Lesaka(LSAK) - 2025 Q4 - Earnings Call Transcript

Financial Performance and Key Metrics Changes - Lesaka Technologies reported net revenue of R5.3 billion and EBITDA of R922 million for FY 2025, with adjusted earnings increasing from R51 million to R186 million, resulting in adjusted earnings per share growing from R0.80 to R2.29 [3][4] - The company refinanced its debt, leading to an increase in gross debt to R4 billion, with a net debt to adjusted EBITDA ratio increasing to 2.9 times at year-end [3][19] - Q4 net revenue was R1.5 billion, up 47% year on year, with group adjusted EBITDA of R306 million, reflecting a 61% increase [10][12] Business Line Performance Changes - The Merchant business achieved net revenue of R3 billion, up 46% year on year, and EBITDA of R657 million, up 20% year on year, driven partly by acquisitions [5][38] - The Consumer business saw net revenue grow by 35% to R1.7 billion and EBITDA increase by 83% to R435 million [5][50] - The Enterprise business reported a decline in net revenue by 9% to R651 million and EBITDA dropping from R55 million to R24 million due to restructuring and closure of non-core units [5][56] Market Performance Changes - The Merchant division expanded its acquiring footprint to 84,541 points of presence, up from 51,880 a year ago, indicating a significant growth trajectory [31] - The Consumer division increased its market share from 9.1% to 13.6%, largely at the expense of Postbank, with a 23% increase in permanent grant beneficiaries [45][49] - The Enterprise division's revenue model is evolving, with a focus on alternative digital payments and utility services, although it remains a minor contributor to overall EBITDA [56] Company Strategy and Industry Competition - Lesaka is focused on building an integrated fintech platform through strategic acquisitions, including the recent acquisition of BankZero, which will enhance its product offerings and reduce dependency on third-party banking services [58][60] - The company aims to streamline operations by consolidating brands and reducing office locations, enhancing operational efficiency and market presence [62] - The competitive landscape includes banks, retailers, and mobile network operators, but Lesaka differentiates itself with a comprehensive product suite catering to both formal and informal merchant sectors [23] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, highlighting the successful integration of acquisitions and the potential for organic growth in the Merchant and Consumer divisions [8][20] - The focus for FY 2026 includes optimizing the balance sheet, enhancing unit economics, and driving sustainable growth through disciplined capital expenditure [19][20] - Management acknowledged challenges in the Enterprise division but emphasized a strategic pivot towards core offerings and channel expansion [51] Other Important Information - The company recorded ZAR 239 million in transaction costs related to acquisitions, alongside non-cash charges for goodwill impairments and accelerated amortization [13][15] - Operating cash flow increased to R370 million in Q4, reflecting strong cash generation capabilities [17] - The company plans to maintain annual capital expenditure below R400 million while continuing to invest in technology and product development [20] Q&A Session Summary Question: What are the expectations for the BankZero acquisition? - Management highlighted that BankZero will enhance Lesaka's capabilities, allowing for the offering of banking services to its merchant base and improving cost structures [58][60] Question: How is the integration of acquisitions progressing? - The integration of Adumo and Recharger is ongoing, with early signs of success in cross-selling and operational efficiencies being realized [26][38] Question: What are the growth prospects for the Consumer division? - The Consumer division is expected to sustain momentum, with a focus on expanding market share and enhancing service offerings to grant beneficiaries [45][49]