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01/11 17:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary indicates strong financial performance with significant year-over-year increases in revenue and adjusted EBITDA across divisions. The Bank Zero acquisition and strategic focus on core products and brand consolidation are positive catalysts. Despite some concerns about nonrecurring costs and lack of specific data on cost savings, guidance remains strong with expectations of continued EBITDA growth. The market response is likely positive, given the record revenue growth and optimistic outlook, although lack of market cap data limits precision in impact assessment.
Net Revenue ZAR 1.53 billion, a 45% increase year-over-year. The increase was driven by restructuring in the Enterprise division, significant investments in platforms, and the Recharge acquisition.
Group Adjusted EBITDA ZAR 271 million, a 61% year-over-year growth. This reflects improved earnings quality with limited accounting anomalies and nonrecurring items.
Adjusted Earnings ZAR 87 million, a 150% year-over-year growth. This growth is attributed to improved financial performance and operational efficiencies.
Net Debt to Adjusted EBITDA Ratio 2.5x, improved from 2.6x last year and 2.9x in the previous quarter. This improvement is due to increased EBITDA performance and careful cash management.
Enterprise Division Net Revenue ZAR 222 million, a 19% year-over-year improvement. This was due to restructuring, investments in platforms, and the Recharge acquisition.
Consumer Division Net Revenue 43% year-over-year increase. Growth was driven by a record pace of expansion in the consumer base.
Merchant Division Net Revenue 43% year-over-year increase, primarily driven by the acquisition of Adumo.
Merchant Segment Adjusted EBITDA ZAR 162 million, a 20% year-over-year increase. The increase was largely due to the Adumo acquisition.
Consumer Segment Adjusted EBITDA ZAR 150 million, a 90% year-over-year increase. Growth was driven by an expanding consumer base and innovations in onboarding systems.
Enterprise Segment Adjusted EBITDA ZAR 22 million, a 241% year-over-year increase. This was due to continued investments in platforms and product development.
Cash Flow from Operations ZAR 341 million for the quarter, closely tracking EBITDA evolution. Investments included ZAR 122 million for lending books and ZAR 106 million for net interest costs.
Capital Expenditure ZAR 90 million for the quarter, with ZAR 51 million spent on growth initiatives such as Smart Safe product expansion and software development.
Merchant Lending Originations ZAR 201 million, a 21% year-over-year increase. Growth was driven by enhanced lending offerings and redesigned onboarding procedures.
Consumer Lending Originations ZAR 820 million, a 77% year-over-year increase. Growth was driven by new loan products and digital origination channels.
Insurance Gross Written Premiums ZAR 120 million, a 38% year-over-year increase. Growth was driven by customized insurance products for the grant beneficiary market.
Enterprise ADP TPV ZAR 11.9 billion, a 13% year-over-year growth. Growth was driven by bill payments and integration with billing partners.
Utilities TPV ZAR 396 million, a 21% year-over-year increase. Growth was driven by organic growth and electricity price increases.
Smart Safe product expansion: Continued investment in growth, including the expansion of the Smart Safe product.
New lending product: Launched a new ZAR 4,000 loan value with a 9-month term, positively received in the market.
Digital onboarding for loans: Introduced a USSD system for digital loan origination, allowing immediate access to funds.
Unity product adoption: Increased adoption of the cloud-based Unity product, enabling greater customer lifetime value and rapid product development.
Grant beneficiary market share: Expanded share to 14.1%, up from 11.4% last year, with 1.9 million active consumers.
Postbank migration: Captured over 20% of Postbank's migrating customers, disproportionate to Lesaka's market share.
Merchant lending growth: Originated ZAR 201 million in merchant loans, a 21% increase year-on-year.
Insurance product expansion: Gross written premiums increased 38% year-on-year to ZAR 120 million, with in-force policies rising 27%.
Revenue growth: Net revenue increased 45% year-on-year to ZAR 1.53 billion.
EBITDA improvement: Group adjusted EBITDA grew 61% year-on-year to ZAR 271 million.
Debt reduction: Net debt to adjusted EBITDA ratio improved from 2.9x to 2.5x quarter-on-quarter.
Cost management: Group costs expected to trend towards a quarterly run rate of ZAR 55 million.
Unified brand strategy: Initiated steps to unify divisions under a single Lesaka brand and consolidate office locations.
Bank Zero acquisition: Progressing as planned, expected to close by FY 2026 end.
Corporate simplification: Streamlining operations by exiting non-core businesses and reducing legal entities.
Cell C equity monetization: Reached an agreement to monetize equity position with a ZAR 50 million underpin.
Integration of businesses and unification of merchant brand: The integration of various businesses and products into a unified merchant brand and product offering requires significant planning and disciplined execution. This process poses risks of inefficiencies, delays, or misalignment, which could impact operational performance and customer satisfaction.
Churn in small to medium single-product merchants: Moderately higher churn rates among small to medium single-product merchants due to price sensitivity could impact revenue and customer retention in this segment.
Declining cash usage in small to medium merchant sector: The declining trend in cash usage in the small to medium merchant sector could reduce cash-related revenues, although partially offset by growth in the micro merchant segment.
Merchant lending penetration: The relatively low penetration of lending products within the merchant base indicates underperformance in this area, which is a strategic growth focus. Failure to improve penetration could limit revenue growth potential.
Credit loss ratio in consumer lending: While stable, the credit loss ratio could modestly increase as the lending product mix shifts to larger and longer-tenor loans, potentially impacting profitability.
Pressure on airtime and data sales: A shift in product mix has led to pressure on airtime and data sales, which could affect overall revenue from prepaid solutions.
Regulatory approval for Bank Zero acquisition: The Bank Zero acquisition is subject to regulatory approval, and any delays or issues in obtaining this approval could impact strategic plans and financial performance.
Office consolidation and lease footprint reduction: The consolidation of office locations and reduction in lease footprint could face logistical challenges and transitional inefficiencies, potentially impacting operational effectiveness.
Seasonality in Enterprise division: The Enterprise division is subject to seasonality in electricity sales and ADP, which could lead to volatility in quarterly earnings and impact financial predictability.
Volatility in Enterprise earnings: Investments in platforms and product development in the Enterprise division may lead to short-term earnings volatility, which could affect financial stability and investor confidence.
Net Revenue Guidance for Q2 FY 2026: The company expects net revenue to range between ZAR 1.575 billion and ZAR 1.725 billion, with the midpoint implying a year-on-year growth of approximately 20%.
Group Adjusted EBITDA Guidance for Q2 FY 2026: The company projects group-adjusted EBITDA to range between ZAR 280 million and ZAR 320 million, with the midpoint implying a year-on-year growth of approximately 42%.
Annual Capital Expenditure: The company expects annual capital expenditure to remain below ZAR 400 million for FY 2026.
Net Debt to Adjusted EBITDA Ratio: The company anticipates continued improvement in this ratio as adjusted EBITDA increases with no material increase in debt. The medium-term target remains at 2x or less.
Bank Zero Acquisition: The acquisition is progressing as planned, with an expected completion by the end of FY 2026. This is expected to allow funding of expansionary cash flows from lending activities with customer deposits, improving cash conversion rates.
Enterprise Division Earnings Outlook: The company expects an earnings uplift later in FY 2026 and into FY 2027 as product platforms go live. A quarterly run rate of approximately ZAR 30 million is a near-term target.
Consumer Division Growth: The company expects the Consumer division's growth trend to continue in the medium term, driven by innovations in onboarding systems and product penetration.
Merchant Division Transformation: FY 2026 is expected to be a transformative year for the Merchant division, focusing on unifying the merchant brand, rationalizing infrastructure, and driving growth in a market ripe for disruption.
The selected topic was not discussed during the call.
The earnings call summary indicates strong financial performance with significant year-over-year increases in revenue and adjusted EBITDA across divisions. The Bank Zero acquisition and strategic focus on core products and brand consolidation are positive catalysts. Despite some concerns about nonrecurring costs and lack of specific data on cost savings, guidance remains strong with expectations of continued EBITDA growth. The market response is likely positive, given the record revenue growth and optimistic outlook, although lack of market cap data limits precision in impact assessment.
The earnings call summary and Q&A session highlight several positive aspects: strategic wins with ADNOC, sustained demand for rentals, and a strong pipeline despite macroeconomic challenges. While management is cautious, they express optimism about future growth, particularly in the Middle East. The company is also focusing on optimizing margins and working capital. Despite some uncertainties, the overall sentiment is positive, suggesting a potential stock price increase of 2% to 8% over the next two weeks.
The earnings call reveals strong year-on-year premium growth and promising growth opportunities in both Consumer and Enterprise divisions. The Q&A section highlights strategic initiatives such as the Bank Zero transaction, which is expected to be close to profitability, and positive regulatory engagements. While there are some risks and uncertainties, the overall sentiment is optimistic with a focus on market expansion and innovation. Despite a goodwill impairment, the company's differentiation and strategic positioning suggest a positive outlook for stock price movement.
The earnings call reveals strong financial growth, particularly in net revenue and EBITDA, driven by the Adumo acquisition. Despite a decline in group revenue, optimistic guidance for FY2025 and FY2026, along with strategic investments, suggest positive future prospects. The Q&A section clarifies debt management and highlights sustainable growth in consumer and merchant divisions, although concerns about regulatory impacts remain. The absence of a share buyback or dividend program is a neutral factor. Overall, the company's growth strategy and financial outlook indicate a positive stock movement over the next two weeks.
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