Lesaka Technologies, Inc. Q1 FY2026 earnings call

Management Statement and Operational Highlights

• Financial Performance: Net revenue was ZAR 1.53 billion, a 45% increase year-on-year, at the lower end of the range. Group adjusted EBITDA was ZAR 271 million, 61% year-on-year growth, at the midpoint of guidance. Adjusted earnings grew 150% to ZAR 87 million. Net debt to adjusted EBITDA was 2.5x, improving from prior quarters.
• Division Details: Enterprise net revenue reflected new base post-restructuring. Consumer continued record growth with expanding active base and successful lending/insurance products. Merchant benefited from Adumo acquisition, with TPV and cash TPV trends noted, and merchant lending and software business updates.
• Strategic Initiatives: Plan to refresh corporate identity, consolidate offices, progress on Bank Zero acquisition, simplify business structure by selling non-core entities, and focus on core divisions (Consumer, Merchant, Enterprise) with aligned financial measures.

Segment Performance

• Enterprise: Net revenue was ZAR 222 million, representing a 19% year-on-year improvement. Segment adjusted EBITDA was ZAR 22 million, up 241% year-on-year. The division underwent restructuring, closed noncore businesses, and completed the Recharge acquisition.
• Consumer: Net revenue increased 43% year-on-year. Segment-adjusted EBITDA rose 90% to ZAR 150 million. Active consumers ended the quarter at just over 1.9 million, a 24% increase from the previous year. ARPU increased 13% year-on-year, driven by cross-selling of lending and insurance products.
• Merchant: Net revenue was up 43% year-on-year, primarily due to the Adumo acquisition. Segment adjusted EBITDA was ZAR 162 million, a 20% increase from Q1 FY '25. TPV increased, cash TPV trends were noted, merchant lending originated ZAR 201 million (21% y-o-y growth), and software business saw site and ARPU growth.

Guidance

• Reaffirmed FY '26 annual guidance on net revenue, group adjusted EBITDA, net income profitability, and adjusted EPS.
• Q2 FY '26 net revenue guidance: ZAR 1.575 billion to ZAR 1.725 billion (midpoint implies ~20% year-on-year growth).
• Q2 FY '26 group-adjusted EBITDA guidance: ZAR 280 million to ZAR 320 million (midpoint implies ~42% year-on-year growth).

Risks

• No specific risks detailed in the transcript beyond general cautions regarding forward-looking statements as per press release, presentation, and Form 10-Q.

Question and Answer

Q: Sequential revenue decline in Merchant segment?

A: There is seasonality and closure of non-core business lines contributing to the sequential decline.

Q: Margin change in Merchant segment?

A: There were nonrecurring costs within the merchant business, but the guidance for Q2 indicates underlying growth.

Q: Infrastructure rationalization and cross-sell in Merchant?

A: Cost savings expected from infrastructure rationalization, and cross-sell attachment rates will be disclosed from the next quarter.

Q: Cell C potential IPO?

A: Supportive of Cell C's IPO, rationalizing non-core assets to focus on core mission, with a ZAR 50 million underpin for the equity position.

Q: Consumer business runway?

A: Room to grow share from Post Bank, penetrization rates, potential to sell insurance to non-EPE customers, and complementarity with Bank Zero acquisition.

Q: Fintech interest in SA?

A: Endorses Lesaka's strategy, considers fintech interest in SA as endorsing the evolving ecosystem and positive for society.

Q: Q2 EBITDA guidance achievement?

A: Confident in organic growth from strategies in divisions, with run rate EBITDA excluding nonrecurring costs expected to support achievement.