Hello, everyone, and welcome to the Lesaka Technologies webcast and conference call for the second quarter of fiscal 2025. As a reminder, the webcast is being recorded and the presentation can be accessed through the webcast link as well as dialing into the Zoom conference call, dial-in numbers provided. Management will address any questions you may have at the end of the presentation. For those joining us via the webcast, you can ask your question by typing into the Q&A function. The webcast link, Zoom conference call, dial-in numbers, as well as our press release and supplementary investor presentation are available on our Investor Relations website at ir.lesakatech.com. Additionally, Lesaka Technologies, Inc. filed its Form 10-Q after the US market closed yesterday. This is also available on our investor relations website. During this call, we will be making forward-looking statements and I ask you to look at the cautionary language contained in our Form 10-Q regarding the risks and uncertainties associated with forward-looking statements. As a domestic filer in the United States, we report results in US dollars under US GAAP. However, it is important to note that our operational currency is South African Rand, and as such, we analyze our performance in South African Rand. In this presentation, we will discuss our results in South African Rand, which is non-GAAP. This helps investors understand the underlying trends in our business. As you know, the company's results can be significantly affected by the currency fluctuations between the US dollar and the South African Rand. I will now turn the call over to Ali Mazanderani.

Good morning, good afternoon, and welcome. It's been a year since I assumed the role of Executive Chairman at Lesaka Technologies, Inc. And so I thought it appropriate this quarter to slightly amend the way we presented our quarterlies. Accordingly, I will start by representing the opportunity as we see it, and highlight key events of the quarter. Dan Smith will then present on the group's financial performance. Steven Heilbron will represent the merchant division, Lincoln Mali the consumer division, and Naeem Kola, the enterprise division. Which we are separating out for the first time as a third pillar to our business. I will then conclude with the outlook for FY2025, and also guidance for FY2026. We have framed the opportunity for Lesaka Technologies, Inc. and our strategic positioning before, but I am conscious that we haven't presented the size of our serviceable addressable market in dollar terms. Given an indication of our perception of market share, and the competitive environment. We will start by doing so for South Africa. Today, we believe our existing products in our three divisions operating in South Africa represent an addressable market net revenue pool of more than $4 billion. We believe the underlying market that we are addressing is growing by 10% to 15% and that through organic and inorganic product and geographical expansion, the addressable market will grow to more than $12 billion in five years' time. Comparable business models to ours at maturity routinely achieve EBITDA margins of north of 30%, and high free cash flow generation from that. We expect our experience will be no different. We believe we will grow revenue faster than the market as we increase market share and we believe our EBITDA growth will be faster than the revenue growth as we experience operational leverage. It's…

Thank you, Ali. Good day, everyone. Before I start, as a reminder, Lesaka Technologies, Inc. is a domestic filer in the United States. We report results in US dollars, and the US GAAP. However, our operational currency is South African Rand, and as such, we analyze our performance in South African Rand. Q2 has been a quarter of continued strong and consistent performance representing robust growth compared to the prior year and delivering on what we committed in terms of group adjusted EBITDA, revenue, and net revenue guidance, as well as a focus on balance sheet optimization and continued M&A activity. We exceeded the upper end of our guidance at an EBITDA level delivering ten successive quarters of achieving our EBITDA guidance. We have also grown our fundamental earnings and fundamental earnings per share, which we believe is the most appropriate measure of our performance. We have reduced our net debt to group adjusted EBITDA ratio. We achieved a number of key milestones in the quarter as we grow and shape our business. These have, however, impacted the comparability of our results, our balance sheet makeup, and net debt position when compared to the prior year. Firstly, we welcome Adumo into the Lesaka Technologies, Inc. Group with the completion of the acquisition on October 1, 2024. To remind you, we paid an effective purchase consideration of 1.67 billion Rand comprising a combination of cash and the issuance of 17.2 million shares. Adumo has also given rise to a large increase in the goodwill and intangible assets we carry on our balance sheet. Intangible assets are amortized being a charge to our income statement, and you will see a large increase in this charge in our results going forward. Note that this is a non-cash item. Adumo has now been integrated…

Thank you, Dan. Good afternoon, everyone. Today, I will be taking you through the strategy, operational KPIs, and performance of our merchant division, which comprises the solutions we have for micro merchants operating in informal markets plus small and medium merchants in the formal markets. Naeem Kola will talk you through the enterprise division in more detail than we have previously done, which has a different solution set targeting enterprise-level businesses. Ali Mazanderani has taken you through the sizable opportunity that is presented by the secular trends of cash to digital migration, growth of informal markets through financial inclusion, and the changing regulatory landscape supporting fintech disruption and market share growth. We are building a platform to take advantage of this opportunity and have made material progress over the past twelve months with three acquisitions bringing scale and new technologies to Lesaka Technologies, Inc. In the merchant division, we believe we are well-positioned with a comprehensive offering to micro, small, and medium merchants. Our solution set has expanded and now covers merchant acquiring across both formal merchants and micro merchants, software and data solutions, alternative digital payments including prepaid solutions and supplier-enabled payments, cash management solutions, including vaults and ATMs, and lending. The solution set and added scale put us in a favorable position to offer value to our merchants by solving for their pain points. These pain points include limited access to digital payments and growth capital, poor cash management solutions, and having to use multiple and disparate service providers. We estimate the share of the addressable market will increase for fintechs, in line with trends witnessed in international and other African markets. We have invested significantly over the past two and a half years, and will continue to invest, innovate, and build our fintech platform to deliver on…

Thank you, Steven. Quarter two is traditionally our busiest quarter with festive season and holiday spend spiking which benefits our transactional volumes as well as loan originations, as our consumers plan for holidays, travel home, attend cultural events, and plan to spend for the New Year's back to school. This has translated to another successful set of results for the consumer business. The Adumo Payouts team joined on the first of October 2024, and the results are included for the full quarter. We have started exploring potential opportunities and synergies which we will develop over time. These will include delivering a digital offering where these customers can have access to their accounts but can also buy other products like prepaid solutions, loans, and insurance. There are approximately twelve million permanent grant recipients in South Africa, which is our core target market for our EasyPay Everywhere platform. Based on our active account numbers, our share is 12%. But at a revenue level, we estimate that our share to be approximately 6.5%, leaving significant room for growth in the current beneficiary market. Our EasyPay offering is especially focused on the needs of South Africa's grant beneficiaries. And we believe we can add significant value to their lives through our tailored products, distribution, and service capabilities when legacy providers are not ideally equipped to do the same. Some examples of the pain points for grant beneficiaries include lower smartphone penetration, and expensive data preventing easy use of digital channels, expensive and opaque pricing structures, limited access to financial services, and long wait at traditional branch networks. We have invested heavily in understanding these pain points of our clients, and are continuously designing and adjusting our products and distribution to align with their needs. We continue to see an encouraging increase in account activation…

Thank you, Lincoln. FY2025 is a build and restructuring year for the enterprise business as we lay solid foundations on which to grow this division and realize its potential, in addition to exiting unprofitable business activities. We have a well-established business which we are investing in and upgrading our technology. We have new products which we have recently launched. The acquisition of the Recharger business is expected to close in early March 2025, and soon thereafter, we will commence integrating the business into the group. Within the enterprise division, we expect Recharger to contribute approximately forty million Rand for our FY2025 group adjusted EBITDA for four months of consolidation. We're developing our enterprise division as a material group adjusted EBITDA contributor in the coming years, which is why we are investing behind it and separating it as a standalone division. Recharger is a South African prepaid electricity submetering and payments business with a base of over four hundred and sixty thousand registered prepaid electricity meters. We're excited by this opportunity as it expands our enterprise offerings and enables us to drive a significant strategy in electricity voucher vending through our platforms. As mentioned earlier, FY2025 is very much a build year for enterprise with a significant amount of uncapped development expenditure impacting EBITDA this quarter as well as a cost overhang from the termination of unprofitable contracts as we eliminate associated overheads. The result this quarter was a loss of half a million Rand down from seventeen million profit last year. I would like to give you a quick overview of our products and solutions. EasyPay is a payment aggregator enabling B2B connections. The EasyPay platform is embedded in major retail businesses across South Africa, as well as smaller retailers. EasyPay was a pioneer in bill payment services and prepaid…

Thanks, Naeem. Moving to Outlook. We are reaffirming our revenue guidance of ten billion Rand to eleven billion Rand, net revenue guidance of five point two billion Rand to five point six billion Rand, and group adjusted EBITDA guidance of nine hundred million Rand to a billion Rand. For the quarter ending March 31, 2025, we expect revenue of between two point four billion Rand and two point six billion Rand, net revenue of between one point three billion Rand and one point five billion Rand, and group adjusted EBITDA of two hundred and thirty million Rand to two hundred and sixty million Rand. We are also pleased to be able to provide, for the first time, group adjusted EBITDA guidance for the year ending June 30, 2026. The guidance range we are providing is ZAR1.25 billion to one point four five billion Rand. This includes Recharger, but excludes any unannounced acquisitions. We also expect to deliver not only positive fundamental earnings per share but also positive profit after tax in FY2026. We will give revenue guidance and further details in due course. Stepping back, it is pleasing to see the evolution of the group adjusted EBITDA over time. From midpoint to midpoint of the range, we are giving guidance of 42% year-on-year growth in group adjusted EBITDA from this year to next. The FY2026 EBITDA guidance implies a one point seven billion Rand swing in profitability over four years and a 45% year-on-year CAGR over the last three years. It's a decent start on our mission, but it really is just a start. We don't expect our growth trajectory to slow, and we expect our best years to be ahead of us. We have outlined at a high level the enormity of the opportunity before us, but I am conscious that given the evolution of the platform, the time is now right for Lesaka Technologies, Inc. to host a Capital Markets Day to unpack our opportunity in more detail. Accordingly, we will shortly schedule a Capital Markets Day next month open to the investment community. This will provide us the opportunity to communicate our underlying drivers as touched on earlier, in more detail, as well as our competitive positioning and provide greater clarity on what we are building. Over the coming years, we expect to be the reference fintech success story on a continent of one and a half billion people. We are looking forward to showing you why. Thank you. We will now take your questions on our Q2 results.

With the Lesaka Technologies, Inc. management team. Please remember that if you have any questions, you can enter them into the chat function and we will address them at this forum. So, Ali, first question coming through from Frank Geng at Briarwood Capital. And he says last quarter, FY2025 guidance did not include any unannounced M&A. Now your reaffirmed FY2025 guidance includes Recharger. Can you please talk us through this?

The FY2025 EBITDA guidance range is around having a slight technical issue. We are live with the Lesaka Technologies, Inc. management team at the Q&A for the second quarter of FY2025. We are just taking a short break on technicals as we understand what the situation is. Ladies and gentlemen, as we are in a live broadcast, always anticipate that technicals can get the better of us, and there are always gremlins in the system. So we'll just take a second before we can resume, and we are live. We are live with the executive management team at Lesaka Technologies, Inc. As I said, some gremlins in the system as we go into that live broadcast, but I'm going to start with the first question to Lincoln Mali, and Lincoln on the consumer side. We have a question from Ross Critter at Investec Securities. And he is saying in the consumer growth specifically, we've seen very buoyant performance. Is this sustainable, sir?

Thanks, Ross. I think it is sustainable. Our first immediate opportunity is to continue to grow our customer base. As we indicated earlier, we are only at 12% market share in that base, so there's an opportunity to take on more customers from our competitors. And from all indications, we are taking more customers than our competitors from those competitors that are struggling. So we are going to grow our customer base. Secondly, we need to cross-sell into that base. We are only penetrated 43% with our loans. We think we can do more in that base, and we can also penetrate more from an insurance point of view where we're only penetrated 35%. So both growing our customers and cross-sell will give us room to grow. But also, we've mentioned something both Ali and I have touched base on the fact that we can start to think about growing beyond just a grant base. And I think the Adumo Payouts two hundred thousand accounts give us that opportunity to start to step away from the grant base and do more beyond the grant base. And thirdly, as Ali pointed out earlier, we will look at other pockets of underserved customers. So in a nutshell, we still see huge growth opportunities in this consumer business, both with our existing customer base and other customer bases that we look at in the future.

Dan Smith, Theo O'Neill at Litchfield's Hills Research is asking, can you please elaborate further on the group's debt position, the outlook, and refinancing as you referred to earlier? And additionally, could you also provide some color on cash outflows in the quarter?

Thanks, Ronald. So our gross debt was... This really comprises a mix of short-term and long-term facilities. Remind everyone the debt arose partially in the acquisition of the Connect Group, partially on the acquisition of Adumo. There is quite detailed disclosure in our 10-K. You're gonna stand down there.

Always laugh at. Okay. We are live, and this is third time lucky. And I've been in many broadcast studios, and I can assure you that live television does have these gremlins that come to the fore. So welcome again to the Lesaka Technologies, Inc. Executive Management live Q&A. I'm Bronwyn Nielsen, and I'm hosting this session this morning. Got a number of questions coming through from the audience. I'm gonna remind you please, if you have any questions, put them into the chat function, and we will address them in this session. Ali, I'm gonna come to you with that question from Frank Geng at Briarwood Capital. He says last quarter, FY2025 guidance did not include any unannounced M&A. Now you're reaffirmed FY2025 guidance includes Recharger. Can you please talk us through this? Thanks, Bronwyn, and thanks, Frank, for the question.

So as Naeem says, our expectation is that Recharger would be contributing about forty million Rand to our EBITDA in FY2025. Our guidance just to remind you, is nine hundred to a billion Rand. And, the guidance we would be providing would be exactly the same and our reaffirming would be exactly the same irrespective of whether Recharger was included or not included. So you can drive your inference from that.

We're staying with Outlook, and I'm staying with you, Ali. In terms of PonteMat Capital coming through, congrats on the impressive results and even more impressive FY2026 EBITDA guidance. Can you discuss the drivers for the strong growth?

Thanks again for the question. So at the midpoint of our range, we have an FY2025 EBITDA of nine hundred and fifty million Rand. In FY2026, it's one billion three hundred and fifty million Rand. That's a 42% year-on-year increase. The contribution excluding Adumo and Recharger from that is roughly speaking a 25% year-on-year growth. Obviously, we are expecting to include Recharger for about four months of this financial year, and we expect to have included Adumo for nine months. And there's about a hundred and fifty million Rand attributable to the difference between their expected contribution then in FY2025 and FY2026. I would like to say that I think that this exclusion in this distinction is gonna become increasingly artificial because the business is, as Dan said, integrating into the collective. We're not running a collection of separate fintech companies. We're running an integrated whole and there's obviously synergies also associated with that. However, for the sake of the question, it's a 25% year-on-year organic growth expectation implied by our guidance. In terms of what is actually driving that growth in our guidance, as we articulated, we expect to be growing faster than the market. So there's a certain market growth there. And really the products that we're expecting to grow faster than the market in the merchant division is the acquiring product. There we've got some cyclical drivers through the digitization of the society and also the software product where we have a strong leadership position. But the growth is also expected to come meaningfully from the consumer division. And a continuation as Lincoln has alluded to. There, it's really quite balanced from a product perspective between transactional accounts and lending and insurance.

Just to remind you that we are with the Lesaka Technologies, Inc. executive team. This is a live Q&A. And, Dan, I've got a question coming through here from Theo O'Neill, and he's from Litchfield's Hills Research. He's saying, can you please elaborate further on the group's net debt position, the outlook, and refinancing as you referred to earlier? And additionally, could you also provide some more color on the cash outflows in the quarter. Dan?

Thanks, Brendan. Theo, our gross debt at the end of the quarter was 3.8 billion Rand. Just unpack how that arose. Some of it was from the acquisition of the Connect Group three years ago. Some of it arose from the acquisition of the Adumo Group. Some of it relates to recent facilities we've put in place to enable growth in our consumer loan book and then there's an element of day-to-day banking, general working capital facilities, and asset-backed facilities. There's a lot of detail in the borrowings note in our 10-Q, which unpacks the different facilities, the tenor, and the rates we pay. So I refer you to that. That's accessible on our website. We are in the process of effecting a comprehensive refinance of our capital structure, our debt facilities in particular. This will optimize the tenure, the repayment profile, and the cost of our facilities and it will also help offset some of our interest costs against the significant cash pile we have in the group so we achieve a netting effect. We have credit approved from our funding banks, and we're deep into the legals. I expect us to complete this in the current quarter. We've highlighted that our target debt to EBITDA ratio is roughly two times in the long term. If I take into account the readily monetizable stake we have in a non-core investment, MobiKwik, we should be able to reduce our debt significantly to a leverage ratio of about 2.4 times. I note that this is based on the last twelve months of earnings, which only includes three months of Adumo's earnings. If I were to annualize that and bring in Adumo for a full twelve months into our earnings, our net debt to EBITDA ratio would be approximately 2.1 times. In…

Thank you, Dan. And, again, just reminding everybody that we are fielding questions live with the Lesaka Technologies, Inc. management team. It is the Q&A for the second quarter FY2025. Lincoln Mali, I have you in my sight, sir, and so does Ross Critter from Investec Securities. He says that consumer growth is incredibly buoyant. It has been incredibly buoyant. Is this growth sustainable?

Thanks, Ross. I think it is sustainable. We have three key levers to pull. All the investment we've made in our products, invested in our people, technology, distribution are all paying off. In the sense that we've seen incredible growth in our account numbers. We think that's the first lever that we'll pull. We have a sense that we will continue to grow our account numbers. We'll be able to take more market share from other market participants, and we think that that's the first lever of growth. And we can see a runway on that. The second lever of growth that gives us confidence is our cross-sell ability. We've seen ourselves growing in terms of our cross-sell. You've seen our ARPU grow now to ninety-four Rand, and it's because of the strength of that cross-sell capability in our teams. We are only penetrated at 43% when it comes to loans, which means that there is still room to grow. We are only penetrated at 35% when it comes to insurance, which means there's still room to grow. The third lever is in the medium term. I think Ali alluded to the fact that we'll start to think about other pockets of customers of underserved consumers beyond the social grant network. Our first area of that is with Adumo Payout, we will start to experiment about what is possible with that core customer base, and then we'll start to think of other underserved pockets of customers. So generally, I would say that there's still room for us to grow in this business.

So still room to grow in the consumer business. Raj Sharma, he asks Steven Heilbron, has growth slowed in the merchant division if you strip out Adumo?

Thanks, Bronwyn. Firstly, I think if you have a look at our FY2026 guidance, it's indicative of considerable growth in the merchant division. We are constructing a platform in the merchant division to take advantage of a sizable opportunity that Ali communicated. An addressable revenue pool of north of $2.8 billion in which we have a very small market share. This bodes well for growth. We will meet our guided returns through both organic and inorganic levers. Now if you have a look at our performance over Q2 2024 to Q2 2025, we grew revenue by 68% to eight hundred and fifty-four million Rand. And we grew EBITDA by 32% to a hundred and eighty-five million Rand. Now this result was impacted positively by the Adumo acquisition, but at the same time, we invested significantly in our platform, in our Kazan business, where we incur operating expenditure, which was significantly up based on these investments, and these investments and initiatives will result in a pull-through in increased earnings in quarters to come.

Right. And, again, you are here with the Lesaka Technologies, Inc. management team. This is the live Q&A for the second quarter FY2025. Naeem Kola, another question coming through from Ross Critter. And, again, Ross from Investec Securities. He's saying, enterprise has not moved forward in the past eighteen months. You say there is a clearer path looking forward. Can you elaborate?

Thanks, Bronwyn. Thanks, Ross, for the question. I think you look at our enterprise division, we've intentionally separated this into a separate division because we see the enterprise division as strategic as well as it will become a material contributor to our EBITDA from FY2026 onwards. If you just look at FY2025, it's been a year of investing into our technology platform as well as our product suite to service our customers better. We have also taken the decision to exit unprofitable contracts and products. The cost overhang of this exit obviously impacts the FY2025 results negatively. But the investment in the platform is strategic and will help us grow our revenues going forward. I think the key area to think about as well is that the Recharger acquisition is super exciting about this acquisition. It basically moves us along the electricity value chain. In addition, it gives us around four hundred and sixty thousand customer touchpoints that we can leverage going forward. So overall, I think, you know, we're investing in a platform to really grow revenues in the future. You know, we have not outlined in the investor presentation the market opportunity and the competitive landscape, but as Ali has indicated, we will be doing this in the Capital Markets Day as well.

Well, there we go alluding to the Capital Markets Day, and I'm sure we will hear more of this from the management team as the story gains traction and certainly an exciting one. Ali Mazanderani, coming back to you in terms of Potomac Capital. Can you discuss any regulatory changes you see on the horizon and how they may help the fintech sector and Lesaka Technologies, Inc. in particular?

Thanks, Bronwyn. I mean, we see the potential for quite a lot of regulatory changes, especially as South Africa follows the path that Brazil and Europe and India have followed empowering non-bank fintechs to help drive digitization in those respective economies, and Saba's been pointing to that for some time. It's noteworthy that at the ASAP launch, the Saab did commit to putting forward an exemption to the Banks Act, which they are expecting to be gazetted in the coming months. That's a very, very meaningful evolution of the market. It would allow nonbanks to be regulated by activity and remove the gatekeeping relationships that we currently have to endure with banks. This would substantially improve our ability to disrupt and also our ability to accelerate revenue and reduce cost. I should say that we would expect to be then regulated by activity rather than just, you know, the sort of blanket bank and TPP environment that exists today. How much would that impact? It's really very difficult to say. I think it'll be dependent on the detail of what's evolved in that context. But we're hopeful and our engagement is through ASAP with the Saab, gives us confidence that the right thinking and the right type of decision-making is happening there.

You've been here for a year. Where to for the business from here?

Thanks, Bronwyn. Well, I hope we managed to improve the technology capabilities of our video broadcasting on our core list. I think that's gonna be helpful, but more seriously, there are some things that I think we do well we need to continue to do. You know, we've done well at keeping our commitments, at saying where we're going and then delivering on that. And it's critically important that we maintain our commitments, that what we say, we deliver on. I think there's other things that we have not done so well. And one of them is telling our story in a simple way and the truth is it is actually quite a simple story. We are not reinventing the wheel. We are just taking it to the frontier. And the reality of our business is if we have the right people in the right places, gravity will take care of the rest. And that's what is both exciting and, to be honest, should be relatively easy to explain. And I'm looking forward to the Capital Markets Day and giving us the opportunity to simplify the message for the investing community so that they can really understand how we're positioning ourselves against the evolution of the market and the digitization of the economy.

Thank you very much to the Lesaka Technologies, Inc. executive management team, and thank you to all of you who have tuned in and have allowed us to navigate these technical challenges in this session. We do have a couple of additional questions in the chat box, and investor relations will ensure that those are answered on an individual basis. It stands just for me to say thank you to everyone joining us and thank you to the Lesaka Technologies, Inc. executive management team. Until next time. That's it for our Q2 Q&A.