Q3 2020 Earnings Call
[music].
Welcome to the confront say that's please hold for enough.
Good morning course stuff, but after the horoscope.
Okay.
Good afternoon, I would like to Triple net one technologies.
Nick what could happen I did.
First name David last name Brown.
Hey, good Brown <unk> company Sir.
Iraq A.I.E.R.A.
Oh no. Thank you David.
[music].
Good day, ladies and gentlemen, and welcome to donate one Q3 Twentytwenty results.
All participants will be in listen only mode.
It'll be an opportunity to last question like to drink country.
If you shoot assistance James Cool. Please take note an upgrade I pacing start seeing favorites.
Please note this call is being recorded.
I was not lots in the country every two to jump out seems kind of hit.
Thank you Irene Oh love come to a third quarter Twentytwenty running school.
With me on the call today is our CEO.
And our CFO Alex Smith.
A press release that not supplementary investor presentation.
On the Investor Relations website.
Our next one dotcom.
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 measure.
And we've provided a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, we will discuss our results in South African Rand, which is a non-GAAP measure.
We analyze our results of operations in a press release and brands to assist investors 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.
Had a question and answer session. Following our prepared remarks, and with that let me turn the call over the hub.
[noise]. Thank you Julie and good day to everyone I hope everyone is healthy and safe during these unprecedented times.
Just like many of you most of US have been working from home for the last several weeks.
South Africa remains on a national locked out.
Similar to every business around the world.
But 19th pandemic has impacted our operations.
During this time, though I'm proud of our ability to ensure we are doing the right thing so I employees customers and the communities that leases.
Today, I would like to focus on four key things.
There's a brief overview about Q3 results as well as a discussion around the impact of the cobot 19 pandemic on our business. The actions, we have taken and to strings about current liquidity position.
Next I'll review, our Planful South Africa.
Ensued, followed by our plans for international markets subsequent to the cancellation of all bank Frick option and for an update on our corporate actions shareholder value and uses skeptical.
So just a brief recap although third quarter results.
Revenue from continuing operations for the quarter.
Was $36.5 million, which was flat year over year in U.S dollars, but grew 8% in constant currency.
In line with US on every can banking industries, you might think response to the cobot, 19th and they make we did not all just sit and guess what drove these two customers you do the locked down during the last few days of multi stream between D.
I would like to note that case Thats contributions are excluded from continuing operations for the third quarter.
We reported an adjusted EBITDA loss from continuing operations of $6.4 million, primarily due to the lack of topline growth in South Africa, and higher losses in Cboes, which is the new brands like the G.
As a result of delays of new product launches.
Including basic for two months adjusted EBITDA would've been a loss of $2.9 million in Q3.
Transaction processing volumes in South Africa increased 24% year over year in constant currency.
Number of bank accounts remained relatively stable at 1.3 million as it related financial services.
We sold case need for $257 million in March 2020, M.D. and I will $48 million in April Twentytwenty.
And at March 31, 22, any weird unrestricted cash of 200, a $9 million and date of $3 million.
On March 27th Al Chemo could have South Africa went into a nationwide locked down.
Only allowing people out of the house, where you've seen tools or if we moved and sees giving out team limited access to facilities and branch offices.
Many of our services would deem essential and they for continued to operate other remotely for with the beat that number of stores on site.
They will also student services, such as ATM, withdrawals, well, which we and others were not limited to charge during the looked well other services like sitting new financial services products, such as loans in insurance policies throughout branch infrastructure also prohibit that during the locked up.
[noise] South Africa extended its initial 21 day looked and introduce the grading system from middle five two level one with effect from maybe the first when it when do they will fall, which studies highly restrictive.
Label, three will become effective on June the first.
When we believe many other activities will be restored, though some limitations on certain fees may continue for now.
Despite the disruptions and distinctions I'm proud of I blew he's got the need to serve our customers doing this unprecedented todd and we'd like to thank them for their tireless efforts.
We experienced a reduction in revenue the last few days of March.
You do the industry wide waiting of states may deem fees. During this period and this is expected to continue at least until the look downgrading the reaches little one.
Well, we observed record Beatty transaction volumes across our mobile a teams and digital channels during April and so far in May.
Demonstrating the relevance and importance of our network.
Some of the highlights during the last 60 days of locked down in South Africa include.
Increasing daily volumes proceeds you know about a teams.
Record volumes Bressay, so easy pay value added services switch.
Record both payment volumes, a new Bell is one thing to join the pet food.
No interruption in the availability of I'll call processing systems in other words, 100% uptime.
And completion and launch of new product developments in record time, such as our mobile based mobile phone based loan origination platform, which works on any type of feature phone for smartphone.
The minute to other businesses around the world, we faced a number of challenges over the past few months.
But we believe that the steps we've taken over the past two years to focus on execution, rather than be tied up with legacy and nonproductive issues.
I have positioned us well to not only survive these challenging times, but we'll see merge with a solid foundation comprising of a sound capital base and relevant technologies.
Our immediate focus has been to ensure the safety and well being of employees baldness customers and communities during the cold with 19 pandemic.
In March we closed the number of our offices and operating locations in order to comply with government regulations and for the general well being of I am buoys. Following the outbreak of but then they make.
We have provided that makes us three facilities for our employees to upgrade remotely and have provided comprehensive predictive equipment that sanitation sanitization facilities.
Those employees a copy to operate with you know offices and operating locations.
In April we developed the system grumpy loans to repeat customers using mobile phone based Ulysses These things, which was launched in early may 20 between de <unk>.
In April we also announced its one of Nate ones non executive directors and its South African based executives.
If they can salary benefits and fee reductions of 30%.
For the three months to June the city of.
These amounts will be donated to the solidarity fund and other related initiatives to assist in the fight against the Cobot 19 pandemic in South Africa, and its impact on various critical functions, such as healthcare social assistance and education.
Over the past six months, we have completed a number of corporate disposals.
Which leaves the group in a very strong and liquid position.
Let me now outlined the second topic, which is our plan for South Africa.
Having taken dramatic steps to reduce costs, you know south African operations in fiscal 2019.
Oh, focusing physical 2020 has been do drones, they shouldn't how south African financial inclusion activities towards that business discuss that met or beat you see model.
We have developed new banking products in cooperation with Finbond.
Stabilized <unk> financial services offerings and continued to increase efficiency, you now distribution and infrastructure.
Our ability to expand our account base and financial services offerings had until Q3 22 any been constrained by the village availability of sufficient liquidity.
It's following the asset disposals during the fiscal year, we are now in a position to inject adequate liquidity to support such growth over the next 12 months.
However, what so ever going to lock down period as a result of cobot 19, we will only be able to come into these activities. Once the government imposed restrictions have been lifted as I've talked to customers typically require face to face into actions.
Under the government imposed restrictions due to government 19, we have been unable to grow loan book doing the locked down period as the face to face marketing and sales of new loan and other financial products is prohibited.
Additionally, we've had to waive fees on certain types of essential services, such as ATM withdrawals by grant recipients during the last time period.
And in January 2020, we launched new loan production collaboration with Finbond utilizing the balance sheet.
These loans off to the high Ellis in customers and before the first about efforts to move up to a high income customer segments.
This initiative showed promising early signs, but he's also currently affected by the locked down regulations.
And finally, we continue to work with Green Dot bank on our ATM and other acquiring initiatives.
Oh processing, a bullet payment platform easy pay has sustained its momentum even through the knocked out as customers and consumers embrace digital payment channels that do not require them to leave them so intact with other people.
As the largest bullpen fed platform in the country, we signed 41, new but as to the pendulum during Q3 2020.
Which some have already been integrated and others I expect it to be integrated by the end of June.
Easy pay revenue increased 9% year on year during Q3 2020, despite a very challenging retail spending environment.
To conclude on their activities in South Africa, we have been unable to say to all of the claims and counterclaims between how subsidiary cash pay most the services or Cps and SASSA through dialogue.
And we accordingly decided that the most appropriate course of action would be to play Cps into bankruptcy protection.
In this rescue as these referred to in South Africa.
As a result business whiskey practitioners have been appointed to independently as states. The viability of Cps is a going concern.
Considering the various claims and counterclaims the likelihood of a settlement and they do propose a plan to all stakeholders.
We are excited about the opportunity in South Africa, we have the right products partners and resources in place and we'll be prepared to grow in the market as soon as it's safe to do so.
We know that the country faces significant hurdles on its way to economic recovery and we are willing and able to provide the growing base of struggling consumers with financial inclusive products and services based on our technology stack.
Now moving onto our international businesses.
Given rapidly changing market conditions and by global reduction in bank valuations, we chose to ultra European strategy by canceling the option to could take a controlling stake in Bank Creek.
The banks still plays a critical role in our European strategy, and while Ciba will still Buckley with bank Frick on mutually agreed ventures.
It will also collaborated with other bank bulk is in the region.
In spite of not controlling bank Frick, we're still able to office fully vertically integrated solution.
Though it may delay time to market and result in lower profit margins.
The near term macro environment, either placed the premium on conserving cash.
Two weeks ago, Ben Creek received official approval from visa and can now onboard payments facilitators, including see vote.
We now one thing to commence with a rollout strategy about products in fitness add in accordance with the current safety restrictions imposed across the continent.
I will now summarized the specific activities that ciba these pursuing.
It is currently in a position to offer or will they be soon be able to offer the following a.
Acquiring services in the E U which is providing small merchants the ability to rapidly begin accepting debit and credit card payments.
D.
Acceptance of open it payment methods or a beams.
Mainly providing small merchants in the EU the ability to exit over 50 alternate payment methods.
Such as early pay we checked base scroll and so forth.
See caught issuing prepaid and virtual cards to you based corporates and merchants D.
Bank account opening through the issuance of instant AI bans and performing direct debits and credits through the Sip assist them in Europe and AC h. in the USA.
And he crypto in block trade products, including a fit to crypto, creating bedroom and vice versa as well as equip the essence storage product.
We will continue to collaborate with bank frick to introduce new payment and blocks and related products.
In Africa, we have seen meaningful business momentum at carbon envied too.
Which supports our strategy to focus on using local talent resources and both the ships to establish a sizable Pan African business.
As for carbon prior to the outbreak of the pandemic and its resulting impact in Nigeria.
That business has continued to airport exponential sequential growth across all the key indicators of its business.
It has reacted quickly to the changing circumstances tightening livni, good criteria and communicating regularly with its customers.
Particularly as Nigeria faces the additional challenge of with low oil prices.
It has successfully raised local funding in recent months and was able to settle all of its U.S. dollar denominated funding prior to the crisis.
Leaving it in a sound financial position.
Carbons vision is to be the first Pan African digital bank with an end to end product state for the Underbanked.
Pretty good carbon had an order to 24 million dollar annual revenue run rate, but lets 70% repeat rate of if they need customers.
Based on revenue carbons run rate is higher than maybe they didn't have challenger banks in the UK such as at them monies stalling bank and Monza.
Carbon is further expanding its suite of services to include virtual cards, crypto currencies and foreign exchange.
Retail credit penetration in Nigeria is still only around 2% and what multimillion adults leaves a long runway for growth.
And finally on the international front, we've had a number of discussions with Mobikwik management team recently, as both India and Africa of facing a number of similarities in dealing with the outbreak.
This is the time when key players with strong financials and relevant products can rapidly expanded business, while many others, all reactionary and focused on survival.
Mobikwik is one shot such company that does not have to compete with high monthly cash burn like most of its peers.
They are a number of out technologies products and know how we're looking at jointly.
They have the potential to positive impact both about businesses in India and across the world.
We have talked about our virtual card and expect Mobikwik to launch the debt before calendar year end due its 15 million qualified customer base, we will discuss offerings as and when they materialize.
Mobikwik itself continues to perform ahead of expectations, primarily due to its successful transition to being a digital financial services provider.
For the quarter ended March 31 2020.
I'll be quick recorded UN audited and realized gross revenue of $74 million up from $38 million for the quarter ended March 31 to the 19th.
He has been contribution margin positive since October 2018, and has been around cash EBITDA breakeven since the month of August 29 team.
I would 19 is expected to have a positive impact on its payments business.
But a nationwide hundred 80 day moratorium on all Doom loan repayments is likely to reduce topline growth into June and September twentytwenty quarters.
However, they still expect to generate healthy top line growth for the full year.
During the March 2020 quota Mobikwik disbursed, approximately 850000, new loads per month.
They also the first introduced a corona virus insurance product, which offers a couple of 700 to $4000.
For a premium as low as $6 to $18.
They sold over 2000, such policies within the first week.
So similar to us with African business, our international portfolio is well positioned to grow for small base once the restrictions ease in the markets in which we operate.
Finally, as I touched on earlier.
We have completed a number of corporate actions over the past six months, including the sales a first case, Nate and D. and I.
Which have positioned us well for the near and long term.
Now that I've outlined the sources of liquidity I.
I would like to focus on capital allocation.
Following the recent disposals, our board has initiated a comprehensive strategic review of the entire company.
In light of the continued uncertainty around the current pandemic the need to ensure that the company maintains a strong balance sheet and pending completion of the strategic review process. The board has decided to delay any share repurchases.
Any return of capital will also be subject to clarification of the company's status under the investment Company Act.
Due to the sale of several large businesses and the decision last month not to take control of Ben Couric pop coupled with a depreciation of the Rand and the shrinking about South African operations base.
We do not currently qualify for P., an exemption from the investment Company Act.
And investment company gasification has numerous and significant implications well the operation of the company and its use of capital. However, we consider ourselves to be an operating company and not that investment company.
Nevertheless, it is important for us to develop a plan to provide us with an exemption that we can confidently rely upon and therefore, we have engaged in the food the strategic review by the board in cooperation with value capital partners to pay such a plan.
Depending on the outcome of the pen we may decide to seek and Exemptive order from the FCC.
We still very much indeed to return some capital to shareholders, but we will need a resolution on the above mentioned items before we can commence any such activities.
Over the last few months, we have announced five new non executive appointments to the board of directors.
Including the appointment of job of abuse as our Jim and they think that when Chris CBIC retires at the end of June.
We believe that each of these directors brings significant and specific skills indicates a business experience to the Nick One board and we look forward to the future contributions.
We also look forward to a productive relationship with value capital partners, who recently became our largest shareholder.
And finally, I would like to express our heartfelt appreciation to Chris Seabrook for scientists leadership and guidance during some very challenging times as direct and chairman over the years and we wish him all the based.
Let me now handed over to elects to go to the financials.
Thank you gentlemen, and good day to everybody.
Given the structural changes in the business over the past 12 months. The comparison of our third quarter results to Q1 in Q2 is more relevant than the year over year comparisons.
Adding to that the effects of kind of at 19.
The thinks it kind of in 19 have direct bearing on their operations and therefore, I will spend more time than normal discussing quarter to date trends for Q4.
The pandemic is global in nature, given the current mix of our operations the most relevant and material impacts from that one our experienced in South Africa, and therefore limited parallel this can be drawn between trends in the U.S. Europe and many other markets and those that we see in South Africa.
Unsurprisingly on near term financial results will depend on the severity of the situation in South Africa. The link the long term catone economic activities.
And finally, the trajectory of the recovery once restrictions begin to be lifted.
Given our businesses largely focused on the Unbanked underbanked, our customer behavior is more dependent on necessities and less so on discretionary spend and habits.
We then if we do not believe that there will be any systemic shift in the behavior of our target markets.
We recognize the accident like social distancing safety et cetera will likely be more pronounced.
Turning to dispose of the last two months, we have a very strong balance sheet a good handle on our costs, having gone through a substantial cost reduction exercise over the past year, and therefore have reasonable visibility on our expected cash burn over the next two quarters.
Despite the fact that we've not made company employees more de salaries with the exception to the management team and directors as discussed by Herman.
And our employees are all productive and you get to execute on our strategy as soon as regulatory and safety conditions permit us to do so.
So that's what goes in level five lump them for March 27 to improve the 30.
This is the most severe form of knockdown with only very limited parts of the economy operating.
The country, then move to level for on maybe the first.
Level for without some increased economic activity, but still maintains most restriction as before.
It has now been announced in South Africa will move to level three from during the first and the operating guidelines for this phase are expected to be released by government over the next few days.
Outside of designated Hot spots. This will see many areas as the economy reopen but there remains significant restrictions on any activity involving social interaction and travel.
At this point it is not definitively clear with micro then operations will be able to resume in earnest and whether the other direct impacts we've seen will fall away.
So Africa is expecting incidents of the virus to continue rising over the coming winter months, which as a reminder, somewhere in the northern hemisphere.
And should the situation deteriorate from the expected path. There is a risk lockdown level would be increased again, particularly in the countries economic hubs.
Moving onto after the quarter 2020 results. Our average rent dollar exchange rate was 15 ran 37 to the dollar compared to 14 rent 17, a year ago and 14 ran 60 in the second quarter.
However, the ran depreciated sharply during March two almost 19 ran to the dollar in reaction to ratings downgrades weak commodity prices and the pandemic.
For partially recovering to its current level around 17 50 to the dollar over the past 10 days I'm sorry.
[noise] third quarter 2020 fundamental loss per share was 11 cents compared to 62 cents fundamental loss per share a year ago.
This compares to the fundamental loss per share in the second quarter of 10 cents.
Hi segment, South African transaction processing reported revenue of $19.9 million in the third quarter, Twentytwenty up 24% compared with the third quarter of 29 team and up 2% from the second quarter 2020 on a constant currency basis and would've been even higher in don't.
For the full gone transaction fees in the last week in March.
The increase in segment revenue was primarily due to an increase in transactions performed through our ATM ATM network and easy pay.
Partially offset by lower fees as a result, a few LP insights accounts in the prior period.
Our revenue for third quarter 2020 was adversely impacted by half a million dollars as result of the cause of 19 Pendleton pandemic as we were unable to charge certain cash withdrawal fees to customers. As a result is a long time during the last few days of March 2020.
We expect the monthly impact or forgone fees to be approximately 20 million rent or $1.1 million at current exchange rates until the current dispensation is ended.
Excluding the impact of the 5.6 million dollar easy pay goodwill impairment loss.
South African transaction processing operating segment revenue and operating loss.
Adversely impacted by the loss of SASSA customers compared to a year ago.
Operating margin for Q3, 2020, and 29 team was negative 44% and negative 75%.
A negative 14.6% Q2 2020.
Our operating loss margin for Q3 2020, excluding the goodwill impairment doesn't make it to 15.5%.
Well, we've made progress in returning the segment profitability, we remain sub scale at this level of accounts and the key focus is on listing revenue.
International transaction processing generated revenue from continuing operations of $1.6 million in the third quarter, 2020, which was down 26% compared to the third quarter 29 team.
But up sequentially on a constant currency basis constant currency basis.
The year over year decrease in revenue in this segment was primarily due to an ongoing contraction in international transaction volumes.
That's having noted the conclusion of bank freaks visa or that will allow us to launch various new services over the next few months.
However, we expect initial sales activity, maybe tempered by the effects of the pandemic in Europe and will be influenced by the extent to reach restrictions ease economic activity returns.
Once new product sales commence we expect to see transaction volumes return to positive trajectory.
Given its largely fixed costs nature, we anticipate losses will start to decline with growing volume and then we are able to reach monthly EBITDA breakeven in early calendar 2021.
Segment operating loss from continuing operations during Q3 2020 increased compared to fiscal 2019.
Due to higher operating losses, reflecting the high fixed cost component to the business.
Our operating loss margin for Q3, 2020, and talking to 19 was negative two 202.6% and negative 84.2% respectively.
As you know we sold our Korean operations in early March and they contributed revenue of $19 million, an EBITDA of $3.5 million for this quarter.
Key features the key features of the disposal were tyco proceeds of $237 million were reduced by the 23.5 million of cash disposed of.
What is the $21.1 million of taxes paid in Korea.
This latter amount includes withholding taxes of approximately $19.9 million on closing the transaction.
And we have commenced the prices to have this amount refund that in the next 12 months.
Estimated U.S. taxes of approximately $15 million, which we expect pay in July 2020.
And we incurred transaction related costs of around $8.6 million and recognized an after tax gain on sale.
<unk> point $7 million.
Financial inclusion and applied technologies segment revenue from continuing operations increased modestly primarily due to higher Antelope terminal sales and insurance revenue.
Lending and prepaid sales were broadly consistent with the third quarter fiscal 2019.
Our operating income margin from continuing operations for the segment was negative 5.3%.
Against a negative 26.1% during third quarter 29 team.
This compares with negative 4% that we expect that we saw in second quarter 2020.
Actually the P. accounts continue to remain fairly steady with a new finbond accounts offsetting some of the natural attrition in account numbers.
Our plans would start ramping up account numbers on the back of the loan product following the release of capital from the disposals, but we've not yet been able to action. This due to the current pandemic locked down.
The key 320 20, we experienced gross loan originations up between 80 to 110 million Rand per month.
We would expect the steady production in our lending revenue as the book Unwinds and if there were no lending activities. During the next two quarters, we would expect to record approximately 70% of the revenue related to the March 2020 book in the fourth quarter fiscal 2020, and 30% in the first quarter for.
Fiscal 2021.
To clarify further without new originations the revenue on the existing book will decline each month, but Conversely cash flow will improve as the book unwind.
In April 2020, the rumors no new loan originations as in store activities and being curtailed.
In the interim or technical team has developed a new mobile based origination product to fulfill demand. During these times, we commenced with the origination of loans through this channel in May.
Month to date. The response for this product has been positive and we believe during the restrictions we can originate about 25% run on a monthly origination volumes through this distribution channel.
It is also important to note that we've not observed any deterioration in the repayment characteristics of our customers.
The duration of the pandemic, thus far and believe we are adequately provisioned.
We expected our lending book and associated revenue will meaningfully increase only once we're able to commence in store lending activities again.
However in the current environment, we are unable to predict the level of origination through the new mobile based product or when we will be able to commence face to face lending and branches again for the expected growth right in the lending book.
We believe that there will be significant them onto these products. Once the operating restrictions are lifted but that the credit criteria will need to be closely monitored.
Similar to lending or insurance business has also been unable to grow as policy base and continues to receive premiums based on its existing level Oh policies.
Given the low level of infections in South Africa to date, there has not been any related increase in claims, but our insurance businesses well capitalized to do with any adverse claims experience should it arise.
For recent press articles and speculation it's clear that so see is making progress on its recapitalization, but this remains an ongoing process.
The progress made in recent weeks is encouraging but until such time as a recapitalizations finalized the impact on cell sees operating viability is assessed.
And we understand the extent of any dilution we will suffer we will continue to assess the fair value of our investment at zero value.
So see you've seen some benefits from an increasing focus on its core operations over the last nine months.
But it needs to complete its recapitalization to create sustainable business.
We recognized income from equity accounted investments.
Point $6 million during the third quarter of Twentytwenty compared to a loss of point $5 million in the same period last year.
Primarily due to the contribution from denied in the current quarter.
However, we recognize three non cash charges to our investments to which may be bank Frick would be two related to market conditions.
Deny it primarily due to changes in foreign exchange rates between December 2019, and March 2020.
On an equal the first 2020, we sold all remaining 27% interest in denied for $48 million of which 43 million was received in cash and the remaining $5 million. We were will be recovered over the next 24 months.
We recorded an impairment loss of $11.5 million related to the difference between the fair value consideration received on April the first 2020, and the carrying value empty annoying, including the $11.3 million included in the accumulated foreign currency translation reserve as of the first.
2020.
In April we pay the termination fee of $17.5 million to cancel the exercise of our option to acquire further 35% of bank Frick.
In the third quarter 2020, we recorded an impairment loss of $18.3 million, which was calculated as the difference between the determined fair value of our interest in bank Frick and are carrying value before the impairment.
In April 2020, we received a cash dividend of approximately $1.3 million.
We remain committed to the bank Frick investment and working closely with them to exploring opportunities.
At March 31, 2020, or cash and cash equivalents were $209.3 million and comprised primarily of U.S. dollar denominated balances of $192 million.
We received the further 760 million Rand.
Cash.
$43 million at current exchange rates related to the portion of DNA sold on April the first.
And settled all remaining outstanding debt of $3 million using the proceeds.
Our cash used in operating activities during the third quarter 2020 was impacted by the cash losses incurred by the majority of our continuing operations.
We were unable to commence origination of loans towards the end of March 2020, due to the kinds of 19 restrictions imposed on our lending activities in March 2020, and this had a positive result on net cash.
During the third quarter 2020, compared to 29 team, where we originated loans and which resulted in a net outflow of cash.
Going forward, we expect our interest income to increase due to the higher cash balances, partially offset by lower interest rates.
We also expect to continue to incur some interest expense related primarily through our ATM funding facilities.
Our third quarter 2020 tax expense was <unk> point $6 million compared to a tax benefit of $3.6 million in the third quarter 29 team.
And our weighted average share count has remained relatively constant at 56.8 million shares.
During the quarter 2020.
Based on the results for third quarter for the third quarter of continuing operations incurred an EBITDA loss of around $6.4 million.
EBITDA is a reasonable proxy for cash in our business and so we are currently incurring cash losses around $2.1 million a month.
The loss of our cash withdrawal fees will increase this cash burn by about $1.1 million month.
In respect to the loan book the monthly reduction in income due to the unwanted the line book will be more than compensated for by the cap to repayments that this will clearly reverse once the nine book starts to grow again.
The duration in severity of the Cobot 19 pandemic is to London, and therefore, we believe it's prudent to withdraw financial outlook for the remainder of fiscal 2020.
While many of US as African processing businesses have recently observed strong transaction volumes, our inability to charge certain essential services. During the locked down period has had an adverse impact on our financial statements.
If we are able to commence the marketing of our new financial and banking products. Prior to the end of fiscal 2020, we believe our adjusted EBITDA will be modestly positive for the full fiscal 2021.
We can now open up the cool for keeping an eye.
Thank you.
Ladies and gentlemen, if anyone would love to ask a question you're welcome to press Star then one when you touched on fine.
Yeah, I wish to restore the question.
Please press star in the two Jeremy this stuff from the question Ken.
Anyone at Luxottica question. Please press Star then one.
Well first question it sounds cutback of B. Riley.
Hey, good morning, guys, Oh, I'm curious if you could tell us when you became aware of the investment Company Act issue and what are the options to remedy that.
Sure.
Hi, Scott.
The company has been aware of the of the based company issue for a while and it's been part of our planning.
Over the last year also.
We had specific plans in place to deal with this issue, but unfortunately, the changing circumstances over the last three months.
Has resulted in the current position that we find ourselves in.
It it is a fairly complicated piece of legislation that when its analyze and we don't have enough time I think on this call to go through all of it.
But from our perspective the key.
Matters that that had an influence on on the current situation, obviously revolves around the bank Frick option, which we did not exercise.
That was clearly part of the plan to remedy the situation.
As well as the significant decline in the South African Rand.
Which had a result effect on the relative valuation of our South African assets. So this is an issue that we that we are aware off and that we.
We plan to deal with.
Still intend to deal with it as as efficiently and as swiftly as we can.
They is a strategic review currently underway to determine the based course of action.
Which is not going to take.
Very long amount of time.
And.
If.
Depending on the outcome of this investigation, we need to ask for an exemption from basis, even that is what we will do.
But we hope to certainly deal with us as expeditiously as possible.
Hi.
What are the ramifications.
Sure declared in the restaurant company and you can't get any kind of.
Yeah.
Forbearance from an idea.
So it's as I said, it's a fairly complicated area of the low.
But.
I think the based a description of the various impact or implications that this may have is actually contained in our Q. So you'll see that there's a risk factor that we've included over there and I'll refer you to that.
For a concise description of what it means.
All right and in terms of timeline to gain clarity I.
I mean are we talking about.
Three months or longer.
Yeah. So obviously Europe. The some of it may not be Italia under our control when the as far as the regulators are concerned but from our perspective, we certainly didn't do to compete everything that we need to do it in the next three months.
Great.
Next question for me in terms of this risk a strategic review feels like we went through this exercise about a year ago and that's what kind of drove the decisions to sell casting that and Tonight. What's different this time and why are we doing that's again.
I think a couple of things obviously, we are they have been quite a few changes recently in terms of the corporate structure.
We have a new.
Number one child in the form of value capital.
That came on board.
The goal so well during the last few weeks and as part of the cooperation agreement that we signed with them.
We agreed to embark on as strategic review of the company.
Also have fab five new non executive directors on the board, we and we believe that it's important and also features aim to embark on on a further review.
Obviously during these times Scott what's the world.
James as it as it has.
And.
Various business activities impacted in different ways.
We think that now is a prudent on to actually just.
It's not a brand new review I would say this is a continuation of a plan that we've been.
Propagating and that we that we started communicating about a year ago.
So.
Those very specific reasons.
We think its opportune for us to two completed now.
Alright, guys I appreciate the answers thanks.
Thank you.
Ladies and gentlemen, just to remind anyone would like to ask a question you're welcome to press Star then one.
No problem and see if at any further question.
No question from Golden of course in capital.
I wouldn't I was going to go down same route to Scott just didn't but he did it and I.
Our dances they got so I don't want do you want to reopen that story about not only have cut cash there can we get some sort of direction, where we're going to go with the cash when we don't get a dividend to where you don't pay a quarterly doing or anything of that nature in other words.
We got some high growth areas in this company.
Whether its India mobile pay doesn't seem to me that what can use our money that can be the best investment for us at this particular point.
Okay.
We.
So obviously this will football bowl of our review that we currently busy with I.
Yeah, just generally speaking about the various uses of capital as I've said during my.
Remarks, it is still our intention to return some capital to shareholders as soon as we are in a position to do sensor. So that hasn't changed. It's you know the form Oh in terms of what it will take is what we currently analyzing.
But you know from our perspective, we still intend to return.
Mountain capital to our shoulders in the in the not too long term.
But.
As far as other uses of cash is concerned.
When we look at at M&A activities et cetera.
We have.
Not.
Identified any and we at this stage study tend to do any large scale M&A activities over the the foreseeable future.
Those that we are considering or may be considering all.
Very specific smaller bolt on.
Kind of deals that will add to our strategic intention and focus.
And the other.
Part of the capital that we've earmarked for the distribution over the next three Mansell. So again as soon as we can start which we think is as early as next week is this is significantly grow that south African load book.
Okay. Thank you.
We have no further questions do you have any closing comments.
No no further comments from outside thank you.
Ladies and gentlemen that concludes this country and thank you for joining last you may now disconnect your lines.