Lesaka(LSAK) - 2025 Q4 - Earnings Call Transcript

Financial Performance - 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 [4][12] - For Q4 2025, net revenue was R1.5 billion, up 47% year on year, and group adjusted EBITDA was R306 million, reflecting a 61% increase [11][12] - The net debt to adjusted EBITDA ratio increased from 2.5 times to 2.9 times at year-end, but annualizing Q4 results suggests a leverage ratio of 2.2 times, approaching the target of less than 2 times [12][20] Business Line Performance - The Merchant division 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 [6][38] - The Consumer division saw net revenue grow by 35% to R1.7 billion and EBITDA increase by 83% to R435 million, reflecting strong performance in cross-selling initiatives [7][52] - The Enterprise division reported a decline in net revenue of 9% to R651 million and EBITDA decreased from R55 million to R24 million due to restructuring and closure of non-core business units [7][59] Market Performance - The Merchant division expanded its acquiring footprint to 84,541 points of presence, up from 51,880 a year ago, indicating a 16% annualized growth [32] - The Consumer division increased its active consumer base to 348,000, a 23% increase year on year, with a significant share of new customers coming from Postbank migrations [46][50] - The Enterprise division's net revenue for Q4 was R190 million, with a focus on expanding distribution channels and integrating acquired businesses [58][59] 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 [41][61] - The company aims to consolidate its brand identity and streamline operations to improve efficiency and reduce costs, with plans to reduce the number of offices and unify its branding [64][65] - The competitive landscape includes banks, retailers, and mobile network operators vying for merchant engagement, with Lesaka differentiating itself through a comprehensive product suite [24][41] 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 growth strategies [9][61] - The focus for FY 2026 includes optimizing the balance sheet, enhancing unit economics, and driving sustainable growth across all business divisions [20][22] - The management team emphasized the importance of cross-selling and bundling services to improve customer engagement and drive revenue growth [30][31] Other Important Information - The company incurred significant non-recurring costs related to acquisitions and restructuring, including ZAR 239 million in transaction costs and ZAR 335 million in non-cash goodwill impairments [15][17] - Operating cash flow increased to R370 million in Q4, reflecting strong cash generation capabilities despite fluctuations in working capital [18][19] - Capital expenditures for the quarter were R103 million, with expectations to maintain disciplined investment below R400 million annually [21][22] Q&A Session Summary Question: What are the expectations for the BankZero acquisition? - Management highlighted that BankZero will enhance Lesaka's banking capabilities, allowing for tailored banking solutions for small-to-medium merchants and improving overall service offerings [41][61] Question: How does the company plan to address the integration of acquired businesses? - The focus will be on streamlining operations, reducing duplication, and enhancing cross-sell opportunities across the integrated platform [27][29] Question: What are the growth prospects for the Consumer division? - The Consumer division is expected to continue its growth trajectory, leveraging increased market share and expanding product offerings beyond the grant beneficiary segment [46][52]