Net 1 UEPS Technologies, Inc. (NASDAQ:UEPS) Q1 2021 Earnings Conference Call November 6, 2020 8:00 AM ET

Company Participants

Dara Dierks – Managing Director, ICR

Alexander Smith – Chief Financial Officer and Interim Chief Executive Officer

Conference Call Participants

P.J. Solit – Potomac Capital Management LLC

Raj Sharma – B. Riley FBR Inc.

Operator

Good day, ladies and gentlemen, and welcome to Net 1 UEPS Q1 2021 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] Please note that this call is being recorded.

I’d now like to turn the conference over to Dara Dierks. Please go ahead, ma’am.

Dara Dierks

Thank you, Claudia. Welcome to our first quarter 2021 earnings call. With me today is CFO and Interim CEO, Alex Smith.

Our press release and supplementary investor presentation are available on our Investor Relations website at 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 financial 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 Alex.

Alexander Smith

Thanks, Dara, and good morning to everyone. And thank you all for joining us on our first quarter earnings call. We hope everyone’s staying healthy and safe during these difficult times. On today’s call, we will run through the following.

We’ll review some of the financial and operational highlights from the quarter. Then discuss our short-term initiatives, which will include some more insight into our Investment Company Act issue and provide a progress report on resolving the matter, which will lead into our related capital allocation plans. Finally, I’ll review our long-term initiatives relative to our new strategic focus before opening it up for questions.

First, I would like to say we’ve seen some encouraging signs in our operational and financial results this quarter as the business return to relative normality, following the lift in various lockdown restrictions that began in early June. We were fortunate as a group that in the easing in June allowed almost all of our operations to return to full activity whilst maintaining all the necessary precautions in terms of social distancing, and provision of sanitizer and personal protective equipment.

We are extremely grateful to all our employees for the dedication that they’ve shown during these times in continuing to deliver services to our customers, many of whom are among the most vulnerable in our society. Their commitment to ensuring the safety of all our customers and colleagues has been unwavering.

With the return to full operations, we have seen increased transaction processing volumes, loan originations and the significant increase in the utilization of our ATM infrastructure over the last quarter.

In addition, while relatively small in number to date, we saw increased demand for our consumer bank accounts, EasyPay Everywhere or EPE in September, and this has grown further in October. Indeed, October will be the first month in nearly 2 years that we will be able to report positive net additions to our EPE customer numbers.

These new EPE customers, many of whom are returning to the company will then have access to the full suite of associated financial services products, which will lift activity levels across many of our operations. We believe that there is a significant opportunity to increase this momentum in the coming months. And this is one of our key short-term initiatives.

Our cost base in South Africa remains stable and at the level that can support significant growth in business activity. As a result, a relatively large percentage of any revenue growth in the coming quarters should drop to the profit line.

As such, we have a clear path to reaching breakeven in South Africa and then to achieving profitability at the corporate level. Our plan is to reach breakeven in South Africa on a monthly basis in Q4 this year.

As mentioned earlier, South Africa remains under limited lockdown restrictions, which continue to affect the broader economy and these affect us to the extent that they affect activity levels in the South African economy. South Africa was in lockdown level 3, up until the August 18, 2020, and in level 2 up until the September 20, 2020.

Currently, South Africa remains at level 1 lockdown, which is the lowest form of lockdown. Unfortunately, over the course of the pandemic to date, it is estimated that 2.2 million jobs have been lost and GDP has contracted sharply. Expectation is that that the economy may contract by up to 10% this year.

Despite this outlook, we did see a number of bright spots in the quarter. The number of active bank accounts remained stable at around 1 million. Our ATM network utilization have seen a meaningful recovery since June. And in September 2020 transactions through our fixed and mobile ATMs were at 2-year highs.

Total transactions for the quarter were up 13% compared to the prior quarter, 15% higher than the same quarter in fiscal 2020. Our lending book has recovered since restrictions were eased with loan originations strong in June through August, though a little more subdued in September, primarily due to the loan cycle.

The loan book finished September 2020 at ZAR384 million versus ZAR307 million at June 30, 2020 and ZAR341 million at September 2019. This increase of ZAR77 million or 25% represents a 10% increase in the number of loan advanced and a 15% increase in the average loan outstanding.

Transaction volumes through our EasyPay switch were up quarter on quarter, as we’ve added a number of new bill issuing customers to the platform. And this also reflects consumers moving to digital channels in these times.

As we discussed in our previous call, we have taken the decision to close down our International IPG operations. And this process has been underway for about 2 months now. The decision to close was not taken lightly, and was mainly as a result of the strategic review, which raised doubts over the commercial prospects supporting continued investment. It was also about ensuring that our focus was on what we believe to be a more compelling opportunity in South Africa.

The closure process is progressing according to our expectations. And we are cautiously optimistic that we will be able to largely conclude the exercise by the end of the second quarter. It will require some attention beyond that date, and that will be largely in respect of more administrative matters. We wish all of those involved in IPG over the last 2 years all the best in their future endeavors.

Additionally, given the upcoming closure of our International operations, we are re-segmenting how we report our financials. The segments are Processing, Financial services and Technology. We’ve also restated prior periods for easy comparison. We believe this should provide increased transparency, allow investors to better track our progress, and also be more in line with reporting from other fintech companies.

That said, I would like to briefly review a few other key financial highlights for the quarter. Quarter 1, total revenue was $37 million, which was a 12% decrease year-over-year in rand, but a 39% increase in South African rand compared to the previous quarter. The sequential increase was partially due to technology hardware sales in the quarter, as well as the return to normalize operations and organic growth.

While the revenue for the prior quarter was depressed by COVID effects, adjusting for these we did still achieve a double-digit increase in sustainable revenue. The decrease in revenue compared to the prior year was largely due to a number of non-recurring revenues in the first quarter of fiscal 2020. The U.S. dollar at ZAR16.77 to the rand in the first quarter of 2021 appreciated 14% against the rand compared to the first quarter of 2020, which adversely impacted our reported results. The rand has recovered somewhat since the last quarter appreciating by 3% against the dollar from ZAR17.28 to ZAR16.77.

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First quarter 2021 fundamental loss per share was $0.23 compared to a $0.02 fundamental loss per share a year ago. And this compares to fundamental loss per share in the fourth quarter of fiscal 2020 of $0.22. We reported an adjusted EBITDA loss from continuing operations of $9.8 million, which was a sequential improvement from the $12.2 million reported for the fourth quarter of 2020, but some of this can be attributed to the receding effects of the pandemic. The international operations which we are closing remained a significant contributed to this loss, which should be largely eliminated from the third quarter of 2021.

By segment, Processing reported revenue of $24.5 million in the first quarter of 2021, down 7% compared to the first quarter of 2020, and up 33% from the fourth quarter of 2020, both on a constant currency basis. The comparatives are somewhat distorted by once-off events and the impact of the pandemic, but core processing revenue has shown a pleasing increase in the quarter. At operating loss level, Processing recorded the loss of $7.3 million in the first quarter of 2021 compared to $5.5 million in the first quarter of 2020 and $10.1 million in the fourth quarter of 2020.

Our Financial services segment generated revenue of $8.3 million in the first quarter of 2021, down 34% compared to the first quarter of 2020 and down 8% from the fourth quarter of 2020, both on a constant currency basis. While our loan book has increased, there is a lag effect for the benefits of this to flow into the results and the decline in revenue reflects the low originations of the last quarter.

At operating loss level, financial services recorded a loss of $2.4 million in the first quarter of 2021, compared to a profit of $0.3 million in the first quarter of 2020, and a loss of $1 million in the fourth quarter of 2020.

Lastly, as I mentioned earlier, our Technology segment revenue was $6.2 million in the first quarter of 2021. At operating loss – at operating profit level, Technology recorded a profit of $1.8 million in the first quarter of 2021 compared to a profit of $1.1 million in the first quarter of 2020 and $0.1 million in the fourth quarter of 2020. Corporate costs were slightly higher at $2.8 million for the quarter on higher adviser costs and much of this is once-off in nature.

Net interest expense was negligible for the quarter reflecting the cash on our balance sheet. While the associated interest income is relatively low in the current environment, it is sufficient to largely offset the interest expense associated with funding our ATMs. Our equity accounted investments generated losses of $19.1 million for the quarter as a result of losses at Finbond and a substantial decline in their share price, which resulted in an impairment of our investment. More detail on the performance of these investments will be provided later in the call.

At September 30, 2020, we had unrestricted cash of $209 million and 0 debt. U.S. dollar denominated balances were $174 million out of the total. Operating cash flows are somewhat distorted by the payment of $15.1 million of U.S. federal taxes primarily connected to our KSNET net disposal.

This was offset by the recovery of withholding tax from Korea of $20.1 million during the quarter, which was recorded as part of the proceeds from the disposal and included in cash flows from investing activities. Our weighted average share count has remained relatively constant at 57.1 million shares in the first quarter of 2021.

I’d also like to give some feedback on developments in our various investments in the quarter starting with Finbond. Finbond had a difficult first half of their fiscal year being the 6 months to August 31, 2020, as this period bought the full brunt of the pandemic impact on their North American and South African businesses.

With a shorter-term loan book, they were more impacted than our loan business and incurred significant losses in the period. In addition, their listed share price declined from ZAR2.30 at June 30 to ZAR1.04 at September 30, and as a result, we are required to impair our carrying value of our holdings by $16.4 million in the quarter. They have seen some improvement in performance towards the end of their reporting period, and we’ll have to build on this in their second half.

Bank Frick performed well during the quarter exceeding expectations, while they have increased provisioning against some of their loan portfolio, the performance of the bank in other areas has been strong. Nevertheless, with Europe in the grip of a second wave of infections under the pandemic, and some countries reintroducing restrictions, this could have a negative impact on the bank’s results going forward, particularly in our third and fourth quarters.

Meanwhile, in Nigeria, Carbon has started to see some normalization of their business as the effects of the pandemic and the associated restrictions have been reduced. While revenue remains below the level seen before the start of the pandemic, proactive management action is seeing their profitability levels recover more quickly. They have recently received their license for accepting deposits in Nigeria, which will enable them to improve their offerings and is another step towards their goal of providing a full digital banking service into their customers.

MobiKwik has also started to see a recovery in processing volumes and revenue during the quarter, and is expecting to return to pre-pandemic levels of revenue by the end of the calendar year. They’ve managed costs effectively holding cash EBITDA losses under $1 million for the quarter. We believe there should be a quick recovery as conditions normalize.

In particular, there have been several developments during the pandemic that we believe should be very positive for MobiKwik longer term growth prospects. We continue to carry the value of our Cell C investment at 0 as of September 30, 2020. Cell C continues to make progress or bit slow on its recapitalization plan, but in the meantime has overhauled its operational model and is delivering improved operational results. If the capital structure can be right sized, we believe there is a sustainable business that can emerge.

Now importantly, I wanted to review some of our other initiatives. As we said on the last call change is a journey rather than a single event and this new adventure is just beginning. First, I’d like to provide a thorough update on our Investment Company Act status. For a bit of background in respect of this issue, the 1940 Investment Company Act is an act of Congress that regulates investment companies. In doing so, it established a definition of investment companies, which is primarily based on some analysis of a company’s financial statements.

Investment companies are distinguished from operating companies and under the Act have meaningful – meaningfully different reporting and regulatory requirements. Some of these regulatory requirements may under certain circumstances, restrict an investment company’s ability to perform certain actions, particularly in relation to its capital structure, including share buybacks and dividends.

The calculation to determine whether a company is indeed an investment company is quite complicated. And while we won’t get into the details on this call, it’s essentially having greater than 40% of the firm’s assets derived from investment securities, with cash balances being completely ignored for the purposes of this calculation.

Investment securities generally include among other things, any companies in which a firm has a minority interest, unless the firm is the entity having primary control of these companies or an exception is available. We believe that based on the way that Net1 is managed and operated; it should not be regarded as an investment company. However, we’ve made a number of strategic partnership arrangements and investments over the years.

With the decline in our South African business following the SASSA contract expiration coupled with the sale of KSNET, which was a wholly owned subsidiary. The investment company calculation was brought to our attention as something we need to be mindful of going forward. Having said that scene, I can confirm that we are proactively dealing with this situation. We are working with a top law firm, who specializes in this field, as the legislation is somewhat arcane and complex.

The most direct way to address any investment company issues is to submit a detailed application to the SEC supporting our status as an operating company, as well as explaining our future strategic corporate development plans in order to reinforce this conviction. We’re in the process of discussing this possibility with the SEC. Given the complexity of the application, and that it is somewhat outside of the ordinary course. There is no fixed period of time established for this process to conclude.

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Based on current assessments, this could take up 6 months, though it could be concluded sooner or later. While this is progressing, we continue to pursue our strategic aims in South Africa, and this could naturally cure or assist in the resolution of the current uncertainty over our status.

I wanted to provide this background and granularity, because this issue is understandably top of mind with our investors. It is also the only one thing preventing this from returning capital to shareholders. As we’ve been indicating we would do ever since we divested from ksnet.

We will continue to keep our investors updated on our progress with this matter, and it will remain a priority for us. Now, I’d like to shift the conversation to the company’s overall capital allocation plans.

As you know from our press release and 10-Q, we currently have over $200 million in net cash on our balance sheet. And we would like to provide additional guidance on how we plan to deploy those funds.

As we mentioned on the last call, we have formed a capital allocation committee of the Board, who are tasked with ensuring that capital in the business is allocated prudently and responsibly. This committee is comprised of recently appointed non-executive directors, the majority of whom are experienced investment professionals.

In terms of the corporate strategy we articulated on our last call, we believe that we’ve identified a significant opportunity to build a unique and sustainable fintech business in South Africa. And we plan to implement this strategy through a combination of organic growth and strategic acquisitions. For example, the growth of our financial services business is most likely to be through organic growth, but will still require some capital, for instance, to grow our loan book.

However, for our processing business, largely focused on merchants or B2b activity, we will look to make strategic acquisitions to more quickly reach operational scale, and possibly to fill out our product offering and distribution channels. With this in mind, the company has put a plan in place to satisfy both initiatives, i.e., returning capital and implementing our plans for growth in order to address the expectation of all stakeholders.

As soon as our Investment Company Act status is clarified, we will look to allocate approximately $50 million for return to shareholders, most likely in the form of a buyback. The balance of approximately $150 million will be available to fund the organic and acquisitive growth we have targeted in our new strategy.

In light of sharing this capital allocation plan, I think it’s important to remind our investors just how big our targeted opportunity is, and the tailwinds we’re experiencing that will continue to help us with these initiatives. We did lay this out in detail during our fourth quarter report. And I would also refer you to our fourth quarter supplemental presentation.

Breaking this into 2 broad categories, our consumer banking and financial services TAM or Total Addressable Market, which is estimated at approximately ZAR57 billion or approximately $3.4 billion annually. And the merchants’ financial services TAM, which is estimated at approximately ZAR104 billion or $6.2 billion.

In addition to the substantial size of these markets, the South African market is primarily a cash-based economy, with approximately 60% of consumer retail transactions still being conducted in cash. Our primary product offering coupled with our superior distribution channels, provide for an exceptionally competitive offering for both categories of markets, wishing to process cash and/or transition to electronic or digital payment platforms.

This includes the provision of financial inclusion to underserviced consumers, which includes unsecured credit, transactional banking, insurance, as well as revenue generating value-added services offered through our EasyPay switch. EasyPay pay is the market leader in terms of prepaid and postpaid services, including bill payments and electricity.

Through our deployed infrastructure, we have the ability to own the last mile, thereby providing us with the perfect opportunity to penetrate these largely untapped markets, and provides secure payment methodologies, as well as to provide a comprehensive ecosystem. Our recent strategic review identified our strengths as well as the requirements to substantially scale our business model on an incremental basis.

While we are in a very strong position in respect of distribution, infrastructure, technology and licenses, we’ve identified the following areas that require focus. Firstly, the distribution of EMV compliant point of sale terminals into the [SMME] [ph] market that will facilitate card processing and acquiring as well as value-added services.

We have concluded an agreement with a large South African bank to bridge this gap and have commenced a pilot project. Secondly, whilst obtaining a banking license is preferable and will result in better economics in our business model, as well as facilitate an efficient response to market. It is not a prerequisite for the successful implementation of our strategic intent.

Our corporate activity as well as our M&A activity focused on South Africa is currently in progress to facilitate our strategy alongside our stated organic initiatives. Finally, another key initiative for the Board is the appointment of a new CEO to replace Herman Kotzé. While we don’t have anything tangible to report today, the Board is very engaged in the process to identify and hire a replacement, who can drive the implementation of our strategy in South Africa.

We will keep our investors updated on this progress.

Wrapping up, I just like to reiterate, we are seeing positive signs in the business and are currently largely unaffected by the current level of COVID-related lockdowns in South Africa. We are engaged in clarifying our Investment Company Act status, which will lead to a share buyback. And we are focused on exploiting a huge opportunity to grow this business into a meaningful fintech player in South Africa.

Before taking any questions, I wish to extend my appreciation to the Net 1 team and specifically to our customer-facing employees, who have continued to provide an excellent service to our customers during an unprecedented and uncertain time. I look forward to their continued contribution to the company. Claudia, if we can take any questions now.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] The first question comes from P.J. Solit from Potomac Capital Management. Please go ahead P.J.

P.J. Solit

Hi, good morning. Hi, P.J. Thanks for the the transparency in some of these issues. It’s good to see the – some of the metrics in South Africa coming back with transactions and loan growth. I guess, in terms of capital return a few questions there, the $50 million, is it still a possibility that that could be in an ongoing buyback or a tender?

Alexander Smith

Yeah, thanks, P.J. I think there are a couple of aspects to this. So, I mean, first of all, just to reiterate, we see an enormous opportunity in South Africa, which is experiencing an acceleration from a cash economy to digital and plastic-card transactions. And so, M&A opportunities are a big portion of what we would be looking at to establish profitable sustainable business.

In terms of the $50 million, we’ve earmarked near-term for capital return, I think we really don’t think it’s feasible to try to buy back more stock than that unless we’re looking at that over a longer time period. We obviously think the stock is inexpensive at these levels. We want to be opportunistic while simultaneously addressing the wishes and concerns of all our stakeholders.

I suppose this number could grow as and when we sell other non-strategic assets, and if the opportunity to repurchase stock at attractive levels persists. Look, we do have $100 million repurchase plan approved by the Board in case things change. So that’s something that was will stay under review as we move forward through the implementation of the strategy.

P.J. Solit

Okay, great. Now on the topic of acquisition, I guess, what does the pipeline look like? I guess, with in terms of size, would you guys spend $100 million or are probably unlikely and you filling some pieces with smaller amounts?

Alexander Smith

Yeah, look, it’s a little bit early to really start giving any sort of guidance around what the M&A activity might look like. I mean, we – and I think we’re still a little way off in terms of being able to land any M&A activity. I think we would probably look at with the intention to scale that, we’d look at, reasonably sized transactions.

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But we want to be very strategic in our allocation of capital, make sure that those acquisitions align. And I’d be surprised that we can complete anything before the fourth quarter or so of this fiscal year.

P.J. Solit

Okay. All right, lastly, it’s good to see you continue to target breakeven in South Africa by the end of your fiscal year. I guess aside from any acquisitions that might accelerate that or help you get there is the biggest step function between where we are today in terms of run rate losses to getting there just continued growth in the loan book or removal of IPG losses or what are the big levers there?

Alexander Smith

So removal IPG losses is one of the leavers. I think the bigger one is the growth in their loan book and really the development of the number of EPE customers. And I think our focus has probably shifted a little bit towards the development of the EPE customers, which will naturally lead into the growth in the loan book. Well, then perhaps with a little bit of a lag.

We have seen, I think I mentioned on the call that, in the prepared remarks that we’ve seen renewed interest in the product from our target base. And in October, it should be the first month in sometime where we’ll see positive net additions to the customer base. And these customers, once they have bought onto the base, they also buy insurance, they take out loans and they utilize our ATM network.

So grading these accounts is really key. And, we’re feeling confident that we can do that. Just to give you some flavor around that. I mean, we think that for every 100,000 accounts, that we add, we would probably add about $3 million of annual revenue. And that’s based on our expectations of about $2.50 per month of ARPU or average revenue per user or per account.

So talking about the breakeven, if we were to add, say, 400,000 accounts before year end, that would give us a run rate of $12 million dollars annually of additional revenue that would fundamentally lift the performance of the South African business.

P.J. Solit

Yeah, the incremental on that is very high, right? Is that like a…

Alexander Smith

Yeah, absolutely.

P.J. Solit

…probably 50%.

Alexander Smith

Yeah, if not more, the benefit of having a largely sort of fixed cost base in terms of the provision of those accounts is that a lot of that revenue just flows through the bottom-line. The incremental costs are provisioning, some insurance claims and the cost of putting the cash into the ATM network, so not substantial in the context of the revenue line.

P.J. Solit

Okay, great. Thanks a lot.

Operator

Thank you. The next question comes from Raj Sharma from B. Riley Securities. Please go ahead, Raj.

Raj Sharma

Hello, good morning.

Alexander Smith

Hi, Raj.

Raj Sharma

Thank you for the additional clarity and visibility. I wanted to understand your – I wanted to go back and get some – probably get some more color on the breakeven and wanted to understand the cost base. How do we look at – how do you look at the gross margin of the existing business and the G&A line? Should we see that as increasing or staying stable, because that’s what plays into getting to breakeven and getting higher incremental revenues? Could you please highlight some color there?

Alexander Smith

Sure. I mean, I think just sort of from a high level, you need to look at the segments that we’ve now produced on the technology side, that’s largely hardware and software type sales, which would have quite a high degree of variable cost associated with it, so direct cost and sales type cost. And then the other areas, the processing and the financial services are more, I guess, fixed cost in nature with much smaller component of variable costs. So when we talk about the stability in the South African cost base, it’s around, we’re really referring to that fixed cost basis sets in services, the processing and financial services side of the business. And that has shown pretty consistent stability over the last couple of quarters.

And as I was mentioning, in terms of the last question, the operational leverage effectively in that part of the business is very strong in the – a lot of the revenue that you can add in drops to the bottom line. You might have picked up that cost base has moved up quite a bit in this quarter, if you compare it with the last quarter. There are some disruptions in there related to some pandemic effects in the last quarter. But probably 80% of the growth in that cost base is coming out of that variable cost that I’m talking about in terms of some of the lower contribution side of the business, the hardware and software sales and some of the associated revenue streams.

Raj Sharma

Right. And then, so the way I’m understanding, it is basically your plan to get to breakeven by – on a monthly basis by the fourth quarter that implies adding accounts.

Alexander Smith

Absolutely, yeah. That’s going be the primary aim. Yeah.

Raj Sharma

Right. And the rate, at which you think you can add accounts, as you just indicated to 400,000, new accounts by year end, should get you to a breakeven – easily get you to a breakeven status.

Alexander Smith

Yeah, we think that would largely get us to the breakeven point, and – that’s certainly of the order of number of accounts that we’re targeting to be at by the end of Q4 2021.

Raj Sharma

Great. And in the past, you talked about an eventual level of 2-plus million in a few years. Is that the right way to look at? I know the overall opportunities much bigger.

Alexander Smith

Yeah.

Raj Sharma

But you could get to 2 million in a year or 2 years time.

Alexander Smith

Yeah, look, we – that’s still the target into the level we were at before some events that happened at 18 months ago, 2 years ago. So we know the customer base out there that’s had experience of us previously that if they’re approached in the right way would, I’m sure come back to us. And so then the 2 million is still very much a targeted level of accounts. And yeah, if we can add the 400,000 odd additional accounts this year, we would certainly look to continue to grow at that sort of pace going forward. So I would hope that we could get there within the space of 18 months following the end of this fiscal year.

Raj Sharma

Okay. And then, I just have 1 more question, and then I’ll get off line. So you had talked a lot about last quarter about substantial under-banked merchant effort, merchant category, how is that? Can you add some color? Are you seeing traction in that? Or is it just additional costs right now?

Alexander Smith

It’s – there is some traction in terms of we have basically entered into an arrangement with, so one of the large banks here in terms of around trying to facilitate the access to point-of-sale devices. But it’s at a very early stage at this point. I don’t think it’s not contributing any sort of significant revenue at this point or really any significant cost at this point. So it’s an area that where the M&A activity is probably the most relevant. And we’ll be looking to exploit that over the coming quarters. But at this point, there’s not a huge amount of tangible progress to report other than that we are starting to implement that strategy.

Raj Sharma

Great. Yeah. And thank you again for the clarity and the streamlining of the reporting. Yeah, I’ll take it offline now. Thank you.

Alexander Smith

Yeah. Thanks, Raj.

Operator

Thank you very much. We have no further questions in the queue. Ladies and gentlemen, that concludes today’s conference. Thank you for joining us. You may now disconnect your lines.



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