Lesaka(LSAK) - 2025 Q4 - Earnings Call Transcript

Financial Performance and Key Metrics - Lesaka Technologies reported net revenue of ZAR 5.3 billion and EBITDA of ZAR 922 million for FY 2025, with adjusted earnings increasing from ZAR 51 million to ZAR 186 million, resulting in adjusted earnings per share growing from ZAR 0.80 to ZAR 2.29 [3][10] - The company refinanced its debt, leading to an increase in gross debt to ZAR 4 billion, with a net debt to adjusted EBITDA ratio increasing to 2.9 times, although annualizing Q4 adjusted EBITDA results in a leverage ratio of 2.2 times [3][19] - Q4 net revenue was ZAR 1.5 billion, up 47% year on year, with group adjusted EBITDA of ZAR 306 million, reflecting a 61% increase [10][12] Business Line Performance - The Merchant business achieved net revenue of ZAR 3 billion, up 46% year on year, and EBITDA of ZAR 657 million, up 20% year on year, driven partly by acquisitions [5][37] - The Consumer business saw net revenue grow by 35% to ZAR 1.7 billion and EBITDA increase by 83% to ZAR 435 million, reflecting strong performance in lending and insurance [42][51] - The Enterprise business reported a decline in net revenue of 9% to ZAR 651 million and EBITDA dropping from ZAR 55 million to ZAR 24 million due to restructuring and closure of non-core units [6][58] Market Data and Key Metrics - The Merchant division expanded its acquiring footprint to 84,541 points of presence, up from 51,880 a year ago, with throughput for the year reaching ZAR 35.5 billion [31][32] - The Consumer division increased its active consumer base to 166,000 in Q4 and 348,000 for FY 2025, with a 23% increase in total customers to 1.9 million [49][50] - The Enterprise division's net revenue for Q4 was ZAR 190 million, with a focus on alternative digital payments and utilities [57][58] 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 banking capabilities for merchants [60][64] - The company aims to streamline operations by consolidating brands and reducing office locations, enhancing efficiency and market presence [63][64] - The competitive landscape includes banks, retailers, and mobile network operators, with Lesaka differentiating itself through a comprehensive product suite catering to both formal and informal sectors [23][30] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, highlighting the successful execution of both organic and inorganic strategies [3][60] - The focus for FY 2026 includes optimizing the balance sheet, enhancing unit economics, and leveraging the BankZero acquisition to expand product offerings [19][60] - Management acknowledged challenges in the macroeconomic environment but emphasized the resilience and adaptability of the business model [35][38] Other Important Information - The company incurred significant one-off costs related to acquisitions and restructuring, including ZAR 239 million in transaction costs and ZAR 335 million in non-cash goodwill impairments [14][16] - Operating cash flow increased to ZAR 370 million in Q4, reflecting strong cash generation capabilities [17][18] - The company plans to maintain capital expenditures below ZAR 400 million annually, focusing on disciplined investment strategies [21] Q&A Session Summary Question: What are the expectations for the BankZero acquisition? - Management highlighted that BankZero will enhance banking services for merchants and improve operational efficiencies, with a focus on reducing gross debt and expanding product offerings [60][62] Question: How is the integration of acquired businesses progressing? - The integration of Adumo and Recharger is ongoing, with early signs of success in cross-selling and operational efficiencies being realized [25][28] Question: What are the growth prospects for the Consumer division? - The Consumer division is expected to continue its growth trajectory, particularly in lending and insurance, with plans to expand distribution and enhance customer engagement [42][51]