Lesaka Surpasses Guidance, But Merchant Division Slumps 2%

Date of Call: Feb 5, 2026

Financials Results

• Revenue: ZAR 1.6 billion, up 16% year-on-year
• EPS: Adjusted earnings per share of ZAR 1.34, up more than sixfold year-on-year
• Operating Margin: Approximately 19%, up from approximately 15% a year ago

Guidance:

• Q3 net revenue guidance range of ZAR 1.65 billion-ZAR 1.8 billion, implying growth of circa 27% (midpoint).
• Q3 group-adjusted EBITDA expected between ZAR 300 million-ZAR 340 million, implying growth of circa 37% (midpoint).
• Full-year net revenue guidance reaffirmed at ZAR 6.4 billion-ZAR 6.9 billion, implying growth of 21%-30%.
• Full-year group-adjusted EBITDA guidance reaffirmed at ZAR 1.25 billion-ZAR 1.45 billion, implying growth of 36%-57%.

Business Commentary:

Revenue and EBITDA Growth:

• Lesaka Technologies reported net revenue of ZAR 1.6 billion for Q2, a 16% year-on-year increase, with group-adjusted EBITDA of ZAR 304 million, reflecting a 47% year-on-year increase.
• The growth was driven by organic performance improvements and acquisitions, with adjusted earnings per share increasing more than six times.

Consumer Segment Performance:

• The consumer division achieved a 38% year-on-year increase in net revenue, reaching ZAR 567 million, with active customers surpassing 2 million.
• This growth was due to a strong lending business, increased ARPU by 15%, and successful cross-sell strategies, supported by increased loan sizes and digital channel usage.

Merchant Division Transformation:

• Despite a 2% decline in net revenue, the merchant division is undergoing transformation, with active merchants increasing 8% year-on-year to over 130,000.
• The decline in revenue was due to a strategic refocus on high-potential clients and pricing pressures, while the increase in active merchants indicates successful integration and cross-selling efforts.

Enterprise Division Progress:

• The enterprise division posted a 67% year-on-year increase in net revenue to ZAR 217 million, largely due to the Recharger acquisition and platform investments.
• Growth is expected to strengthen with new product launches and internalization of merchant acquiring volumes, despite current investment costs.

Financial Strategy and Outlook:

• Lesaka maintained a leverage ratio of 2.5x, with a target to reduce it further, and anticipates continued deleveraging post-Bank Zero acquisition.
• The company expects consistent operational execution and earnings momentum, with a focus on strategic growth through the Bank Zero integration and One Lesaka rebranding.

Sentiment Analysis:

Overall Tone: Positive

• Statements include: 'delivered on our guidance for the 14th consecutive quarter,' 'pleasing to note that group-adjusted EBITDA grew 47% year-on-year,' 'another standout quarter,' 'very pleasing result,' 'strong earnings growth in Q3 and Q4 expected,' 'excited about the second half of the year and the earnings momentum we expect to take into FY 2027.'

Q&A:

• Question from Theodore O’Neill (Litchfield Hills Research): Concerns about the sustainability of transaction fee increases and whether growth in insurance and lending is from taking share or serving an underserved market.
  Response: Transaction fee increases are an annual review. Growth in loans and insurance comes from taking share in the formal sector and serving an underserved market where customers lack formal financial services, offering fair and transparent products.

• Question from Ross Krige (Investec): Inquiry on merchant ARPU trend, cross-sell/product penetration outlook, and the key cross-sell opportunity.
  Response: Merchant ARPU expected to stabilize and increase over the next 12 months. Product penetration increased marginally. Cross-sell focus is on acquiring, particularly with ADP in community and software in corporate segments.

• Question from Ross Krige (Investec): Follow-up on consumer lending growth drivers and future expectations.
  Response: Lending growth driven by increased loan size/tenure (40% of Q2 originations) and digital USSD channel adoption (8% of new loans). Growth expected to continue as product evolution is early and book quality is strong.

• Question from Ross Krige (Investec): Question on estimated marketing/rebranding costs excluded from adjusted EBITDA.
  Response: Rebrand costs estimated between ZAR 50 million-ZAR 75 million for the next two quarters.

• Question from Johan Baes (unspecified firm): Inquiry on the estimated rand amount of deposits to be transferred from Lesaka customers to Bank Zero upon merger completion.
  Response: The acquisition is expected to reduce gross debt by more than ZAR 1 billion, implying a substantively larger deposit base, but no specific number provided.

Contradiction Point 1

Merchant Business Margin Expectations

Guidance on typical Merchant margin range appears inconsistent.

What is the expected run rate and trend for declining ARPU over the next 6-12 months? - Ross Krige (Investec)

2026Q2: The expectation is for ARPU to stabilize and ultimately increase over the coming 12 months, driven by the collective performance of all products. - [Dan](CFO)

What is the cost impact of infrastructure rationalization and any milestones on cross-sell within the Merchant segment? - Ross Krige (Investec Bank Limited)

2026Q1: Merchant business margins typically oscillate between 19% and 25% across different quarters, and should be viewed on a blended or rolling basis. - [Daniel Smith](CFO)

Contradiction Point 2

Merchant Product Cross-sell Attachment Rates

Statements on current merchant product attachment rates conflict.

Is the decline in product penetration related to merchant cross-sell a timing issue? When is improvement expected? - Ross Krige (Investec)

2026Q2: The product penetration rate (percentage of merchants using multiple products) has actually increased marginally. - [Dan](CFO)

What is the expected impact on the cost base from infrastructure rationalization and any milestones on cross-sell within the Merchant segment? - Ross Krige (Investec Bank Limited)

2026Q1: The vast majority of merchants have more than one product, with high attachment rates for products like ADP and software. - [Ali Zaynalabidin Mazanderani](CEO)

Contradiction Point 3

Consumer Lending Growth Drivers and Outlook

Inconsistent emphasis on primary growth drivers for consumer lending.

What are the key factors driving the increase in consumer lending originations, and what is the projected growth for the next year? - Ross Krige (Investec)

2026Q2: Key drivers are: 1) A product change increasing loan size... 2) Investment in the low-cost digital USSD channel... There is still significant upside potential as the product is in early stages of evolution. - [Lincoln](Operational Lead)

What are the near-term growth opportunities for the Consumer division's core products and overall market share? - Theodore O'Neill (Litchfield Hills Research, LLC)

2025Q4: The successful launch of a **new lending product**... The primary focus is on **account growth**. - [Lincoln Mali](CEO of Southern Africa)

Contradiction Point 4

Financial Impact of the Bank Zero Acquisition

Contradictory statements on the timing and nature of the acquisition's financial impact.

What is the estimated rand amount of deposits to be transferred from Lesaka customers to Bank Zero post-merger? - Johan Baes

2026Q2: The Bank Zero acquisition is expected to reduce the company's gross debt by more than ZAR 1 billion. - [Ali](CEO)

What is the expected timeline and cost for integrating the pending Bank Zero acquisition, and is profitability in year one anticipated after accounting for all mentioned factors? - Ross Krieger (Investec Securities)

2025Q4: If the transaction completes, the business is expected to be **profitable or very close to profitable**... The timeline is pending regulatory approval, but the expectation is for a **minimal material gap** between standalone and combined performance. - [Steven Heilbron](CEO of Connect Group)

Contradiction Point 5

Consumer Market Share and ARPU Trends

Contradiction on the trend and drivers of consumer ARPU.

What is the expected ARPU run rate and trend over the next 6-12 months? - Ross Krige (Investec)

2026Q2: ARPU decline is primarily driven by the ADP product... The expectation is for ARPU to stabilize and ultimately increase over the coming 12 months. - [Dan](CFO)

Can you comment on market share gains in the Consumer business and whether this trend has continued into April and May? - Frank Geng (Briarwood Capital)

2025Q3: ARPU has increased from ZAR 90 a year ago to ZAR 106. Expect continued growth in both customer base and ARPU. - [Lincoln Mali](Operational Lead)