Release Date: February 06, 2025

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

Positive Points

• Lesaka Technologies Inc (NASDAQ:LSAK) exceeded the upper end of their EBITDA guidance, marking ten successive quarters of achieving their EBITDA targets.
• The company reported a 42% year-on-year increase in group net revenue, driven by strong performance in the merchant and consumer divisions.
• The acquisition of Dumo has been successfully integrated, contributing significantly to the merchant division's net revenue and group adjusted EBITDA.
• Lesaka Technologies Inc (NASDAQ:LSAK) has been proactive in optimizing their balance sheet and reducing net debt to group adjusted EBITDA ratio.
• The company is strategically positioned to grow its market share in South Africa, with a focus on expanding its customer base and product offerings.

Negative Points

• Lesaka Technologies Inc (NASDAQ:LSAK) reported a net loss of 584 million rand, primarily due to a significant write-down of their investment in Mobikwik.
• The company's net interest expense increased due to higher borrowing levels, impacting overall profitability.
• There was a 29% retraction in net revenue for the enterprise division as the company focuses on restructuring and eliminating unprofitable contracts.
• The company experienced a significant increase in short-term gearing to fund acquisitions and consumer loan book growth.
• Selling, general, and administration expenses increased significantly due to higher employee-related expenses and stock-based compensation charges.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with LSAK.

Q: Can you provide more details on the impact of the Dumo acquisition on Lesaka's financial performance this quarter? A: Dan, the CFO, explained that the acquisition of Dumo was completed on October 1, 2024, and has been integrated into the group. It significantly contributed to the merchant division's net revenue and group adjusted EBITDA, leading to a large uplift. The acquisition was funded through a combination of cash and shares, and its impact has been incorporated into the FY25 guidance.

Q: How is Lesaka addressing the competitive environment in the South African market? A: The Executive Chairman highlighted that Lesaka differentiates itself by being customer-led rather than product-led, offering a wide range of solutions across various subsegments. The company is targeting more than 10% market share in the medium term, as market share continues to shift from traditional banks to fintechs. Lesaka is also actively involved in regulatory discussions to evolve the environment in South Africa.

Q: What are the key drivers of Lesaka's revenue and EBITDA growth? A: The Executive Chairman noted that the top three products contributing to EBITDA are merchant acquiring, alternative digital payments, and transactional accounts, which together represent over 50% of EBITDA. These products benefit from the digitization of the economy and have some hedge against inflation, contributing to revenue and EBITDA growth.

Q: Could you elaborate on the changes in Lesaka's debt position and plans for debt reduction? A: Dan, the CFO, mentioned that the company has increased short-term gearing due to the Dumo acquisition and related costs. Lesaka is undertaking a comprehensive refinance of all debt facilities to optimize debt and reduce interest charges. Additionally, the company plans to monetize its investment in Mobikwik once the lockup expires, which could significantly reduce net debt.

Q: What is the outlook for Lesaka's consumer division, and how does it plan to expand its market share? A: The Executive Chairman stated that the consumer division is focused on expanding its customer base, particularly as competitors face challenges. Lesaka aims to grow its market share above 10% by cross-selling into its existing base and expanding its product offering beyond the grant and payout market into other underserved niches.

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