Net 1 Ueps Technologies Inc. (NASDAQ:UEPS) Q2 2019 Earnings Conference Call Transcript

Feb 08, 2019 • 08:00 am ET


Net 1 Ueps Technologies Inc. (NASDAQ:UEPS) Q2 2019 Earnings Conference Call Transcript


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Good day, ladies and gentlemen, and welcome to Net1's Second Quarter 2019 Earnings Conference. 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 note that this call is being recorded.

I would now like to turn the conference over to Dhruv Chopra. Please go ahead, sir.

Dhruv Chopra

Thank you, Chris. Welcome to our second quarter 2019 earnings call. With me on the call today is our CEO; Herman Kotze, and our CFO; Alex Smith. Our press release and a supplementary financial presentation are available on our Investor Relations website 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 US dollar and the South African rand. We will have a question-and-answer session following our prepared remarks.

So with that let me turn the call over to Herman.

Herman G. Kotze

Thank you, Dhruv, and good day to everybody else. As you are all aware, this was a very difficult quarter for our company and the transition out of our SASSA contract has been more challenging than anticipated given the auto-migration of our EPE account holders. Alex, will go over our financial results in detail shortly, but our operating loss for the quarter was predominantly attributable to our rural South African businesses. Our remaining transaction related businesses continue to operate in-line with our expectations and provide a substantial source of EBITDA to the group. The annualized EBITDA contribution of these businesses based on Q2 2019 results was approximately $56 million. Furthermore, we have net cash of $35 million and remain comfortable with the group's liquidity position over the next 12 months. Our immediate focus is to return our EPE-related businesses to a monthly break-even level by the end of the fourth quarter in turn being both EBITDA and cash flow positive as a result.

Going forward, the four pillars of Net1 will be more geographic focused and business units focused and we expect it will greatly reduce the complexity in analyzing our business. The four pillars will be (A) South Africa, (B) Africa, (C) Europe and Asia, and (D) Korea. I will spend some time discussing each of these shortly. But before I address these pillars, I would like to briefly discuss my thoughts on current valuation as I know this is top of mind. We believe that the issues