Lesaka(LSAK) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported revenue of ZAR 2.5 billion, net revenue of ZAR 1.36 billion, and group adjusted EBITDA of ZAR 237 million, achieving guidance across all metrics for the quarter [9][10] - Fundamental earnings grew 98% year on year to ZAR 58 million, translating to ZAR 0.72 per share, an increase of 60% [11][12] - Net revenue increased 42% year on year, primarily driven by the inclusion of Adumo and a 32% increase in the consumer segment [11][12] Business Line Data and Key Metrics Changes - The Consumer division had record transactional account enrollments, lending, and insurance originations, contributing to a 32% revenue growth year on year to ZAR 446 million [38] - The Merchant division's net revenue was up 58% to CAD 782 million, with segment adjusted EBITDA increasing 7% to CAD 150 million [28][29] - The Enterprise division reported an EBITDA of ZAR 2 million, down from ZAR 14 million last year, due to restructuring costs and exiting certain hardware businesses [41][66] Market Data and Key Metrics Changes - The company serves 1.9 million consumers monthly, with a market share of 13% among permanent SASSA grant recipients [32] - The merchant acquiring offering now has over 81,000 points of presence, with throughput on devices growing to CAD 9.9 billion for the quarter [22] - The prepaid solutions throughput increased 4% year on year to ZAR 5.3 billion, while supplier enabled payments grew 57% year on year [25][26] Company Strategy and Development Direction - The company is focused on building a multiproduct fintech platform and has made acquisitions like Recharger to enhance its offerings [6][8] - The strategy includes optimizing capital allocation towards high-growth areas while downscaling less attractive market opportunities [7] - The company aims to achieve a net debt to group adjusted EBITDA ratio of 2x in the medium term, indicating a focus on financial stability [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued momentum of the Consumer division and expects strong growth in FY 2026 [51] - The company anticipates a revenue guidance of ZAR 10 billion to ZAR 11 billion for FY 2025, with a net revenue increase of 42% year on year [49] - The Enterprise division is expected to become a material contributor to EBITDA, with significant investments being made in technology and new products [42][66] Other Important Information - The company launched an employee share ownership plan, aligning employee interests with company success [9] - The acquisition of MobiKwik resulted in a net loss of ZAR 311 million, impacting overall financial results for the quarter [8] - The company completed a debt refinance, reducing the weighted average cost of debt from approximately 12% to 10.7% per annum [16] Q&A Session Summary Question: Comment on your market share gains in this business. Has this continued into April and May? - Management noted a significant increase in customer base and market share, with record sales in recent months indicating continued growth [57] Question: How deep could the endpoint for penetration end up? - Management believes there is potential to grow insurance product penetration into the 40s and expand beyond the current customer base [59] Question: Can you give insight on why card acquiring and ADP appear to be growing slower than the market? - Management clarified that net revenue is growing at market rates and expects to restore growth in the prepaid space back to mid-teen levels [61][64] Question: What has caused the deterioration of the Enterprise division's contribution to revenue and EBITDA? - The Enterprise division faced challenges due to the closure of legacy businesses but is expected to contribute positively in FY 2026 [66] Question: How do you think about capital allocation in the context of cash vaults? - Management emphasized that cash vaults are part of a holistic offering to merchants, facilitating a transition to more profitable services [68][71] Question: How should we think about margin evolution within your group per division? - Management expects the Consumer division's margin to exceed 30% over time, with similar expectations for the Merchant division [72][74]