• Revenue: 2.6 billion Rand, 3% increase year on year.
• Net Revenue: 1.056 billion Rand, 16% organic growth from Q1 2024.
• EBITDA: 168 million Rand, meeting the midpoint of guidance.
• Operating Income: 30 million Rand, up from 4 million in Q1 2024.
• Fundamental Earnings: 43 million Rand, improved from a loss of 5 million Rand in Q1 2024.
• Consumer Revenue: 378 million Rand, 30% increase year on year.
• Consumer Segment Adjusted EBITDA: 79 million Rand, 99% increase year on year.
• Merchant Adjusted EBITDA: 142 million Rand, 1% decrease year on year.
• Loan Book: 273 million Rand, 8% increase in disbursements over the previous quarter.
• Insurance Policies: 466,000 active policies, 30% increase year on year.
• Cash Generated from Operations: 196 million Rand, slightly lower than the previous quarter.
• Net Debt to Group Adjusted EBITDA Ratio: 2.6 times, compared to 3.8 times a year ago.
• Guidance for FY25 Revenue: 10 billion to 11 billion Rand.
• Guidance for FY25 Group Adjusted EBITDA: 900 million to 1 billion Rand.

• Warning! GuruFocus has detected 8 Warning Signs with LSAK.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Lesaka Technologies Inc (NASDAQ:LSAK) achieved the midpoint of its guidance for both revenue and EBITDA, with revenue reaching 2.6 billion Rand and EBITDA at 168 million Rand.
• The company reported a significant improvement in fundamental earnings, moving from a loss of 5 million Rand in Q1 2024 to a profit of 43 million Rand in Q1 2025.
• Net revenue for Q1 2025 was 1.056 billion Rand, representing an organic growth of 16% from Q1 2024.
• The consumer segment showed strong performance with a 30% year-on-year revenue increase to 378 million Rand and a 99% increase in segment adjusted EBITDA.
• Lesaka Technologies Inc (NASDAQ:LSAK) is well-positioned to benefit from the digitization of economies in Africa, with a focus on providing integrated multiproduct offerings to both consumers and businesses.

Negative Points

• Currency fluctuations between the US dollar and the South African Rand significantly affect the company's results.
• The merchant division experienced a slower organic growth rate compared to previous expectations, with a 9% year-on-year growth in net revenue.
• Increased competition in the South African merchant market has impacted the company's performance, with banks and other fintechs becoming more active.
• Group costs increased to 53 million Rand for the quarter due to new hires and incremental operational costs, impacting overall profitability.
• The company experienced a significant working capital outflow related to the payment of annual staff bonuses and the timing of payables settlements.

Q & A Highlights

Q: Can you unpack what you mean by the huge pool of profits in the payment space currently sitting with the banks and waiting for disruption? How quickly will this materialize for fintech in South Africa? A: Ali Mazanderani, Executive Chairman, explained that the biggest competitor is inefficiency. The banking space holds a large profit pool, particularly in merchant acquiring and ancillary services, with a total processed volume of about $100 billion by the big five South African banks. The net margin is around 100 basis points, representing about a billion dollars annually. He expects fintech disruptors to capture a significant market share, similar to trends seen in the UK, Europe, and Brazil over the last decade.

Q: In the merchant division, organic growth is slower than expected. How should we be thinking about the merchant business growth rates on an organic basis for full year 2025, excluding a Dumo? A: Ali Mazanderani noted that the company achieved the midpoint of its guidance for nine consecutive quarters. The guidance indicates a 30% year-on-year organic growth on a like-for-like basis. Steven Heilbron added that the merchant division expects 23% growth at the midpoint for FY25, aligning with historical performance, and emphasized the focus on disruption and bundled product offerings.

Q: The consumer segment had an excellent performance. What new products are in the pipeline, and what are the findings from your research behind considering increasing loan size and term? A: Lincoln C. Mali, CEO Southern Africa, stated that research showed clients demanded more credit than the current 2000 rand/6-month limit. The company plans to offer a product with a 4000 rand limit and a nine-month term. Additionally, the acquisition of a Dumo provides an opportunity to offer new products to a non-grant beneficiary consumer base.

Q: Can you provide an example of leveraging larger corporate customer relationships in the enterprise business? A: Dan Smith, Group CFO, explained that the enterprise division aims to build solutions for internal and external clients. Practical examples include expanding bill payment services to third parties and corporate customers, and offering tokenization services for security purposes to Telcos and municipalities.

Q: Please unpack the increase in group costs and explain the large working capital outflow. A: Dan Smith detailed that group costs increased due to new hires and scaling the platform, with expenses related to compliance, legal fees, and audit costs. The large working capital outflow was primarily due to the payment of annual staff bonuses and the timing difference in settling payables for VAS and bill payment services.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.