Lesaka Technologies, Inc. · NASDAQ:LSAK
Lesaka Technologies — Net1 UEPS Technologies — FY2019 Earnings Presentation
50 slides from Lesaka Technologies's earnings presentation, 2019
Slide 1: FY 2019 Investor Presentation
FY 2019 Investor Presentation www.net1.com
Slide 2: Safe Harbor Statement
Safe Harbor Statement The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could caus
Slide 3: Defined Terms
Defined Terms Unless specifically noted otherwise within this presentation, the following terms are hereby defined as follows: Constant Currency: We analyze our results of operations both in U.S. dollars, as presented in the consolidated financial statements, and supplementally in ZAR, because ZAR i
Slide 4: Performance Summary
Performance Summary Q4 2019 Company highlights include: Q4 2019 Investment portfolio update: • South African operations achieved break-even • Cell C short-term liquidity issues being actively for the month of July 2019 addressed but resulted in negative fair value adjustment in Q4 2019 • Deleveraged
Slide 5: Strategic Summary
STRATEGIC SUMMARY FY 2019 ——— NET1 74
Slide 6: Return to our roots: Financial Inclusion
Return to our roots: Financial Inclusion Providing Innovative and Cost-Effective Solutions FINANCIAL TECHNOLOGY Affordability Accessibility Offline/security Micro-loans Distribution Micro-insurance Unbanked and Under-banked Omni-channel Working Capital VAS Easy-to-use 6
Slide 7: What is Financial Inclusion?
What is Financial Inclusion? A framework to evaluate and understand financial inclusion Framework adapted from David Porteous 2010 Policy Paper: Financial inclusion measurement for regulators: Survey design and Implementation, Alliance for Financial Inclusion 7
Slide 8: Global Market Opportunity
FY 2019 | Global Market Opportunity Net1 is a global fintech player focused on the unbanked GLOBAL REACH TECHNOLOGY 19 office or service locations globally • Core UEPS/EMV platform • Tokenization – virtual card • Mobile banking/payments (QR) • Crypto-asset storage • Card processing gateways • ACH pr
Slide 9: FY 2019 Strategic Review
FY 2019 | FY 2019 Strategic Review 2019 Report Card 1) Obtain break-even in our South African operations Progress: • Reduced headcount and costs; • Achieved monthly EBITDA break-even for the month of July 2019 (not June 2019) 2) Strengthen balance sheet Progress: • Early settled long-term debt; zero
Slide 10: Short-Term Strategy
FY 2019 | Short-Term Strategy 2020 Targets 1) Accelerate transition from B2B to B2C model in South Africa Metrics: • Grow active account base by at least 10% from Q4 2019 levels; • Expand financial and value-added services businesses at least 10% from Q4 2019 levels 2) Introduce and scale up payment
Slide 11: FY 2020 Adjusted EBITDA Bridge
FY 2020 Adjusted EBITDA Bridge For FY20, we expect to generate at least $16 million adjusted EBITDA compared to a loss of $32 million from continuing operations in FY19 Adj. EBITDA $ millions $20 $(32) $16 11
Slide 12: Long-term Growth Strategy
FY 2019 | Long-term Growth Strategy Focus on four key pillars to drive long term growth and profitability SOUTH AFRICA AFRICA EU/ASIA (IPG) KOREA Financial Inclusion Mobile Payments, Digital Issuing, Acquiring, Improve growth and (Individuals) Financial services, UEPS Processing (SMEs) profitability
Slide 13: How We Succeed
HOW WE SUCCEED FY 2019 ——— NET1 74
Slide 14: South Africa B2C
FY 2019 | South Africa B2C Banking the under-banked - Distribution Second Largest branch infrastructure when combined with Finbond Combined, we have 808 branches (Finbond = 435/Net1 = 373) 1,300 Fixed ATMs 70,000 POS (EasyPay) Excluding Capitec, SA banks are shutting down infrastructure, especially
Slide 15: South Africa B2C (Cont'd)
FY 2019 | South Africa B2C (Cont’d) Banking the under-banked – Functionality and Cost Our products offer maximum functionality at an affordable price Value Proposition – Basic Banking • Biometric security • No minimum balance • Free transactions with low monthly fee • Free internet banking • No debi
Slide 16: South Africa B2C (Cont'd)
FY 2019 | South Africa B2C (Cont’d) Banking the under-banked – Transaction Processing Vertical integration by controlling all components of the payment system increase marginal returns ➢ ATM Acquiring • Add functionality through Finbond • Potential to deploy up to 300 new ATMs in FY20 ➢ POS Acquirin
Slide 17: South Africa B2C (Cont'd)
FY 2019 | South Africa B2C (Cont’d) Banking the under-banked – Financial Services Cross-sell across coordinated group entities such as Moneyline, SmartLife and Finbond ➢ Lowest cost loan products • Grow current customer base by >10% ➢ Insurance • Grow current customer base by >10% • Introduce other
Slide 18: International Payments
FY 2019 | International Payments SMEs are the under-banked in Europe – IPG We have the products, licenses and experience to focus on the opportunity of servicing small merchants in Europe ➢ Increase the breadth of services offered ➢ Increase international reach With our investment in Bank Frick, we
Slide 19: International Payments (Cont'd)
FY 2019 | International Payments (Cont’d) IPG new payments product development and features We have the products, licenses and experience to focus on the opportunity of servicing small merchants in Europe Issuing Platform Acquiring neobank offering • One account/multiple • Target specific verticals
Slide 20: IPG's new blockchain and cryptocurrency products
FY 2019 | International Payments (Cont’d) IPG’s new blockchain and cryptocurrency products With twenty years of experience in cryptography and distributed ledger technology Net1 and IPG have developed new products with support from Bank Frick Crypto Brokerage Crypto-asset Storage • All-new way to in
Slide 21: Africa Expansion
FY 2019 | Africa Expansion Mobile-first, stepped expansion into Africa Leverage existing VTU, ZappGroup, One-Fi (Carbon) operations and IFC relationships ➢ Prepaid Utility Vending Solutions (UVS) • Leverage current VTU deployments including in 9 countries with MTN ➢ Mobile-based payments • ZappGroup
Slide 22: Korea Turnaround Plan/Disposal
FY 2019 | Korea Turnaround Plan/Disposal Implement revenue and profit improvement plan in Korea In parallel assess indicative offers received for the business ➢ Optimize sales approach • Restructure indirect agent portfolio and agreements • Scale up direct sales model ➢ Rationalize cost structure •
Slide 23: Strategic Investments
STRATEGIC INVESTMENTS FY 2019
Slide 24: BANK Investments
BANK Investments FINBOND (South Africa) Ownership: 29% Carrying Value: $35 Mn South African mutual bank and lender with 400+ branches. Traded on JSE (Ticker: FGL) PROJECT 2020: Launch new UEPS/EMV products Leverage combined branch, ATM and POS infrastructure DEVELOPMENTS: Reported revenue of ZAR 2.6
Slide 25: Mobile Payment Investments
MOBILE PAYMENT Investments MOBIKWIK (India) Ownership: 13% Carrying Value: $27 Mn Leading digital fintech and payments company in India with 80+ million customers PROJECT 2020: Expand financial services offerings – loans, insurance, wealth Scale virtual card and introduce new Net1 offerings DEVELOPM
Slide 26: Mobile Payment Investments (Cont'd)
MOBILE PAYMENT Investments (Cont’d) V2 Limited Ownership: 50% Carrying Value: $2 Mn Startup Africa-focused mobile payments company leveraging QR-code technology PROJECT 2020: Commercially scale operations in Ghana Enter at least one additional African market DEVELOPMENTS: Started operations in Octob
Slide 27: Telecom Investments
TELECOM Investments Cell C (South Africa) Ownership: 15% Carrying Value: $0 Mn Third-largest mobile operator in South Africa PROJECT 2020: Conclude recapitalization Integrate new MTN sharing agreement and build sustainability DEVELOPMENTS: Made fair value adjustment to zero as of June 30, 2019 Provi
Slide 28: Financial Highlights
FINANCIAL HIGHLIGHTS Q4 2019 and FY 2019
Slide 29: Financial Report
FY 2019 Financial Report Q4 2019 and FY 2019 Financial Highlights – (Excludes DNI in Q4 2019) Q4 201 9 Q4 201 8 F201 9 F201 8 ($ Millions) Revenue 71 1 49 381 61 3 % change USD (52%) (38%) % change Const. FX (40%) (30%) Adjusted EBITDA (1 ) 24 (1 3) 1 27 % change USD nm nm EBITDA Margin (%) (1 %) 1
Slide 30: Business Segment Results – Q4 2019
Q4 2019 Financial Report Business Segment Results – Q4 2019 Q4 constant currency SATP Revenue • SATP constant currency revenue declined 63% • Expiration of SASSA contract and impact of auto- R 893 1,000 migration of EPE customers R 732 800 • ITP constant currency revenue grew 2% ZAR Millions 600 • L
Slide 31: Business Segment Results – FY 2019
FY 2019 Financial Report Business Segment Results – FY 2019 – (excludes DNI) USD Revenue Operating Operating Margin (Millions) (Loss) Income F2019 F2018 F2019 F2018 F2019 F2018 SATP $ 96 $ 268 $(301) $ 43 (32%) 16% % Change* (60%) nm ITP 148 180 3 (12) 2% (7%) % Change* (7%) nm FIAT 90 222 (39) 55 (
Slide 32: Business Segment Results – Q4 2019
Q4 2019 Financial Report Business Segment Results – Q4 2019 USD Revenue Operating Operating Margin (Millions) (Loss) Income Q4 2019 Q4 2018 Q4 2019 Q4 2018 Q4 2019 Q4 2018 SATP $ 19 $ 64 $ (2) $4 (13%) 7% % Change* (63%) nm ITP 36 44 2 2 6% 5% % Change* 4% 32% FIAT 18 54 (11) 14 (13%) 7% % Change* (
Slide 33: Balance Sheet Overview
FY 2019 Financial Report Balance Sheet Overview USD (Millions) Jun 30, 2019 Jun 30, 2018 Net Unrestricted Cash $ 46 $ 87 Investments and Equity Accounted Investments(1) $ 178 $ 296 Total Assets $ 673 $ 1,217 Total Equity $ 353 $ 737 Total Debt $ 10 $ 50 Book Value / Share $ 6.25 $ 13.00 Net Cash / S
Slide 34: Key Investments
FY 2019 Financial Report Key Investments % held Balance Sheet Value (Jun 2019) Equity Accounted: Bank Frick 35% $47 million >$47 million (1) Finbond (JSE listed) 29% $35 million $76 million (2) Carbon 25% $8 million $25 million (3) DNI 30% $61 million $61 million (4) Investments: Cell C 15% $0 milli
Slide 35: Business Overview: South African Transaction Processing
BUSINESS OVERVIEW SOUTH AFRICAN TRANSACTION PROCESSING Q4 2019
Slide 36: SATP Segment Highlights
Q4 2019 | SATP Segment Highlights Financial Highlights • Revenue - $19 million • 70% decrease from $64 million in Q4 2018 • 63% decrease on a constant currency basis • Lower transaction revenue from fewer EPE accounts and SASSA Grindrod accounts • CPS contract expired at the end of Q1 2019 • Operati
Slide 37: Business Overview: International Transaction Processing
BUSINESS OVERVIEW INTERNATIONAL TRANSACTION PROCESSING Q4 2019
Slide 38: ITP Segment Highlights
Q4 2019 | ITP Segment Highlights Financial Highlights • Revenue - $36 million • 16% decrease compared to $44 million in Q4 2018 • Lower transaction values and volume in South Korea • Contraction in IPG processing activities particularly China processing and crypto-currency transactions • Operating i
Slide 39: ITP Segment Highlights (Cont'd)
Q4 2019 | ITP Segment Highlights (Cont’d) Key Trends • South Korea and Rest of the World (ROW) Growth • South Korea revenue down 6% in KRW compared to Q4 2019, but up 11% sequentially from Q3 2019 • ROW revenue impacted by contraction in IPG processing activities Revenue KRW Billions Revenue ROW (ex
Slide 40: IPG Consolidation and Expansion
Q4 2019 | IPG Consolidation and Expansion IPG PLAYS AN INTEGRAL ROLE IN PROVIDING END-TO-END SOLUTIONS FOR ISSUING, ACQUIRING AND PROCESSING Card Processing Volume ($Mil) Q4 2019 PROGRESS UPDATES: 180 160 • Consolidation of various business units largely 140 120 complete with appropriate management
Slide 41: Business Overview: Financial Inclusion & Applied Technologies
BUSINESS OVERVIEW FINANCIAL INCLUSION & APPLIED TECHNOLOGIES Q4 2019
Slide 42: FIAT Segment Highlights
Q4 2019 | FIAT Segment Highlights Financial Highlights • Revenue - $18 million • 67% decrease from $54 million in Q4 2018 • 59% decrease on a constant currency basis • Operating Loss - $(11) million • Operating income $14 million in Q4 2018 • Minimal retrenchment costs incurred in Q4 2019 • EPE Acco
Slide 43: FIAT Segment Highlights (Cont'd)
Q4 2019 | FIAT Segment Highlights (Cont’d) Key Trends Average Active EPE accounts Value of Loans Outstanding 1,400 Millions 1,200 2.0 1,000 Millions 1.5 800 600 1.0 400 0.5 200 0.0 0 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 As of quarter ended Outstanding Capital Deferred Service Fees
Slide 44: Appendix A
Appendix A ——— NET1 Sar 5
Slide 45: Revenue Contributors
FY 2019 Revenue Contributors Q4 2019 forms the base revenue for Net1, with no further contributions from SASSA, SASSA/Grindrod accounts or DNI. FY 2020 revenue performance will be benchmarked to reported Q4 2019 in order to evaluate and compare on a like-for-like basis 45
Slide 46: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures Q4 2019 – Fundamental Net (Loss) Income and Negative EBITDA Three months ended Jun-19 Jun-18 $ '000 EPS, basic $ '000 EPS, basic Fundamental net (loss) income (Non-GAAP) (139,089) (2.45) 12,584 0.22 Impairment loss (6,249) (1,052) Loss on disposal of DNI (631) - A
Slide 47: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures FY 2019 – Fundamental Net (Loss) Income Year ended Jun-19 Jun-18 $ '000 EPS, basic $ '000 EPS, basic Fundamental net income (Non-GAAP) (222,867) (3.93) 113,720 2.00 Impairment loss (16,290) (9,385) Loss on disposal of DNI (5,771) - Amortisation of intangible asset
Slide 48: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures FY 2019 –Negative EBITDA Year ended Jun-19 Jun-18 $ '000 EPS, basic $ '000 EPS, basic Net income attributable to net1 (GAAP) (273,579) (4.82) 64,246 1.13 Change in fair value of equity securities 167,459 (32,473) Loss on disposal of DNI 5,771 - Non-controlling int
Slide 49: Appendix B
Appendix B ——— NET1 Sar 5
Slide 50: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures F2019 –Negative EBITDA (continuing and discontinued operations) Year ended June 30, 2019: Continuing Discontinued Total Operating income (GAAP) (91,150) 11,681 (79,469) Depreciation and amortization 29,323 8,026 37,349 Impairment loss 14,440 5,305 19,745 (Negative
Net1 UEPS Technologies — FY2019 Earnings Presentation on 6ix