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

Thank you, Irene. Welcome to our fourth quarter 2018 earnings call. With me on the call today is our CEO, Herman Kotzé; and our CFO, Alex Smith. Our press release and a supplementary financial presentation are available for - on our Investor Relations website, ir.net1.com. We expect to file our Form 10-K in a couple of weeks or sooner. 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. So with that, let me turn the call over to Herman. Herman Kotzé: Thank you, Dhruv. Good morning, and good afternoon to all of our shareholders. We are eagerly counting down the days to the expiration of our contract with SASSA, 32 days to be exact. While we are proud of our achievements and social upliftment to millions of underserved South Africans over the past 6.5 years, the unfounded media allegations, challenges by competitors and NGOs not to mention sometimes hostile political positioning has been very distractive to the company and its shareholders. We remain on track to exit the obligations to SASSA and the Concord…

Thank you, Herman. I will discuss the key results and trends within our operating segments for the fourth quarter of 2018 compared to a year ago. For Q4 of 2018, our average rand dollar exchange rate was ZAR 11.45 compared to ZAR 13.19 a year ago but positively impacted our U.S. dollar results by approximately 13%. Revenue of $149 million in Q4 2018 was down 4% year-over-year in dollars and down 16% in constant currency. Our fundamental earnings per share decreased by 48% relative to Q4 2017 on a constant-currency basis and include a tax-affected USD 0.07 decrease in the fair value of our Cell C investment. Excluding the fair value adjustment, fundamental earnings per share was $0.29 in the fourth quarter of 2018. As indicated in the last quarter, we've included this amount in fundamental earnings because we believe it is appropriate for the returns generated from this significant investment to be included in any assessment of the company's performance. And for fiscal 2019, it will be included in our GAAP earnings due to deduction of new accounting guidance. The decline in value in the quarter reflected in this adjustment is caused by lower market multiples and the peer group, partially offset by the underlying improvement in operating performance of Cell C as reflected in their results announcement last week. We are pleased with the progress evident in Cell C's recently announced results for the 6 months ended June 30, 2018, which showed revenue and subscriber growth and continued improvements in profitability. While there has been some speculation around the need for additional funding in Cell C since their results last week, Cell C has made good progress with a ZAR 1.4 billion facility approved in July and is in discussions for a funding round of a similar size,…

[Operator Instructions] Our first question is from Allen Klee of Maxim Group.

Good morning. Some questions on SASSA and EPE. Can you quantify the CPS loss in the quarter? And then when the contract ends the ability to reallocate that infrastructure could - can that create a positive earnings from that? And then also on the - you're getting underpaid given that you’re processing the most expensive people now, a timing for when you might hear about getting higher rates for that? And then on the customers that sounded like they were at risk, it sounded like you mentioned 800,000 and 900,000 of EPE customers that, maybe talk about what you can do proactively to try to mitigate the potential churn of those customers? Thank you so much. Herman Kotzé: Thanks, Alan. I think I've got a list of your questions, but please remind me, if I have skipped up on some of them. In terms of the CPS loss, we don't split out those numbers. They are subject to a final review, and they, obviously, need to be provided to the court at the end of the contract period. So as soon as that is done, we will publish the results of exactly what the losses were. We expect it to continue. On your timing question, we do not know exactly when the court will provide us with response. We have filed an urgent application to the court. We've also addressed some correspondents to the Chief Justice to ask them to please provide us with guidance in this matter. As far as we understand, considering that we do have the recommendation from National Treasury, it's simply a matter of the court agreeing and approving the recommendation that was made. But as the highest court in the land, there is no set time in terms of how these kind of applications are…

Okay. And then in terms of Cell C, with DNI, can you talk a little about, if you think that Cell C will - based on the what you can generate from SIM cards and commissions on the cellular plans, how you think about if this can be accretive in fiscal '19? And do you still feel comfortable that Cell C plus DNI providing around 25% to 50% EPS in fiscal '20? Herman Kotzé: We are very confident of the ability between our distribution network and technologies combined with those of DNI and Cell C that it will be a meaningful contributor in the fiscal 2019 year. For us the big game changer, I guess, for the three of us together has really been the dollar-sharing initiative that Cell C has signed, which opens up its reach across virtually the entire country. It improves the signal coverage or the customer experience if I can put it that way from a 50% geographical cover, which previously was mainly in the urban centers to more than 80% on a national basis. And so a huge part of the rural side of South Africa will now also be adequately covered. That is obviously where a lot of our customers reside and a lot of our EPE clients reside. And so with the ability to now provide them with a reliable cellular and data service as well as the low-cost bank accounts, low-cost credits and low-cost insurance products, we're very bullish about the prospects of this particular side of our business and our strategy. We foresee significant growth in terms of revenues, the uptick in users. We also now have the ability to target a slightly different segment of customer than what we had before. So from that point of view, we are extremely bullish. If we talk about the other synergies that have been identified as a result of the acquisition of the majority stake in DNI and our minority investment in Cell C, we certainly have the ability to provide Cell C with the SIM card requirements, and we've done so over the last two quarters, almost on an exclusive basis. So that's been very good for us, and we expect that to continue and as we believe we provide them with a very competitive product and service. And in terms of just being able to distribute in terms of telephony and communication-based products and services, when we talk about normal airtime, we talk about data and we talk about content delivered through cell phones and tablets. We believe that there is an enormous potential in an underserved market. Those customers today are ours in some way or form either by being banked through us or having one or more of our other financial services. And so by bringing all of these together, the upside is enormous.

Okay. Thank you. And then for KSNET, can you talk a little about the competitive environment? And what turns this business eventually back to growth? Herman Kotzé: Sure. Korea is a highly competitive environment. South Korea is a country that is highly serviced in the financial services industry and in the transaction processing industry by a number of players. In our side of the business being primarily transaction processing and value-added network provision, there are two other major competitors and a variety of smaller ones. I would say, they are probably between 10 and 15 of these value added networks in totality. But it is really an industry dominated by the top 4 players of which KSNET is one. And the competitive environment, I think, has been hugely influenced by the introduction of these capped rates by the government on the one hand. So we - before we could compete just on a pricing basis, we are now slightly hamstrung by the fact that there is a cap that's been put on what can be charged on the one hand. On the other hand, there are also certain regulations that have been introduced that prevents the then companies from engaging in promotional activities. As an example, in the past, we were able to provide the point-of-sale devices free of charge to our customers. That -- those kind of initiatives have now also been stopped by the government. So that's also really removed an element of how we could differentiate ourselves. The key for us right now is to absorb the losses that -- or the reduction, rather in the issuing and the acquiring fees. The immediate way for us to fix that is, if your fees go down by 40%, you have to increase your volumes by 40% in order…

[Operator Instructions] Our next question is from Tom Zeifang of Lucrum.

Hello, guys. Can you give us a little more granularity on the CPS losses in Q4 and going forward in Q1? Herman Kotzé: Tom, we are - at this point in time, we're in the process of finalizing the submissions that we have to make to the court in terms of the overall financial performance of CPS over the 6-month extension period. So until that's finalized, we don't want to elaborate too much on it. Safe to say that in the absence of our ability to charge a fair fee, I think the mathematics -- broad mathematics are pretty simple to quantify. We are at the moment still charging under the old rate, which is ZAR 14.42 per payment. The only differentiator between the last quarter and the first, let me say Q4 and Q3 is that we used to charge this rate on roughly 10.8 million grant recipients, whereas, we are now only allowed to charge the rate on the actual number of people paid at cash pay points. That number has obviously declined steadily as the phaseout process happens. And I would say for Q4, we probably paid an average of 1.8 million to 1.9 beneficiaries as opposed to the 10.8 million. So overall, about a 9 million reduction if you multiply that by the ZAR 14.42, it gives you an indication of the reduction in our revenue. We've obviously tried to reduce our cost base accordingly, but I would say as a broad measure, we've probably run at a loss of around ZAR 60 million a month over the last quarter.

ZAR 60 million a month over the last quarter? And it gets larger in Q... Herman Kotzé: Yes.

Yes. And it gets larger in Q1. Herman Kotzé: It gets larger in Q1 to the extent that the beneficiary base reduces, that's correct. But that may obviously be offset partially or in totality, once we get the pricing finalized for the last 3 months of the contract period.

Okay. Can I ask a housekeeping question too? You mentioned ZAR 3 million a quarter for expenses, which by my math is ZAR 0.20, ZAR 0.23, what exactly is that for? Herman Kotzé: I think that -- are you talking about the head office expenses?

Herman, I think, I can get that. Tom, I think it's ZAR 3 million -- $3 million in amortization for the DNI acquisition.

But it wasn't compensation for our legacy employee?

No. Herman Kotzé: No.

Okay. I’ll get back in queue, Thank you.

We have a follow-up from Allen Klee of Maxim Group.

Yes. For other international areas, can you talk about, as you're consolidating it, what the potential longer term could be from a revenue and earnings perspective? And then similarly with MobiKwik, as you potentially rollout the mobile wallets to their base what the potential there could be? Thank you. Herman Kotzé: Dhruv, do you want to just handle the MobiKwik part of it first?

Sure. So Allen, on MobiKwik, obviously, we are in the first innings here of rolling out our products. We're only 4 months in. And as we've mentioned on previous calls in India, the key to generating revenues particularly when you're reporting in dollars is you need to get to significant volume. So even though we've seen good and great initial growth, and we've got a pipeline of new products in there, I mean, if you look at the value processed in the last quarter were still $3 million. So we still have a ways to go before we can start quantifying the financial impact of our products in here. But giving ourselves the best shot by: A, ramping up the ones we have; and B, introducing more to keep driving that volume up. Herman Kotzé: Thanks, Dhruv. And just, Allen, on the IPG side, I think it's important that as soon as we've got our two flagship, while three flagship development certified, being our multicurrency issuing and acquiring platforms as well as our instant onboarding platform, those are all effectively completed. We await certification from mainly Visa and MasterCard to commence with the marketing and the rollout of that. In broad terms, and we just gone through a significant strategic planning session over the last month or so finalizing the group strategic direction. We have set ourselves in IPG, a target of growing that business at least by a factor of 10x in terms of its top line and bottom line contribution over the next 3 years. Ladies and gentlemen, that's all we have time for today. Thank you very much for joining us. You may now disconnect your lines.