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Net1 UEPS Technologies (NASDAQ:UEPS)
Q2 2020 Earnings Call
Feb 07, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, ladies and gentlemen, and welcome to the Net 1 UEPS Q2 2020 earnings call. [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 -- Vice President, Investor Relations

Thank you, Claudia. Welcome to our second-quarter 2020 earnings call. With me today is our CEO, Herman Kotze; and our CFO, Alex Smith. Our press release is available on our Investor Relations website, ir.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 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. [Technical difficulty]

Herman Kotze -- Chief Executive Officer

Thank you to Dhruv, and good day to everybody again. We have continued to execute toward our strategy and corporate actions outlined on our fourth quarter 2019 earnings call. I would like to focus today's discussion on our three strategic areas, namely South Africa, Europe, and Africa as well as our progress of our various corporate actions and related to that, about capital allocation. The highlights of our Q2 2020 results include: we reported revenue of $74 million, which was down 2% in constant currency.

We reported adjusted EBITDA of negative $0.7 million, primarily due to the lack of top line growth in the South Africa and higher losses in IPG as a result of delays of new product launches. EPE accounts remained relatively stable at 1.04 million and debt-related financial services. KSNET EBITDA margin has remained stable at 22%. And we sold our payroll processing business first for $12 million in December 2019.

And more recently announced the sale of KSNET for $257 million in January 2020. We had previously outlined four key objectives for 2020. But have now completed the sale of KSNET, we will focus on the three remaining objectives for the rest of the year. The first objective for fiscal 2020 was the transition of our South African businesses to a B2C model.

Our target was to grow our active account base and our loan book by at least 10% from the 1.1 million customer level we had in Q4 2019. With this anticipated availability of liquidity in Q4, we now expect to add 120,000 accounts, and increase the loan book by at least 30% by the end of Q4 2020. The benefits of which will be visible in the first half of fiscal 2021. Our distribution, technology, years of experience and affordable financial and value-added services offerings are the key differentiators in the market and play a critical role in driving account growth.

Our current loan book has been steady around 24 million for the past few quarters, which is down from a peak of $80 million two years ago. We intend to inject meaningful liquidity into this business during Q4 2020, which we believe will drive higher growth in financial services, account growth and fee income and, in turn, return our South African operations to being a meaningfully profitable and cash-generative business. We expect the EPE base to naturally churn over time and new account growth to be driven by the Finbond offerings. EPE accounts were approximately 1.04 million and we continue to observe natural accretion in line with our expectations.

As we noted, we are well under way with the transition of our South African business to a B2C model. We have largely completed all the technical product and marketing developments we required to scale this business. In the second quarter of 2020, we commenced a soft launch of our new Finbond banking offerings. And without any investment in marketing and in a limited number of branches, we opened 13,000 new accounts over the holiday period.

In the quarter, we also introduced a new variable loan product to the market, which also allows complete flexibility within preset limits regarding the amount at repayment period. We have seen good demand for these products, and during Q2, we have issued more than 60,000 of these loans. During the quarter, Finbond also launched a new loan product, where we provide the technical, operational and distribution support in return for a commission. These loans have two points of differentiation compared to our traditional business.

First, our bank deploys it's own capital; and second, the customers are higher income earners than our traditional customer base. We continue to see volume increases in our ATM infrastructure, and in Q2, continued with the rollout of ATMs in the country and installed 73 new machines, bringing our total deployed base to 1,430. EasyPay continued to the gain in market share, both with retailers and billers, winning a number of mandates during Q2, and grew 7% compared to a year ago. We also made significant strides in our R&D to build a cloud-based UEPS E&P issuing and acquiring system, that can significantly accelerate time to market for any new issuing banks anywhere in the world.

Our second objective for 2020 is to introduce and scale our new payments, crypto and blockchain offerings in Europe. On our first quarter 2020 earnings call, I outlined our European strategy with Bank Frick and IPG in detail. And therefore, we're not going to dip on again today. We expect to launch the first of it's kind brand-new crypto and blockchain products, along with a new brand as well as IPG's new issuing and acquiring products in the second half of fiscal 2020.

Many of these products are rolled out in close cooperation with Bank Frick. In order to accelerate time to market, we have also begun discussions with additional financial institutions across Europe. And we are optimistic, one or more of these initiatives that will bear fruit. As our European products scale, we expect IPG revenues to grow, in turn, reducing losses and then becoming accretive to the group.

In October 2019, we exercised our option to acquire an additional 35% interest in Bank Frick. The transaction is subject to approval from the Liechtenstein Financial Market Authority and is now expected to close in April 2020. Outside of our option exercise, we do not anticipate any material investments required for our European strategy, other than in business development and sales resources. Most of the investments needed to create IPG and it's products have already been incurred and expensed over the past two years.

These are concluded at its on-site audit of IPG's nerve center in Malta, on November 29, 2019. And there they gave us positive verbal feedback instantly, they have yet to provide an official clearance. We are dependent on Visa and there time frames to prove unconditional approval in order to commence with the full-scale onboarding of new clients. Lastly, on India.

In fiscal 2019, MobiKwik applied for direct membership with Visa and became an associate member in Q4 2019. In October 2019, the Reserve Bank of India approved the application by MobiKwik and Visa to launch COD programs with MobiKwik as the issuer. We are currently working with MobiKwik to relaunch our virtual card offering on a much larger scale across their qualified customer base, which has in excess of 10 million users. MobiKwik itself has performed ahead of expectations, primarily due to its successful transition to being a digital financial services provider.

In the quarter ending December 31, 2019, MobiKwik recorded of an audited annualized revenue of $66 million, up from $28 million in last year. It has been contribution margin positive since October 2018, and achieved cash EBITDA breakeven in the month of August 2019. Digital Financial Services now account for approximately 25% of MobiKwik's total monthly revenue, compared to 0 during the previous fiscal year, and it is currently disbursing in excess of 110,000 new loans per month. Our third strategic objective for 2020 to rapidly grow payment solutions sales in Africa.

We aim to accelerate market penetration in Africa through Net 1, ZappGroup and Carbon. We expect ZappGroup to start generating revenue and enter at least one other country outside of Ghana during fiscal 2020. ZappGroup has largely completed all development and testing work for their first client in Ghana, and we expect the commercial launch with one of the largest banks in the country before the end of Q3 2020. Additional sound customers are expected to be rolled out over the remainder of calendar 2020.

Meanwhile, ZappGroup has also made meaningful progress with potential customers to expand in Nigeria, Africa's most populous country. In addition to the progress they have made, we are also particularly pleased with the sales leads for Net 1 products they have begun to generate. Carbon continues to report some exponential sequential growth across all the key indicators of its business, number of app installations, unique customers, loans disbursed and number of value-added transactions. Several new products and services have been launched, including an SME financing platform and a healthcare financing platform for the treatment of malaria.

Carbon's main business unit in Nigeria, OneFi, also reported another full year net profit for its year ended December 31, 2019. Carbon's continued growth will be driven by the ability to access capital and/or funding in order to meet the demand for its suite of products. Let me now spend a few minutes on the progress we have made on the corporate actions we outlined at the start of the fiscal year. First, KSNET.

On January 23, 2020, we signed an agreement with Paylater and Stonebridge Capital for the sale of KSNET for total proceeds of $237 million. In addition to the above, we also took out 10 million dividend in early January. Therefore, the total proceeds broadly is the $237 million plus the $10 million dividend, less the permitted adjustments, including cash in Korea, resulting in net proceeds of $217 million. Second, on DNI.

We have already sold down our stake in DNI from 55% to 30%. And the option we have granted to sell the remaining 30% for approximately $59 million is vetted until March 31, 2020. Operationally, DNI has continued to grow in its cash generative. This has also made good progress in raising the financing for its previously announced acquisitions, which are expected to close by June 2020.

Concurrently, they have also been actively working on placing our shares with select institutional investors. We, therefore, continue to believe that DNI will be in a position to call our option. Third, on 1st, in December 2019, we sold our payroll processing business first for approximately $12 million. We utilized the proceeds to settle a portion of our long-term borrowings, which at December 31, 2019, has left only $4 million outstanding in that facility.

Now that we have outlined the sources of liquidity, I would like to focus on capital allocation. It is important to note that we are an operating company and not an investment company. And therefore, it is imperative, we are able to reinvest in our businesses to ensure they are able to reach sufficient scale where they can generate sustainable profits and cash flow. So first, looking at the investments in South Africa, we anticipate investing $40 million to $50 million that's primarily toward expanding our loan book back toward our historical levels.

With an average duration of less than six months, we are able to turn our book over twice in a year, resulting in larger financial services revenue, account growth and transaction fees and therefore, profitability and positive cash flow. Second, investments in Europe. As one of our two primary focus areas, we anticipate spending approximately $50 million in Europe, primarily for the exercise of our Bank Frick option. And third, returning capital to shareholders.

We will initiate a meaningful return of capital to shareholders in the form of a stock repurchase. We will only be able to communicate the exact nature, quantum and timing of the repurchase program when we have received the proceeds from the asset disposals mentioned before. And in preparation for this corporate activity, which is likely to commence in Q4, our onboard replenished share repurchase authorization to $100 million this week. Regarding the remaining legal matters with SASSA, both our claim and the counter claim are at various stages within the respective courts.

To conclude, we are excited with the new products, markets and business models we have developed and look forward to focusing on execution rather than be tied up with legacy and nonproductive issues we have endured over the past 18 months. Let me now hand it over to Alex to go over the financials.

Alex Smith -- Chief Financial Officer

Thank you, Herman, and good day to everybody. I'll discuss the key results and trends within our operating segments for the second quarter of fiscal 2020 compared to a year ago as well as compared to quarter 1, 2020, as sequential comparisons are more relevant today, given the changes in June by the group over the past year. For the second quarter of 2020, our average rand-dollar exchange rate was ZAR 14.60, compared to 14.32 a year ago and ZAR 14.75 in the first quarter. We recorded a fundamental loss per share of $0.10 this quarter, compared to the $0.90 fundamental loss per share a year ago, in which we have included a substantial impairment of our loan book as well as a contribution from DNI.

This compares to a fundamental loss per share in the first quarter of $0.02. This deterioration in performance against the previous quarter was mainly due to a reduction in ad hoc revenues in the South African business. By segment, South African transaction processing reported revenue of $20.4 million in the second quarter of 2020, down 6% compared to the second-quarter 2019. But up 4% from from the first quarter of 2020 on a constant-currency basis.

The year-over-year decrease was primarily due to the termination of the SASSA contract, including those with SASSA Grindrod cards, and to a lesser extent, the reduction in the number of EPE accounts. These decreases in revenue and the resulting impact on operating income were partially offset by higher transaction revenue as a result of increased usage in our ATMs. Our operating margin for the second quarter of 2020 and 2019 was negative 14.6% and negative 53.8%. And compared to a negative 17.4% in the first quarter of 2020.

The improvement in the operating margin in the latest quarter is encouraging, but we remain subscale at this level of accounts and the focus is on lifting revenue. International transaction processing generated revenue of $34.4 million in the second-quarter 2020, which was down 10% compared to the second quarter of 2019 and flat compared to the first quarter of 2020 in U.S. dollar terms. The year-over-year decrease in revenue in this segment has now contributed equally by the Korean operations in IPG.

Segment operating margin improved to 8.2% in the second-quarter 2020, compared to the negative 10.6% a year ago, but down from the 11.1% recorded in the first quarter. For the second quarter of 2020, KSNET revenue in Korean won was down 1% year-over-year to $33.5 million and consistent with the first quarter of 2020. EBITDA margins were the same as that -- as the second quarter of last year at around 22%, although slightly lower than what was achieved in the first quarter. KSNET's cash conversion remains strong with limited need for capital investment in what is now a relatively capital-light business.

With the expected closing of the disposal transaction, we will stop consolidating KSNET from March 2020. In respect of the transaction, its worth just covering off some of the tax effects of the transaction. We will be required to pay withholding taxes to approximately $19 million on closing the transaction, but these should be recoverable over a period of six to 12 months. In addition, we have a U.S.

tax liability arising from the disposal, which we currently estimate at between $15 million and $21 million. We will also incur a transaction-related costs of around $7 million in respect of the disposal. Returning to operational performance. IPG's legacy businesses have continued to decline.

But once we roll out our new products, we expect this business to return to growth in pair its current losses. IPG losses also include approximately $100,000 of development costs in respect to the crypto asset storage product incurred during Q2, on top of the $1.7 million invested prior to this quarter. These development costs will start to reduce during fiscal 2020, once we launch the product. Financial Inclusion and Applied Technologies generated revenue of $22 million in the second quarter of 2020, which was up 15% compared to the same period last year but 27% lower compared to the first quarter of 2020.

The increase in revenue over the prior fiscal year is primarily due to higher account fee income. Tough this will reduce over time and needs to be replaced with new customer accounts. Ad hoc sales reduced from the $8 million of the previous quarter to around $3 million, comprising airtime sales and higher-than-normal hardware sales. In addition, fee income reduced by approximately $2 million against the previous quarter as nonrecurring fee sources reduced.

Operating margin with a negative 4%, compared to negative 142% in the same period last year, and 5% in quarter 1 of 2020. The operating margin in this business is heavily influenced by the revenue level as there is a significant fixed cost component in this segment, primarily related to the costs incurred to operate our financial services branch infrastructure. Active EPE accounts remained fairly steady through the first quarter, and with a stable EPE base, our lending and insurance businesses have also returned to more normalized operating performance levels. Our new Finbond sponsored products have grown over the last quarter.

The acceleration of this growth is critical for the South African operations. Our net loan book increased by about ZAR 25 million of 7% over the quarter. And default rates remain in line with the historical levels seen prior to the loss of our customers last year. Our new variable loan product are proving popular with the existing customer base, and we need to expand the take-up of this product into new customers for the group.

Our micro insurance policyholders have remained flat at around 220,000 over the last three quarters. And we are progressing initiatives to expand the distribution channels, though with limited success to date. Our corporate expenses in the second quarter of 2020 was slightly higher than the first quarter. They are also slightly higher than the equivalent quarter last year due to higher advisor fees related to some of our strategic initiatives.

But this is offset by lower acquired intangible asset amortization following this deconsolidation of DNI, and the fact that IPG's acquired intangible assets are now fully amortized. We continue to assess the fair value of our investment in Cell C at a 0 value. We do not see any likelihood of increasing that fair value until the recapitalization has been completed. Though Cell C itself has seen some benefits from an increasing focus on the core operations, that need to complete the recapitalization to create a sustainable business.

And we continue to provide support to the management team and are working on providing access to our distribution network facility to benefit. We recognized income from equity accounted investments of $0.5 million during the second quarter of 2020, compared to a loss of $1.3 million in the same period last year. And in that amount, we saw a contribution of $0.4 million from our 30% investment in DNI, a business that was consolidated in the equivalent period last year. Bank Frick's contribution listed in the quarter, but its near-term profitability continues to be impacted by its investment in people to expand our operations.

We expect to see a stronger performance in the next fiscal year as some of the investments start to deliver, but the earnings will move into the group's statement of operations once the exercise of the option -- the exercise of the option closes. Finbond did not contribute to earnings in the quarter as their annual report earnings in our first and fourth quarters. We expect the contribution from our equity accounted investments to be positive on also an annual basis. As it is impacted by the timing of reported results by our various investments.

At December 31, 2019 of our unrestricted cash was approximately $50.7 million, compared to $46.1 million at the end of June. Setting these amounts off against short-term credit facilities of $13.9 million and $9.5 million, respectively, means our net unrestricted cash increased marginally from $36.6 million to $36.8 million. However, this cash position was distorted by the early settlement of the January of micro loan repayments of approximately $8 million, meaning the underlying cash balance was approximately $28.5 million. The decrease in our cash balances was lower in this quarter than we experienced in the last quarter as some investment in working capital reversed and largely reflects the impact of the current operating performance.

Adjusting for the loan book cash flows, there was a $4 million outflow from operating activities, which also includes a $2 million release from working capital. Capital expenditures in the quarter of $0.8 million was well below all the comparative periods. But is not expected to change significantly going forward as our capital expenditure is largely limited to replacement. We have short-term banking facilities available to us in various territories of $32.2 million at December 31, 2019, $13.9 million of which have been utilized.

This excludes the facilities used to fund the ATMs. As of December 31, 2019, we had restricted cash of $84.4 million, and associated short-term facilities utilization of $84.4 million. We have in place short-term credit facilities of ZAR 1.45 billion or $103.2 million, specifically to fund our ATMs in South Africa. And have presented cash drawn under these facilities and in the processing system as restricted cash on the balance sheet.

The only debt on the balance sheet of $4.1 million relates to the funding of the Cell C airtime purchase that we expect to be able to settle when Cell C's recapitalization is complete or under the terms of our borrowing arrangements. This has reduced from $14.5 million at the end of last quarter as our proceeds from the first disposal were required to be used to partially settle these borrowings. Herman has discussed the sale of our Korean operations will release significant capital into the business, which will allow us to settle all borrowings, reinvest in our businesses that have been starved of liquidity over the last 12 months and return capital to shareholders. Our second quarter 2020 tax expense was $1.7 million, compared to a tax benefit of $4.4 million in Q2 2019.

Our effective tax rate continues to be impacted by the losses incurred by certain South African businesses, as we have effectively not recorded a deferred tax asset benefit related to these net operating losses. Our effective tax rate, therefore, likely to continue to now -- by the losses incurred by certain of our businesses. Our weighted average share count has remained relatively constant at 56.6 million shares through quarter 2 2020. Given the timing of our various corporate actions and availability of liquidity as well as certain pending European regulatory approvals, there are a number of moving parts in our business this year.

Using the same assumption of a constant currency base of ZAR 14.27 to the $1, we believe this fiscal 2020 adjusted EBITDA is likely to be a loss of approximately $3 million, a decrease from our previous guidance of $16 million profit. This decrease is primarily due to an $11 million reduction related to foregone contributions as a result of the sale of KSNET come first, as well as an $8 million negative impact related to the delayed liquidity injection in South Africa due to the timing of our asset realizations, and IPG's inability to launch its new projects due to the dependencies on Visa certification. Our focus following the injection of liquidity during the fourth quarter of 2020, will be to drive new account growth and financial services in South Africa, and commenced with the scaling up of our new initiatives in Europe. In turn, returning the group to an adjusted EBITDA position in fiscal 2021.

We can now open up the call for Q&A.

Questions & Answers:


Operator

Thank you. [Operator instructions] We have a question from Scott Buck of B. Riley. Please go ahead.

Scott Buck -- B. Riley FBR -- Analyst

Yes, good morning, guys. I'm curious, in the 2020 adjusted EBITDA guide, whether or not there's any contribution from Bank Frick in that $3 million loss number?

Alex Smith -- Chief Financial Officer

No. There's no -- we haven't incorporated any Bank Frick contribution in that guidance. We'll bring that in once the option -- once the deal effectively closes.

Scott Buck -- B. Riley FBR -- Analyst

OK but you will be consolidating results beginning in the June quarter, I guess?

Alex Smith -- Chief Financial Officer

Yes, that's right. So, expect it to close in April from -- so from April onwards.

Herman Kotze -- Chief Executive Officer

Yes.

Scott Buck -- B. Riley FBR -- Analyst

OK. Perfect. And then, second, can you remind us of what returns have looked like historically in, of course, South African business, maybe when you were at kind of 3 million active account level?

Herman Kotze -- Chief Executive Officer

So, Scott, it depends across which products and businesses you measure the total returns. I guess the easiest way for us to outline the revenues and the returns is to look at it on a per customer basis. And so, the average sort of revenue that we realized from, let's say, margin that we have realized from our South African customers and cardholders and, obviously, excluding the old pension welfare distribution component of it, so focusing on the provision of a bank account, transactional services, loans, insurance products, et cetera, across the entire base, we would anticipate probably around ZAR 25 to ZAR 50 contribution from each of our cardholders. The margin, obviously, increases exponentially with the amount of clients that are increased because the cost base is relatively fixed as far as the South African core business is concerned.

And if you look at the 3 million people that we had, let's say, roughly two years ago, I think the revenues that we had at that point of approximately $250 million. That, obviously, excludes KSNET and the SASSA business. And EBITDA probably in the region of $50 million on that number. So, roughly a margin of, I would say, 20%.

Scott Buck -- B. Riley FBR -- Analyst

Great. That's really helpful. Third, what gives you confidence that without having the SASSA contract as kind of a distribution feeder that you'll be able to grow the account base from just over a million now to 2 million to 3 million over time?

Herman Kotze -- Chief Executive Officer

It's purely our distribution network that we haven't scaled down as a result of the loss of that contract. So, we have retained – in fact, we've grown our financial services branch infrastructure. We have also deployed sort of semi portable branches through the use of customized the containers. And in combination with the Finbond branch infrastructure, if we just look at physical brick and mortar branches, we are just sort of between 700 and 800.

These are mainly distributors in the rural and semi-rural areas, which in the South African context is fairly unique and gives us access to a part of the market that few of the other banks or our competitors of actual service. The second thing I think that's quite important is that we have the technology that enables us to operate in these rural and deep rural areas in an offline manner where required. We also have the experience of having serviced our customer base for the last 20 years or so, which gives us the unique advantage. And finally, when you just look at the product slate that we offer in terms of the bank accounts with the functionality and the pricing of what we offer, combine that with the financial services, and the fact that these are specifically designed for our target market, we know because we do regular benchmarking that we are still by far the cheapest product set on offer to that customer base.

And so, that's effectively the factors that provide me with confidence that we'll be able to grow this business.

Scott Buck -- B. Riley FBR -- Analyst

Super. I appreciate the color there. Last one for me. If I'm doing my math right, it looks like you guys should have roughly $160 million or so, if all the proceeds work out with DNI and you keep to the, I guess, investment or capital allocation schedule as you've laid out.

How much cash do you need on the balance sheet to run the business? And I guess what I'm really asking is how much of that $160 million is, is actually available for repurchases?

Herman Kotze -- Chief Executive Officer

I think it's a great question. Obviously, the $160 million is also a factor of the combination, I guess, of the KSNET and DNI and proceeds. And as you say, net of the investments, as I've outlined, Net 1, historically, has been a business that is more comfortable having a net cash position and as safety cushion in order for us to grow, specifically the working capital side of things, when it comes to the growing of the book, etc. At this stage, we don't foresee any specific need for further meaningful material acquisitions.

Most of our businesses are capex light, or the capex that we've required has been invested. And so we would -- I think to be comfortable with a cash buffer of probably between $30 million to $50 million to grow any of our initiatives over time. And at the same time, we obviously have to assume that we've extinguished all of the debt that remains within the group, that is not a material number. But it's something that we will also be attending to.

So we've set up the repurchase limit up to $100 million. I think as we realize these proceeds from the various investments, which I hope is sort of in the early part of Q4, we will be able to provide more color of the exact quantum and nature of the repurchase program.

Scott Buck -- B. Riley FBR -- Analyst

Great. I appreciate the time today, guys.

Herman Kotze -- Chief Executive Officer

Thank you, Scott.

Operator

[Operator instructions] We have a question from Bill Gordon from Gordon Capital. Please go ahead, sir.

Bill Gordon -- Gordon Capital -- Analyst

When we complete the Bank Frick deal, what do you see the prospects are for Bank Frick? These are -- and the other payments?

Herman Kotze -- Chief Executive Officer

The answer, I think, is simply that we will then become as Net 1, a principal member through Bank Frick of both Visa and MasterCard, so we will have unfitted access as a principal member to both the issuing and the acquiring licenses. That enables us to price our products and the offerings to merchants, specifically for acquiring at a level which is competitive to those offered by our competitors. Compare that to a situation where we need to leverage off other third-party financial institutions where you are provided with a buy rate, and then you still have to mark up your offering from that buy rate. I think for us, that is one of the key importance in differentiating matter.

It also allows us to launch all of our new technologies that we've been developing over the last two years, ranging from instant onboarding to virtual bank account issuance in a fully regulated environment within the EEA. And finally, also, the products that we've developed on the blockchain and the virtual financial asset side, we will be able to offer those through a bank that is a member of the group, which is widely regarded as the leader in the European space that's within the blockchain and virtual financial assets base. So that in a nutshell is the benefits that we see, the immediate benefit of completing that transaction.

Bill Gordon -- Gordon Capital -- Analyst

And how do you see DNI working out?

Herman Kotze -- Chief Executive Officer

In DNI, we've granted the option. It expires on the 30th of March, as I said. At this point in time, the process of -- and we granted the option to -- effectively to the management team of DNI. And so they are very well advanced in finding the institutional investors who are interested in acquiring our 30% stake.

At this stage, the process, I think, is relatively advanced and we have no reason to believe that the option will not be completed by the 30th of March.

Bill Gordon -- Gordon Capital -- Analyst

Thank you.

Operator

[Operator signoff]

Duration: 41 minutes

Call participants:

Dhruv Chopra -- Vice President, Investor Relations

Herman Kotze -- Chief Executive Officer

Alex Smith -- Chief Financial Officer

Scott Buck -- B. Riley FBR -- Analyst

Alex Smith -- Chief Financial Officer

Bill Gordon -- Gordon Capital -- Analyst

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