set and the blueprint that we've designed is in fact being followed by the people that are going to become operational. Otherwise we would have to be in 80 countries, and it's unlikely we can achieve that.

Okay, okay. One follow-up. Are you still working or considering to work with various handset companies to integrate your various solutions and/or other mobile service providers outside of MTN?

Oh, absolutely. There's absolutely no doubt that, that is one of our visions. And I think I mentioned before that the B2C model, which has been used by many people, is an incredibly expensive model to implement. Simply because the customer acquisition is always expensive. We believe that the B2B, and certainly the B2B to C is quite a nice model simply because it allows us to get paid from a business point of view but still to have access to the customers directly, which means it almost means that some people are prepared to share with us and to pay us, even if it is a smaller amount, to actually do customer acquisition as well. So it sort of kills two birds with one stone, but we believe that's the first, probably, the easiest way to scale very, very quickly, and then giving us the opportunity to gather all of these individual customers together and to then make them our own customers as well. So that's the strategy we've deployed, and you can see through some of the announcements that they're starting [ph] to actually work for us. We think this is a good, easy way to get in and it's easier to sign a business deal than a customer deal. Let the businesses sign the customers, but let the customers be our customers as well, which means you do the two things in one go.

So would somebody like Samsung, for example, or some of the other Android players who've introduced their own branded mobile wallets of sorts, would they be...

Some of them will definitely do it, there is no doubt about that, and I mean, we see all operators to be a potential channels for us. But as you know, a lot of operators today are all going into that type of stuff themselves. If you look at Samsung, for example, they raised on [ph] -- I don't know what to call it anymore, because I've lost complete understanding of what people call mobile wallets or whatever they call them. Because really it's almost like an agglomeration of what you got in your actual wallet in your own pocket, which now you're moving onto the phone. Now candidly, we don't do that, as you know. We are -- personally, I think it's a complete waste of time. But that's something that they want to do, and they are fighting against other big players. So while they're doing these things internally, they don't really have much time to make a company like ours because we're outsiders, while they've got the internal strategy groups that are doing this. So when necessary, we certainly will work with them. And if they want us to work with them, we will do so. The only thing I can assure you, that we don't rely on them to do anything for us. Microsoft might be a little different in this particular field, because we already have a contract with them. We're already doing some loading, as you know, of phones, and now we've actually been given the go ahead that we can load the application on the worldwide basis with Microsoft before it was restricted to South African. So we are starting to do more with larger groups rather than less, right? But once again, it's just a question of accessibility to channels. But like before and like I mentioned to you before, we rely on ourselves before we rely on other people to generate business for us.

Okay, okay. Makes sense, you have to drive it yourself. On India...

I'm sorry, Russell, would you mind if we take -- if you rejoin the queue. And I think we should have [ph] someone else.

Sure, sure.

[Operator Instructions] Peter Luber from Post Street Capital.

Just on EasyPay, you guys have outlined before that it would take about 1.5 million users at ZAR 16 per month to hit that SASSA EBIT level that you're earning today, and with 150,000 a month, that cadence is sort of by March 2016, you'll hit that. If you have a more affluent customer spending, spending more, is it possible that you could hit that level of SASSA EBIT kind of earlier than March at that 150 cadence? And then the follow-up is just with all -- with the line of sight to 2016 EPS, you still have that 2- to 3-year line of sight to $4 of EPS?

Again, I mean, you're absolutely right. Obviously, it's going to depend on the customer composition. So we based our figures on going for the lowest possible income group that we could possibly think of. In other words, we're looking -- we always like to work with the worst-case scenarios rather than the best-case scenarios, because typically the world today, it's probably the worst-case scenario that normally wins. So first, we would like to start what's the worst case, if, of course -- and it's starting to show us that, in fact, it might go that way, whereby we could end up with more than 30% or 40% of our customers might not, in fact, be the lowest income groups. And if that happens, there's no doubt that this is going to make the period of stand [ph] that we will require to reach equality and if -- as if and when we would lose the SASSA tender, we might achieve that faster than expected. But we're talking about the different type of customers, which means the different products. For example, we're just about to launch our own inter-web or web-based banking service, because those customers are a little bit more sophisticated so the type of channels and products they require is different to lower income groups. So to me, let's not put the cart before the horse, I believe that we still need another good quarter or up to 6 months from now to ramp up and to make sure that we scale what we want to do, and I think then the metrics that you are talking about will become far more visible than what -- that what we have after the last 6 weeks. All I can tell you after the last 6 weeks is that we are basically on target in terms of what we were expecting to get, which is great news. But we also know what products are currently being used. We're just a little bit surprised that, in fact, we're getting quite a large number of non-low-income-group people actually also joining the banking platform, which, of course, we're really excited about because it gives us also some opportunities. So give us another quarter or 2, and then we'll be able to give you far more detail in terms of the makeup of everything, okay? And -- we, we're -- sorry. Okay. That's it. Sorry.

We are on track for $4 a share. Are we on track for $4 a share?

Yes, but he didn't ask that, I think. I didn't catch that piece, sorry. The line went little bit dead for a while. That you're talking, are we are on track for $4 a share? Well, we are a growth company, and if you look at the numbers that Herman is already put down on the table, certainly this is something that we believe is a target that we can achieve. There is absolutely no doubt in our mind. I think the company is starting to really scale much faster. The momentum, I think, is accelerating. And candidly, between the EPE -- and I mean we keep on talking about EPE in South Africa, but I think where the real EPE growth is going to happen is when we actually launch the same products in Nigeria and Uganda and other developing economies, either with or without The World Food Programme. And of course, it's ZAZOO because already you've seen the number and that is something that is growing at 30%, 40%, in some aspects, 70% per annum. So that's where we really see this scale is really going to happen. Those 2 products, I think, are going to become gigantic very, very quickly.

We have time for one more question from Russell Anmuth of Gotham Holdings.

So Dhruv looks like he's making excellent progress in laying the groundwork in India, right? It's a very difficult country to enter and do business in. How do you think, just how do you think India plays out in a little bit, if you can just walk us through it a little bit in terms of how product gets in the marketplace, and how you start to realize revenue and actually when cash flow streams start to come in?

Well, the Indian -- and you're right, Dhruv is making some headways, he is, in fact, sitting in front of me right now, and I'm pleased to see that he is finally making some headways. So he is actually doing a great job there and you're right, India is not an easy market. I think I did mention that before, whereby you need 15 [ph] million people before you can make a profit, all right. So it appears that maybe -- I may be wrong -- maybe we need far less than that to be able to make a profit. I think it's a question of finding the right niche. I think we found it. And there's no doubt that initially the B2B to C is going to be the way to go in terms of generating revenues with very little cost, so very little investment, but at the same time, creating this so-called customer database that we can target ourselves. So long term, you're going to see that we're going to go more B2C. And by the way, as you know, we're involved with people like Oxigen and there's a number of things in the pipeline that we're about to finalize as well that we will be talking about in the next 4 to 6 weeks, I'm hoping, which are very exciting as well. And there are couple of other things we're getting involved with in India as well, which involve point-of-sale, which involves ATMs and involves [ph] switching. So there's a few other things that we are doing to make sure that we build the same sort of blueprint, for lack of a better word, as we've managed to build in South Africa. Now in India, of course, the opportunities are really endless because you can work nationally…

Does that go state-by-state? Is that how Dhruv is focused?

I think Dhruv is doing a bit of both. He is working both at the national level, but it's like anything when you have the state-by-state level, even if you sometimes do things at national level, it is only the national people are going to let the state do what they want. So you go to work in generic manner at the state level and also work at the lower level to make sure that, in fact, the projects are going to be accepted. So the states normally are running what we call government projects, but the government projects have got to be cleared by the central government, first and foremost. So there is a lot of work that has to be done continuously in India to keep up with legislation because they have a lot of it, they tend to change a lot of it. The only thing that we are incredibly interested about and excited about is because India seems to be incredibly proactive, and their vision of the payment system is very, very similar to what we're doing. Financial inclusion for them is absolutely paramount, and tend to be they're not afraid of passing the rules and the laws that are going to stop people from stopping it from happening, and by doing that, they're actually enabling us to actually doing it ourselves. So that's what we're really excited about in India. In the next couple of months, 6 months or so, we should start seeing exactly what sort of money can be made, depending on the number of customers we're going to have.

How does Korea look? Are you able to build on the considerable position that you have there with -- what you've got with more exciting, value-added technologies and services?

Once again, the answer is quite simple. In Korea, we know that this is a very advanced country when it comes to technology, and we've now identified that really to get in South Korea, to ride on what we've done, is going to be mobile payment, for lack of a better word. And once again, not so much through a variable PIN, although it sounds to me, it would be quite a good for them because I think they need it. But certainly, through EasyPay and contactless payments, that's really where we believe that we can ride on our current infrastructure.

Ladies and gentlemen, on behalf of Net 1 Ueps, that concludes today's conference. We thank you for joining us. You may now disconnect your lines.