Lesaka Technologies, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Financials: Finished FY 2025 with net revenue ZAR 5.3 billion, EBITDA ZAR 922 million, adjusted earnings ZAR 186 million (up from ZAR 51 million last year). Adjusted earnings per share grew from ZAR 0.80 to ZAR 2.29.
• Debt and Acquisitions: Refinanced debt facilities in March 2025, expanded banking relationships. Completed acquisitions of Adumo (ZAR 1.7 billion), Recharger (ZAR 507 million), and announced acquisition of Bank Zero (ZAR 1.1 billion). Sold MobiKwik for ZAR 290 million.
• Business Units: Merchant business grew with net revenue up 46% but integration ongoing. Consumer business had standout growth. Enterprise business restructured, with Q4 showing improved EBITDA run rate.
• Investor Engagement: Launched Association of South African payment providers, held Investor Day in March 2025.

Segment Performance

• Merchant business: Net revenue was ZAR 3 billion, up 46% year-on-year, with EBITDA of ZAR 657 million, up 20% year-on-year.
• Consumer business: Net revenue grew 35% to ZAR 1.7 billion, and EBITDA increased by 83% to ZAR 435 million.
• Enterprise business: Net revenue declined 9% to ZAR 651 million, and EBITDA declined from ZAR 55 million to ZAR 24 million.

Guidance

• Reaffirmed net revenue, group adjusted EBITDA, and positive net income guidance for FY 2026.
• Adjusted earnings per share guidance provided, with FY 2026 expected to have adjusted earnings per share more than ZAR 4.60.
• Anticipates Bank Zero acquisition to close before end of 2026 financial year, with potential to reduce cost of funding and gross debt levels.

Risks

• Macroeconomic: Potential impact of broader macroeconomic conditions on business performance.
• Regulatory: Uncertainties around regulatory approvals for acquisitions like Bank Zero.
• Accounting: Noncash items such as goodwill impairments, intangible asset amortization, and transaction costs which are nonrecurring but impact financials.

Question and Answer

• Q: Rank near-term growth opportunities for Consumer division? A: Lincoln Mali mentioned account growth from Post Bank migration, lending product growth, and insurance growth beyond EPE, with future opportunities from Bank Zero transaction.
• Q: Near-term growth expectations for Enterprise division? A: Naeem Kola stated Enterprise division had a transition year, with Q4 run rate of group adjusted EBITDA around ZAR 30 million, aiming to contribute north of 10% to FY 2026 guidance.
• Q: Goodwill impairments detail? A: Daniel Smith explained goodwill impairments relate to individual cash-generating units (CGUs) acquired, with some CGUs requiring impairment due to reassessment of cash flows, a noncash accounting charge.
• Q: Regulatory developments impact? A: Lincoln Mali discussed engagement with Reserve Bank on draft bank act exemption, waiting for final proposal, and other regulatory engagements on sector governance and interchange.