Lesaka's Q4 2025 Earnings Call: Contradictions Emerge in Consumer Division Growth, Bank Zero Integration, Merchant Division Expectations, and Shoprite's Market Impact

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

Date of Call: September 11, 2025

Financials Results

• Revenue: ZAR 1.5B net revenue in Q4, up 47% YOY
• EPS: ZAR 2.29 adjusted EPS for FY 2025, up 187% YOY (from ZAR 0.80)

Guidance:

• Reaffirm FY26 guidance for net revenue, adjusted EBITDA, and positive net income.
• FY26 adjusted EPS guidance: > ZAR 4.60 (>100% YOY).
• Q1 FY26 outlook provided for net revenue and adjusted EBITDA (no figures disclosed).
• FY26 CapEx expected to be < ZAR 400M.
• Expect ~ZAR 160M accelerated brand amortization in FY26.
• Bank Zero expected to close by June 2026; plan to migrate loan books into the bank and reduce gross debt by ~ZAR 1B post-close.
• Target net debt/adjusted EBITDA of ~2x medium term.

Business Commentary:

* Financial Performance and Growth: - Lesaka Technologies reported a net revenue of ZAR 5.3 billion for FY 2025, with an adjusted earnings per share growing from ZAR 0.80 to ZAR 2.29. - The growth was driven by strategic acquisitions, particularly the acquisition of Adumo, and organic growth in the consumer and merchant divisions.

• Acquisition Strategy and Integration:
• Lesaka completed three major acquisitions in FY 2025, including Adumo for ZAR 1.7 billion and Recharger for ZAR 507 million.

• The integration of these acquisitions, especially Adumo, contributed significantly to the company's growth and expanded its merchant footprint.

• Consumer Division Performance:

• The consumer division saw revenue grow by 35% and EBITDA by 83% for FY 2025.

• This was due to increased sales through the launch of the Bonngwe platform and successful cross-selling of insurance and lending products.

• Enterprise Division Transformation:

• Lesaka's Enterprise division is shifting towards a new strategic direction, resulting in a 9% decline in net revenue and EBITDA challenges.

• The company is focusing on restructuring and building a leaner, focused business model for long-term growth.

• Bank Zero Acquisition and Strategic Impact:

• The planned acquisition of Bank Zero is expected to enhance Lesaka's banking capabilities and reduce gross debt.
• This strategic move will enable Lesaka to offer comprehensive banking solutions to its merchant base, enhancing product offerings and customer value.

Sentiment Analysis:

• Management delivered 12 consecutive periods of meeting profitability guidance; Q4 net revenue up 47% and adjusted EBITDA up 61%. FY25 adjusted EPS rose to ZAR 2.29 (from ZAR 0.80). FY26 guidance reaffirmed with adjusted EPS > ZAR 4.60 and positive net income. Consumer division revenue +35% and EBITDA +83%; Merchant and Enterprise positioned for further growth with integration and cost efficiencies.

Q&A:

• Question from Theodore O'Neill (Litchfield Hills Research): Rank near-term Consumer division opportunities across core products and market share.
  Response: Focus is account growth via Postbank migrations (~20% share of movers), scaling the new lending product, and expanding insurance beyond EPE; Bank Zero adds medium-term upside.

• Question from Theodore O'Neill (Litchfield Hills Research): Near-term growth expectations in Enterprise across core products and share.
  Response: Enterprise is exiting a build year; targeting >ZAR 30M quarterly EBITDA run-rate and contributing >10% of FY26 segment adjusted EBITDA.

• Question from Ross Krieger (Investec Securities): Bank Zero integration timing/costs and profitability contribution in year 1.
  Response: Integration plans are ready and simple (team ~45); profitability expected to be at/near breakeven at close with quick synergies driving positive contribution.

• Question from Ross Krieger (Investec Securities): Details behind goodwill impairments by CGU and reasons.
  Response: Noncash impairments arose at certain CGUs within acquisitions (e.g., Adumo units) due to model changes; aggregate valuation intact though accounting requires write-downs (~ZAR 335M).

• Question from Ross Krieger (Investec Securities): Update on competitive environment given new SME entrants.
  Response: Large TAM with room for multiple winners; Lesaka is differentiated via multiproduct, integrated solutions (payments, software, cash, lending) and proprietary distribution, with low share to grow.

• Question from Ross Krieger (Investec Securities): Regulatory outlook from ASAPP engagements.
  Response: SARB’s draft exemptions feedback is positive toward opening payments; final proposal expected in weeks; ongoing engagement on governance and interchange.

• Question from Michael Steere (Avior Capital Markets): Cell C stake, Shoprite banking entry, and PPA/impairments outlook.
  Response: Most material: ~ZAR 160M additional accelerated brand amortization expected in FY26; Cell C carried at zero with upside if IPO succeeds.

• Question from Viwe Kupiso (RMB Morgan Stanley): Key risks to >100% EPS growth and positive net income in FY26.
  Response: Confident given consistent delivery; risks mainly exogenous shocks and noncash items; guidance is a minimum bound.

• Question from Viwe Kupiso (RMB Morgan Stanley): Credit quality trends in consumer and merchant lending.
  Response: Consumer loan loss ratio ~6% and stable; merchant impairments ~1.4% of originations, slightly improving; no early stress signs.

• Question from Frank Yang (Brywood): Drivers of FY26 guidance by division and whether it excludes Bank Zero.
  Response: Guidance excludes Bank Zero; expect >20% growth across Consumer, Merchant, and Enterprise, driven by user base expansion and higher ARPU/take-rates; EBITDA midpoint implies ~46% YOY growth.

• Question from Craig Smith (Anchor Securities): Bank Zero closing requirements/timing, is Lesaka becoming a bank, and timing to move loan books to retire debt.
  Response: Needs Prudential Authority and Competition approvals; aim to close by June 2026; Lesaka remains a fintech with a bank subsidiary; plan to migrate loan books quickly (deposit base dependent) to cut ~ZAR 1B gross debt.