Lesaka Technologies Inc (LSAK) 2020 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Net1 UEPS Technologies Incorporated Quarter 4 of 2020 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded.

I'd now like to hand the conference over to Mr. Dhruv Chopra. Please go ahead, sir.

Thank you, Judith. Welcome to our fourth quarter 2020 earnings call. With me today is our Chairman, Jabu Mabuza; our CFO, Alex Smith; and our non-Executive Director, Ali Mazanderani.

Our press release and supplementary investor presentation are available on our Investor Relations website, ir.net1.com. We will be referring to certain slides in the presentation during our prepared remarks.

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 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 the 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. But with that, let me turn the call over to Jabu.

Thank you, Dhruv. Welcome to the Net1 results presentation for the quarter and financial year ended June 30, 2020. This being my first results as Chairman since taking on the role in July. The last quarter has been a time of change in renewal at Net1. On the Board, Net1 welcomed 3 new directors in May, in Antony Ball, Ali Mazanderani and myself. That was followed in June by the appointment of Mr. Kuben Pillay and the resignation of 4 long-serving directors, being the former Chairman Chris Seabrooke, Paul Edwards, Alfred Mockett and Alasdair Pein. Let me take this opportunity to thank them for their service to Net1 over many years.

We have also established a capital allocation committee that will be chaired by Antony Ball, who is a highly accomplished investor in the private and public market.

In addition to the Board changes, we have had executive changes. Herman Kotze announced that he will be stepping down from the CEO role in September. Herman has spent 22 years with the group. On behalf of the Net1 Board, I would like to extend our sincere well wishes to Herman for his future endeavors. Our CFO, Alex Smith, will take over as interim CEO until the Board finalizes the appointment of a permanent CEO. To ensure cohesion during this transition period, I've also set up a weekly Chairman's meeting.

Finally, on this theme of change and renewal, we have initiated a strategic review process during the last quarter. To ensure independence, the review was led by a non-executive Director, Ali Mazanderani, who is an accomplished investor and operator in the financial technology business globally. During this presentation, Ali will share the key insights from this strategic review. All of this change and renewal has been driven by the goal of unlocking value for shareholders in this deeply undervalued company.

Change is a journey rather than a single event, but we have taken the significant initial steps over a very busy last quarter. I am excited to be part of this journey as Chairman. I will now hand over to Alex to walk you through the Q4 financial and operational results.

Thank you, Jabu. And good day to everyone. I hope that everyone is healthy and safe during these unprecedented times. We'll follow a slightly different format today, where I will address some of the operational, financial and capital allocation topics. And then Ali will discuss our strategy, which was borne out of the recently concluded strategic review. We will then open up the call to Q&A.

Before we dive in, I'd like to echo Jabu's thanks to Herman. We're very grateful for a significant contribution to Net1 over the years. During his tenure at Net1, the company attained a number of significant milestones, and he leaves the business well capitalized with a solid platform for growth.

Though the COVID-19 pandemic is global in nature, given the current mix of our operations, the most relevant and material impacts for Net1 are experienced in South Africa and therefore, limited parallels can be drawn between the trends in the U.S., Europe and many other markets and South Africa.

Since the easing of restrictions in South Africa on the 1st of June 2020, however, our ability to operate our business has picked up meaningfully, but continues to be affected by the ongoing impact of the pandemic on the wider economy and the ability and willingness of people to move around South Africa freely. Despite these disruptions and restrictions, I'm proud of our employees who continue to serve our customers during this unprecedented time, and we'd like to thank them for their tireless efforts.

The key financial highlights for the fourth quarter of 2020 include: in the fourth quarter, total revenue was $26 million, which was a 14% decrease year-over-year in South African rand, excluding the impact of the SASSA implementation fee reversal in the last quarter of 2019. The decrease in revenue was due to the effect of the COVID pandemic on forgone fees and lower financial and value-added sales, as well as lower ad-hoc technology sales and lower international processing volumes.

The total quantifiable impact of COVID-19 on our adjusted EBITDA was ZAR 32 million or $1.8 million during the quarter. The U.S. dollar at 17.28 to the rand in the fourth quarter of 2020 appreciated 22% against the South African rand compared to the fourth quarter of 2019, which adversely impacted our reported results. The rand has partly recovered to between ZAR 16.50 and ZAR 17 over the past few weeks.

The fourth quarter 2020 fundamental loss per share was $0.22 and compared to $3.05 of fundamental loss per share a year ago. This compares to a fundamental loss per share in the third quarter of $0.11.

We reported an adjusted EBITDA loss from continuing operations of $12.2 million due to lower revenue in South Africa, higher losses internationally and the effects of the pandemic and a $1.3 million Cell C inventory write off. Excluding the net impact of the pandemic and ones-off items, adjusted EBITDA loss would have been $9.1 million.

By segment, South African transaction processing reported revenue of $14.2 million in the fourth quarter of 2020, down 9% compared to the fourth quarter of 2019 and down 20% from the third quarter of 2020, both on a constant currency basis and largely due to the effects of COVID on transaction volumes and fees, including the 2 months when we were unable to charge for certain transaction fees during the lockdown.

International transaction processing generated revenue from continuing operations of $1.4 million in the fourth quarter of 2020 which was down 12% compared to the fourth quarter of 2019, but up 3% versus the third quarter of 2020 on a constant currency basis. The year-over-year decrease in revenue in this segment was primarily due to an ongoing contraction in international transaction volumes.

Lastly, financial inclusion and applied technologies segment revenue from continuing operations was $12.6 million down 13% compared to the fourth quarter of 2019 and down 20% compared to the third quarter of 2020, largely due to delayed technology sales and the unwinding of the loan book during the lockdown period given new loan origination was severely curtailed in April and May, which resulted in a commensurate reduction in loan revenue and profits.

Our cost base in South Africa remains relatively stable. During the quarter, we paid a $17.5 million termination fee in cash to cancel our option to acquire a further 35% interest in Bank Frick. Other material nonrecurring items included a $7 million loss on the deconsolidation of CPS.

Our equity accounted investments generated earnings of $1.1 million in the fourth quarter of fiscal 2020, down 33% compared to the prior year due to losses incurred by primarily V2 and Carbon. At June 30, 2020, we had unrestricted cash of $218 million and no debt. U.S. dollar-denominated balances were $171 million out of the total.

Our weighted average share count has remained relatively constant at 57.1 million shares during the fourth quarter of 2020.

Moving on to some operational highlights. The number of active bank accounts remained relatively stable at 1 million. New account originations were also curtailed during the lockdown, and we have opened approximately 15,000 new Finbond Bank accounts through June 30, 2020. Our ATM network utilization declined by about 10% in April and May as our branches were shut down during lockdown. However, we have seen a meaningful recovery starting in June. And in August 2020, transactions through our fixed and mobile ATMs were at or near 2-year highs.

EasyPay switching volumes and prepaid airtime and electricity sales were lower in the fourth quarter of 2020 as a result of the knockdown restrictions in April and May before partially recovering in June 2020. Nonetheless, EasyPay revenue increased 4% year-over-year in constant currency as a result of bill payment revenue increasing by around 28% year-over-year, given the trend towards electronic payments and the signing up of new bill issuers.

As expected, our lending book unwound during April and May as we were unable to originate new business, and our revenue from lending activities decreased in the fourth quarter of fiscal 2020 as a result. However, our lending book has recovered since restrictions were eased. And the number of new loan originations increased from around 500 in April to 30,000 in May, as a result of the new mobile loan origination channel and further to in excess of 130,000 loans in June 2020. The loan book finished June 2020 at ZAR 307 million, largely in line with the end of the third quarter 2020 and indeed the fourth quarter 2019.

Despite the challenging conditions in the broader economy, we have not observed any deterioration in the collection rates in the loan book. Our strategic investments had mixed fortunes during the pandemic, and we continue to work closely with all of these partners.

Some key highlights include: Bank Frick delivered a strong performance in the quarter, benefiting from increased trading income and reported net income of CHF 1.8 million in the first half of 2020. Finbond reported solid results for the year ended 29 February, 2020 during our fourth quarter, but issued a trading statement in late June indicating that their earnings were likely to be more than 20% down in the half year to August 31, 2020, due to the effects of the pandemic on both their South African and North American operations. We continue to work closely with Finbond in terms of the rollout of new products and the provision of software and systems.

Carbon had a difficult quarter as a result of the direct impact of the pandemic on Nigeria and their business directly. However, their rapid management action in the early stages of the lockdown protected the business, and they have seen a steady recovery in lending levels, and therefore, revenue over the last couple of months, while improving credit quality.

MobiKwik saw a slowdown in revenue levels over the quarter, and has proactively managed its product mix to limit the impact on EBITDA. They are well placed to benefit from the pickup in activity as India emerges from the pandemic and especially given their profile as an Indian-owned and managed fintech business. They expect to return to pre-COVID revenue levels before the end of the calendar year and then resume their growth path which has seen them double revenue every 12 months or so up until the onset of the pandemic.

Cell C continues to make progress towards a critical recapitalization and remains on our balance sheet at a 0 value. The underlying business itself is improving its operating performance and is undergoing a significant rightsizing exercise. However, the need remains for a recapitalization in order to achieve sustainability.

And I can now move on to capital allocation. A key feature of the strategic review process that has been undertaken and will be discussed by Ali later on this call, is a focus on responsible and appropriate capital allocation. Following the various disposals concluded in the last financial year, the group has a substantial cash balance and an opportunity to rebuild a sustainable business while taking into account the expectations of stakeholders.

As we previously disclosed, we are working towards formally determining our status under the Investment Company Act, which includes filing an application with the SEC relating to that determination. This process involves, amongst other things, analyzing the potential impact of our anticipated performance and revise strategic direction on our status under the Investment Company Act. We anticipate filing such application with the SEC in due course. Until we formally determine our status under the Investment Company Act, we do not believe we will be in a position to return capital to shareholders in an efficient manner unless, in implementing our revised strategic direction, it becomes clear that such a formal determination is no longer necessary.

Lastly, I'd like to go over our thoughts about fiscal 2021. We've seen a meaningful improvement in various metrics since the effects of the severe lockdown were lifted on the 31st of May 2020. Our loan book in South Africa has recovered from its lows, fixed and mobile ATM utilization has improved and bill payments continue to grow. Therefore, we do expect to see a sequential improvement in top and bottom line performance for the group. But in order to achieve a sustainable improvement and return to profitability for the company, we will need to see consistent progress on: one, continued growth in the loan book; two, an increase in the number of bank and financial services customer; and three, reduced losses from our international businesses.

We do intend to focus more intently on the South African market. And while we expect monthly EBITDA to turn positive during the course of the year, we believe it is prudent to get a few more months of data before we would be in a position to offer full year guidance or profitability targets for the full year.

I'd now like to hand the call over to Ali to go over the Net1 strategy.

Thank you, Alex. As is my first time addressing the shareholders of Net1, it's probably best to provide you a brief background before we get to the crux of the strategy review. I've been appointed to the Board as a non-Executive Director in May 2020. In addition to my duties as a Director, I'm also consulting to Net1 on its strategic review. And I'll continue to be involved in supporting the business through the implementation of that strategy.

Prior to my role at Net1, I spent the last decade investing in financial technology businesses around the world, in Latin America, Africa, the Middle East, India and Southeast Asia. Several of these businesses have grown into billion-dollar-plus market capitalization companies, and I have really seen the power of a strong value proposition that enables underserviced populations to access digital financial services.

The evolution of the business over the past 2 years and the need to focus on our competencies form critical inputs in this strategic review process. One of the most notable recent developments was the establishment of the Capital Allocation Committee of the Board. I am a member of that committee, and we are tasked with ensuring that shareholder funds in the business are allocated prudently.

On a housekeeping note, I will refer to certain slides in the supplemental investor presentation, which is being posted on the Net1's Investor Relations site, and it will also be available on the webcast.

I'll start with Slide 7. What are Net1's core competencies. When we commenced the strategy review, our first task was to identify Net1's core competencies and where it has a clear right to win. The first of Net1's core competencies is the provision of low-cost financial services to underserviced consumers. These include unsecured credit, transactional banking and a digital wallet, insurance and various value-added services.

The second is Net1's unique ability to provide secure payment processing in off-line and rural environments. In this area, Net1 has proprietary technology in UEPS and a well-established payment processor in EasyPay, which is a market leader in parts of the bill payment ecosystem. Both of these competencies have been proven in the South African market. The common thread between them is competencies that enable underserved segments within both the consumer and merchant populations to access digital financial services.

We also assessed the geographic split of Net1's current consolidated operations following the disposal of the Korean operations. 96% of employees are in South Africa and 97% of revenues are generated in South Africa. So Net1 today is primarily a South African business.

On Slide 8, I will want to preempt one question that we are likely to receive. Does this mean you are focusing on South Africa? The answer is, yes. That is where Net1's core -- current core competencies are, where Net1 staff and revenue are, and it also represents a sizable market opportunity with more than ZAR 150 billion of TAM, total addressable market. My experience has been that single country emerging markets payments companies can reach significant scale. And I think this is borne out by the several billion-dollar-plus payments businesses coming out of emerging markets, from Brazil to Nigeria and Egypt to Bangladesh.

Slide 9. South Africa is primarily a cash-based economy, with approximately 60% of consumer retail transactions still being conducted in cash, similar to many other middle-income countries. There are really 2 key points to take from that fact. First, there is a secular shift away from cash towards digital payment methods, South Africa is part of this shift and is at a similar phase of transition as other middle income countries; and second, there is still a lot of headroom for this tailwind to play out, with cash still being 60% of transactions.

On Slide 10, the addressable market. Within that overall South African context, we looked at Net1's total addressable market, or TAM, based solely on its current competencies. We looked at the TAM in 2 broad categories: a consumer financial services TAM, which is estimated at approximately ZAR 57 billion or approximately USD 3.4 billion; and a merchants financial services TAM, which is estimated at approximately ZAR 104 billion or USD 6.2 billion.

The conclusion, therefore, is that Net1 currently has the competencies and technologies to target 2 sizable addressable markets within South Africa with a combined TAM of ZAR 150 billion or over USD 9 billion.

I'm now on Slide 11, the characteristics of the addressable markets. Our detailed analysis further determined that Net1 is well positioned in the underserviced niches on both the consumer and merchant side. On the consumer side, Net1 has the proven capabilities to provide credit, insurance, transactional banking and wallet features to a bottom of the pyramid base that is underserved by other competitors in the financial services industry.

On the merchant side, the underserved portion is the sizable SME, small medium enterprise; and MSME, micro small medium enterprise markets, of which there are an estimated 700,000 formal merchants and 1.4 million informal merchants. Net1 is well positioned to service both markets with the merchant side having particularly attractive secular growth characteristics. It's important to note that although I am talking of these 2 markets separately, the 2 offerings are often interlinked. It is quite rare to find a business like Net1 that has already invested in the technology needed to provide most major payment services independently, whether issuing or acquiring or bill payments. At the same time, is offering a range of financial services like lending and insurance.

Slide 12 outlines a strategic vision for Net1. We -- we tried to bring this holistic offering to life on this slide using a single merchant as an illustrative example. Our research classifies an MSME is one that has sales of approximately ZAR 600,000 per annum, that is only USD 36,000. So this is a small merchant. Today, these businesses primarily deal in cash, providing a secure cash deposit process for them is an important use case, particularly with the security concerns in the South African market. Net1 with its existing fixed and mobile ATM infrastructure in underserviced areas is well positioned to provide a version of this service. This is the cash deposit revenue stream at the top.

In addition to supplying their existing cash business, Net1 can also drive cross-sell opportunities and generate additional revenue from these merchants in 2 key areas: first, by allowing those merchants to accept digital payments, which in South Africa are mostly card payments, at the moment. This would provide acquiring revenue to Net1. Second is to enable the merchants to offer bill payments and value-added services like airtime and electricity sales. This leverages EasyPay's existing capability and provides additional revenue to both merchant and Net1.

The offering I just described is the traditional merchant offering. What is exciting is that Net1 also has the capability to offer the merchant an EasyPay wallet or transactional bank account to store their funds and potentially to settle their funds in. This will provide issuing revenue to Net1. In addition, once you have the point-of-sale infrastructure in the field, you can bank the customer on your platform. You are able to provide lending and insurance products based on a solid understanding of the merchant's cash flow requirements and ability to repay.

The combination of these services might be expected to result in a take rate of between 2% to 5% of total merchant spend. Simultaneously, the merchant benefits because, when these services are provided as a package offering, there are efficiencies created. For example, a bill payments business, where the offering is typically prepaid, can be netted off against an acquiring offering where merchants are settled following a transaction, which can create a lower cost to serve, especially when leveraging the same infrastructure. The efficiency benefits of providing a bundled solution are also likely to help drive digital adoption faster as the economic case is more compelling.

Slide 13 relates to Net1's existing infrastructure. How do we make this full-service offering a reality and what do we need? The short answer is that Net1 is already very well positioned and owns and controls many aspects of the distribution, infrastructure, technology and licenses. There are some gaps, for example, in the distribution in the MSME market, which is the point-of-sale terminal lined under distribution infrastructure. However, Net1 has begun to deploy point-of-sale devices in partnership with the South African bank in order to address this opportunity.

The other gaps, which would be beneficial to fill to enhance Net1's offering, include a mutual banking license, which would enable Net1 to reduce its cost to serve across multiple payment streams from acquiring, to ATMs, as well as to take deposits in its own right and a fresh and relevant brand.

So in short, there is work to do in filling the key gaps. But Net1, by and large, has the capabilities, technology and infrastructure to make the strategic vision a reality. Net1 currently services both the consumer and merchant market, and has the capacity to bring the 2 offerings together to provide a holistic service. This will increase customer stickiness and significantly improve the unit economics.

The price of being the leading financial technology company in South Africa targeting underserviced customers is great, if executed with focus and consistency. Net1 is better placed than any other business in the country to unlock that price. We are looking forward to the journey ahead.

With that, operator, we're happy to open it up to Q&A.

(Operator Instructions) The first question comes from Raj Sharma of B. Riley.

I have a few questions. Just starting off of Ali's talking about the assets and technologies in South Africa in the businesses. Are you missing any assets or technologies? Should we expect the company to make any acquisitions? Or does Net1 largely have all that you need to grow your core business? And then I've got a couple of others.

So I guess -- I guess I should answer that. So Net1 largely has all of the assets and technologies required to execute on the strategy. As I said, there is 3 areas that it could augment its capabilities in. One of those areas is in the last-mile distribution in the micro merchant space. The other one is that there is a pricing benefit if you are able to access the national clearing settlement arenas for acquiring ATM and accept deposits, that would be facilitated by a mutual banking license. I think the third that I touched on was clearly a relevant and fresh brand. I think that the each of those -- the first 2 predominantly can be addressed by acquisition, but do not have to be addressed by acquisition.

Right. And then just going off of the need for a mutual banking license, does that play into the plan that you have to submit the filing with the SEC? Would that require additional capital? Could you talk a little bit about that? If you were to -- since you're proactively trying to satisfy the requirements of the Investment Act, what would that sort of imply? Would that mean you're going to take on more of a majority stake? Or is there a plan that you would divest some of the minority investments? How does -- can you help us just understand how you foresee that playing out?

Can I just comment on this, Ali. I think if you -- the way the Investment Company Act classification works, obviously, the more operating assets that we control, the better in terms of having a clear sight of your classification under the Investment Company Act. So if we were to take control of another business, for example, it would push us into a better position in terms of that Investment Company Act classification, obviously depends on a multitude of variables. So it's not a straightforward calculation necessarily. But at the moment, under the Investment Company Act, cash as regarded as a neutral asset that maybe you can convert cash into controlled operating assets then that helps significantly in terms of how you're viewed under the Investment Company Act. Is that all right?

So -- so does that -- so this would imply by -- what is it tell you about your strategic direction? What does it tell us about your strategic direction? Does that mean you are trying to become an investment company? Do you foresee that classification coming through? Or I'm just trying to understand what the direction is, especially if you want to grow your South African business and most likely possibly need the mutual banking license? But would that then fairly put you in the investment company category?

No, it's more likely to assist us in making sure that we're not an investment company under the Investment Company Act. So the plan is that we regard ourselves as an operational business, not an investment company. And investing in our South African business and lifting its fair value would naturally help to fix the Investment Company Act dilemma that we have at the moment.

Right. And can you talk about the time line for this process? Do you think that this -- how long do you think this takes the determination?

It's not -- really, there's no fixed time lines, unfortunately. So we can't really, unfortunately, give a lot of clarity on the time lines. As we said, we're in the process of submitting an application. And after that, as I understand that, it's really a process that the SEC will then run through. And as I said, there aren't any real fixed time lines around it.

Right. And then my last question is, what did the strategic review -- I guess, what is the strategic review yield in terms of the nonstrategic assets, MobiKwik, Bank Frick, the Ceevo, the Carbon? If not, strategic can investors assume that they would eventually be divested?

Ali, can you pick that up? Or would you like me to.

Sure. I'm happy to do it. I mean I think that the most important change for the operations outside of South Africa is that the Board has taken a decision to accept their Ceevo business. The business has been significantly cash flow negative since inception and has incurred material operating losses. And for the purposes of prudent capital allocation, the Board deems an exit of the business as the optimal part. We will look at all of our strategic investments in the coming months, but we have no specific plans for divestments of others. All of the other operations will be assessed on a case-by-case basis.

And on the same token you might decide to up your stake in any specific nonstrategic asset? Is that fair, that you increase your investment or divest some?

So I mean, I think that the fact that we are focusing our interests on South Africa and that is our strategic priority would mean that, clearly, it will be through that lens that the Capital Allocation Committee will be looking at any potential opportunities.

The next question comes from David Eborall of SaltLight Capital Management.

I hope you can hear me?

Yes.

Okay, great. Yes. Maybe I could just pry a little bit just from the previous question. I mean, Finbond has publicly disclosed that they're looking to sell the SA operations. How is that -- I'm kind of drawing the line out to your mutual banking license needs here. How is it influencing your strategy going forward and your thinking going forward?

The second question I have is some of the other bank or holding companies or banks, the regulator has started to impose some extra regulatory burdens and perhaps capital burdens, which has meant they've spun off these banks. Have you had this conversation with the South African regulator that's, I guess, is also filtering into this investment holding company criteria for the SEC? Has this also been an issue? And has this come up in your thinking? Maybe you could elaborate on that?

Maybe just framing on the question a little bit. The reference to a mutual banking license is not a precondition of the strategy. It's not a necessary condition. Having a mutual banking license could provide additional strategic benefits, but it's certainly not a gating item, just to contextualize that.

The path in which that could be pursued there is multifarious. There's not one particular direction of travel. I'll let -- Alex made a comment earlier, if anything specific to say with respect to Finbond or South African regulator.

Yes. Look, we certainly haven't had any conversations with the regulator. And I think part of any decision that we make around mutual banking license would include assessment of what are the associated costs and the regulatory requirements with that. So at this point, it's really too early to talk about how that might influence the situation. We do have a lot of regulated entities within the South African group anyway. We have the insurance company, we have a couple of FSP licenses. So we're not a stranger to the regulated environment anyway.

Okay. And so if Finbond is looking to sell their South African operations, and you're not going to follow-on, how does that impact your strategy? They're not having that kind of distribution base for credits.

We don't really utilize their distribution base to originate credit at this point anyway. We do have some sort of cooperation and collaboration arrangements, but they're relatively small in terms of -- and relatively recent, and we really don't see them -- see those relationships as critical in terms of growing our financial services business.

I'm sorry, my last question. So then is that -- then am I reading you correctly that Finbond doesn't play a funding benefit to you nor a distribution benefit. What -- could you maybe talk about what that benefit is?

Are we talking about Finbond today or?

Yes, Finbond today.

At the moment, we just have -- we have an substantial investment in Finbond. We did collaborate in certain areas, as I said. So there is a little bit of cross-selling, but it's relatively small. We don't source any funding from Finbond, and we are providing some services and some particularly IT services into Finbond. But no, there's no real, what's the right word, cost benefits at this point in time with Finbond.

(Operator Instructions) The next question comes from Irnest Kaplan of Kaplan Equity Analysts.

Hope you can hear me?

You are very soft.

Okay. 2 questions from my side. Number one, given that you're focusing on South Africa, would you be keeping your NASDAQ listing? And number two, with regards to the ZAR 150 billion-odd of TAM, is most of that greenfield opportunity that hasn't been tapped or do you have to take market share away from others?

Maybe I could start with -- this is -- so I'll start with the second question. The TAM that is represented there represents the TAM as it exists today. The green -- so if you like, that high, you would be taking from others. However, the total addressable opportunity, if you were to include the expected growth of the market as a consequence of digitization, would be a large TAM. So you could generate revenue, both by taking share and also by driving the market. Clearly, as Net1 is also operating with underserviced customers, there is a material opportunity to drive the market. And in a lot of these verticals, there is limited competition.

In terms of the -- the first question, Alex, I don't know if you want to have a go?

Yes. I mean, I don't think the NASDAQ listing is up for discussion at all. I think we don't see any change in that position at all.

The next question comes from Asset Managers.

I have some questions on the restructuring of Cell C. Other investors are optimistic that they can recover some of the value, some of the investment. And I wanted to know how involved are you in the restructuring process of Cell C? And do you think you can recover some of the investment? And do you have any time lines that you can guide us on when this will be completed?

I can take those questions on Cell C. We are involved to a degree in terms of that we -- we're obviously a 15% shareholder, and have Board representation at Cell C, but we are not actively driving that recapitalization process from our side. We're always hopeful that we'll be able to recover something out of the original investment. But as you'll have seen from our financials, we've written that investment down to 0. We certainly think there's a business there if we can get the capital structure right and that -- then there would be value that would be realizable out of it.

In terms of time lines, I'm afraid I can't shed any further light on time lines other than -- I know everyone is working very hard to expedite that process and complete it as quickly as possible.

I appreciate your answer, but I just want to push back a bit. Everyone is obviously hoping to recover some money, but how realistic is that hope? Why are you hopeful?

I think, as I said, there is a core -- a strong core business there, and this is more of a balance sheet structuring issue in terms of where Cell C is. And if that balance sheet can be rightsized in terms of its structure, then there's no reason why the underlying performance can't come through and deliver some value.

But as an equity holder I mean, obviously, we're thinking that the bondholders would take quite a significant haircut, which means that the equity holders will be wiped out. And I misunderstanding the restructuring process, why do you think equity will have value?

That will all come out in the detail of recapitalization when it's announced in terms of how that is structured. When you've written an investment down to 0, there's not that -- any sort of value would be welcome.

Okay. But you -- have you had any -- the rumor is that the term sheets are out, have you had any sight of it?

Nick, this is Dhruv. I think we're just clouding up the call for the rest. So I would recommend you pointing these questions to either Cell C or to Blue Label because we would like to address some of the other areas, I think Alex has said what we can publicly.

Yes. I'm just going to -- you guys are -- it's an important part of the valuation process of the company, so...

No, it's valued at 0. So...

No, no, that's the accountants valuation. I mean -- I need to determine the value, whether we can recover any of that valuation. And I'm just asking there are -- other investors are very hopeful. And you guys are hopeful, I just sort of want to know why are you so hopeful? And whether you've had sight of any term sheets or anything like that?

I think some of that borders on material, nonpublic information, but I'm happy to have a conversation with you offline. And we can facilitate a call with you and the Blue Label and Cell C teams.

The final question comes from P.J Solit of Potomac Capital Management.

Obviously, over time, if you're successful in implementing these plans and becoming a profitable fintech company in a large market. You won't be valued in terms of half of cash and investments at that point. So obviously, there should be some urgency to take advantage of the opportunity to implement a buyback and take advantage of that now. I guess, can you share any more thoughts on that and any more thoughts on the time line in terms of when was the SEC submission made? Is there any guidance, any dialogue back and forth? Or do we just need to sit and wait?

P.J., unfortunately, there's very little sort of clarity we can give on time lines. The application has not been formally submitted. I think it's close, but not actually submitted at this point. But -- and then once we're in and formally applied, then we don't really have a great deal of insight into how long it will take to get resolution on the matter. So it's very difficult, unfortunately, to give you any guidance on time lines, but we'll continue to do all we need to do from our side to expedite the process.

P.J., so just to add that point.

Yes.

Yes. Just to add to what Alex was saying. So I mean, there's a parallel, right? There's -- one is the application and clarification from the SEC, which Alex has addressed. But there's also the other side that if we build the business operationally, then we could self-cure that problem or drastically improve the ratios. And that is within our control, and that is where we're trying to focus on in parallel.

Okay. And is it realistic to think that you could self-cure in the next couple of quarters here in calendar 2020? Or is that too aggressive?

I think that's probably a little bit...

Is it even possible?

Its probably a little bit aggressive in terms of a self-cure. I think it will probably go into third and fourth quarters of this fiscal.

And the other route of going through the SEC, did the counsel tell you that calendar 2020 resolution could be a possibility in that route?

I think there might be a possibility, I think, is the advice at this point.

Okay. Is there a scenario in taking to counsel as well, where if you have the pathway and the visibility on one or both of those pathways, that you could start some form of capital return before actually getting entirely there?

We haven't had that discussion yet with counsel.

Thank you. Ladies and gentlemen, that was the final question. Thank you for joining us on the Net1 UEPS Technologies, Inc. Conference Call. You may now disconnect your lines.