Lesaka's Q4 2025: Contradictions Emerge on Market Share Gains & Customer Growth, Enterprise Growth Strategy, Regulatory Changes Impact, and Merchant Division Growth

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: R5.3B net revenue for FY2025; Q4 net revenue R1.5B, up 47% YOY
• EPS: Adjusted EPS R2.29 for FY2025, up 187% YOY; Q4 adjusted EPS R0.99, up 211% YOY

Guidance:

• Reaffirmed FY2026 guidance for net revenue, group-adjusted EBITDA, and positive net income.
• FY2026 adjusted EPS guidance: >R4.60 (>100% YoY vs R2.29).
• Q1 FY2026 guidance provided for net revenue and group-adjusted EBITDA (no figures disclosed).
• FY2026 group-adjusted EBITDA growth targeted ~46% YoY at guidance midpoint.
• Capex expected
• Medium-term leverage target: net debt/adj. EBITDA ~2.0x; Q4 annualized at 2.2x.
• Enterprise division expected to contribute >10% of segment adjusted EBITDA in FY2026.
• BankZero expected to close before FY2026 year-end; plan to cut gross debt by ~R1B and lower funding costs.

Business Commentary:

* Record Revenue and Growth across Segments: - Lesaka Technologies reported net revenue of R5.3 billion for fiscal year 2025, with the Merchant division contributing R3 billion, up 46% year-on-year. - Growth was driven by strategic acquisitions, particularly the acquisition of Adumo, which added over 23,000 merchants to their base.

• Consumer Division Performance:
• The Consumer division achieved net revenue growth of 35% and EBITDA growth of 83% to R1.7 billion and R435 million, respectively.

• This performance was attributed to an increase in the consumer base, successful integration of products like Bungwe, and enhancements in lending and insurance offerings.

• Enterprise Division Transformation:

• The Enterprise division reported net revenue of R651 million and EBITDA of R24 million for fiscal 2025, with plans for the division to contribute north of 10% to group EBITDA in FY2026.

• The transformation was supported by business reorganizations, channel expansion, and significant contract wins.

• Regulatory Engagement and Strategic Acquisitions:

• Lesaka continues to engage with regulators and industry stakeholders, launching the Association of South African Payment Providers to collaborate more closely.
• The strategic acquisition of BankZero, a neobank with a modern technology stack, is expected to enhance Lesaka's banking capabilities and reduce costs.

Sentiment Analysis:

• Management reported meeting guidance for 12 consecutive quarters; Q4 net revenue up 47% and adjusted EBITDA up 61% YOY; FY2025 adjusted EPS rose to R2.29 (187% YOY). Reaffirmed FY2026 outlook with adjusted EPS >R4.60 and positive net income; highlighted integration benefits, balance sheet optimization, and expected debt reduction via BankZero.

Q&A:

• Question from Theo (LHR): Rank the near-term opportunities in Consumer among accounts, lending, and insurance; where is the greatest strength?
  Response: Focus first on account growth/market share (Postbank migration), then scale the new lending product, and expand insurance beyond EPE; BankZero broadens medium-term opportunity.

• Question from Theo (LHR): Near-term Enterprise growth across core products and market share?
  Response: Post-build, Q4 implies >R30M quarterly EBITDA run-rate excluding restructuring; expect Enterprise to contribute >10% of FY2026 segment adjusted EBITDA.

• Question from Ross Krieger (Investec Securities): BankZero integration timing/costs and whether year-one profitability includes synergies?
  Response: Integration plans are ready for day one; small team (~45) eases execution; expect near-breakeven at close and profitable with quick, easily realizable synergies.

• Question from Ross Krieger (Investec Securities): Detail on goodwill impairments and affected CGUs?
  Response: Impairments arose in certain CGUs within acquired groups as cash-flow expectations changed; aggregate goodwill hasn’t fallen, but accounting requires write-downs at CGU level (~R335M).

• Question from Ross Krieger (Investec Securities): Update on competitive dynamics given banks pushing into SME?
  Response: Market is large with room for multiple winners; Lesaka differentiates via breadth (payments, software, cash, lending) and owned distribution, focusing on integrated solutions over single products.

• Question from Ross Krieger (Investec Securities): Any notable regulatory developments ahead?
  Response: SARB’s Banks Act exemption process trending positively after industry feedback; awaiting final proposal; ongoing engagement on governance and interchange; direction supports openness and innovation.

• Question from Mike Steer (Avior Capital Markets): South Sea stake impact, Shoprite’s banking entry, and PPA amortization outlook?
  Response: Carry 5% South Sea at zero; supportive of IPO which could revalue stake; Shoprite’s move validates segment and Lesaka competes via comprehensive offering; expect ~R160M accelerated amortization next year.

• Question from Vera Capiso (RMB Morgan Stanley): Key risks to >100% EPS growth and positive net income in FY2026 amid macro headwinds?
  Response: Company isn’t a macro proxy; diversified growth and 12-quarter track record support confidence; main risks are exogenous shocks and potential non-cash items.

• Question from Vera Capiso (RMB Morgan Stanley): Trends in credit quality for consumer and merchant books?
  Response: Consumer loss ratio ~6% and stable; merchant impairments ~1.4% of originations with slight improvement; no early stress signs.

• Question from Frank Gang (Briarwood): Drivers of FY2026 guidance by division and whether BankZero is included?
  Response: Excludes BankZero; EBITDA midpoint implies ~46% YoY growth; expect all three divisions to grow >20% via user/ARPU expansion (Consumer, Merchant) and volume/mix lift (Enterprise).

• Question from Craig Smith (Anchor Securities): Remaining approvals and timing for BankZero; does Lesaka become a bank; pace of loan-book migration and R1B debt reduction?
  Response: Awaiting PA and Competition Commission approvals; targeting close by Mar/Apr and before June FY26; bank will be a subsidiary; aim to migrate most loan books at close, enabling ~R1B debt reduction subject to deposits.