Lesaka Technologies, Inc. Q2 FY2026 earnings call

• Received Competition Tribunal approval for the combination with Bank Zero and commenced consolidating operating brands under One Lesaka. - In June, will consolidate multiple Gauteng offices into a single location in Johannesburg, with progress on consolidating Cape Town and Durban offices. - Lesaka employs ~3,750 people, with close to half focused on sales and marketing, 23% on servicing and operations, and ~20% in technical roles. - Exited Cell C stake and concluded legacy CPS contract, contributing positively to Q2 results. - Group adjusted EBITDA grew 47% year-on-year, adjusted earnings per share increased more than sixfold.

Merchant division: Net revenue pulled back 2% year-on-year; segment adjusted EBITDA was ZAR 170 million, a 6% decrease from last year. Consumer division: Net revenue rose 38% year-on-year to ZAR 567 million; segment adjusted EBITDA more than doubled to ZAR 159 million. Enterprise division: Net revenue was ZAR 217 million, a 67% year-on-year improvement; segment adjusted EBITDA was ZAR 24 million. Group adjusted EBITDA grew 47% year-on-year to ZAR 304 million.

• Third quarter net revenue guidance: ZAR 1.65 billion to ZAR 1.8 billion. - Third quarter group adjusted EBITDA guidance: ZAR 300 million to ZAR 340 million. - Full year net revenue range: ZAR 6.4 billion to ZAR 6.9 billion; group adjusted EBITDA range: ZAR 1.25 billion to ZAR 1.45 billion.

Q: I have a question about the Consumer segment. In the 10-Q, you cited an increase in transaction fees, insurance premiums and lending revenue for the year-over-year growth. Is the increase in transaction fees an annual event? And on the insurance and lending, I want to understand the growth there. Is this an underserved market or do you have to take share from competitors?

A: Lincoln Mali responded that transaction fees are reviewed annually, taking market share from competitors like PostBank; loans and insurance target underserved market as many formal institutions don't serve these customers.

Q: On Merchant, the decline in ARPU, if you could just -- I think Lincoln mentioned a few of the drivers. Just in terms of the run rate going forward, how much of the impact is still going to come through there? Like how do you see ARPU trending, I guess, over the next 6 to 12 months? Then, in terms of the cross-sell in Merchant and the decline over the last year in product penetration. Just wondering, is that a timing issue? When do you expect that to start moving the other direction? And then thirdly, on Merchant, just the acquiring cross-sell, which pretty show the impact on ARPU. Just wondering, is that sort of a key opportunity in the short term? And I wonder if you would comment on where you see that penetration going across the different parts of the business?

A: Ali Zaynalabidin Mazanderani responded that ARPU is expected to stabilize and increase over 12 months, cross-sell penetration rate has increased, acquiring is a key cross-sell opportunity in community and corporate segments.

Q: On Consumer, the lending growth or originations is obviously picking up quite a bit. If you could just maybe talk to some of the drivers behind that. And then again, if we think about the outlook over the next year, is that a lever that you expect to continue or an opportunity that you expect to continue to execute on? Like what sort of growth rates and originations should we think of going forward?

A: Lincoln Mali responded that increased loan size to ZAR 4,000 and tenure to 9 months, investment in USSD digital channel, 8% of new loans from USSD, 78% originations to repeat borrowers, expecting continued growth.

Q: What is the rand amount of deposits estimated to be transferred to Bank Zero in terms of current Lesaka customers once the merger is complete?

A: Ali Zaynalabidin Mazanderani responded that they expect to reduce gross debt by north of ZAR 1 billion, deposit base to be substantively more but no specific number provided.