Lesaka Technologies Earnings Call Highlights Strong Growth

Lesaka Technologies, Inc. ((LSAK)) has held its Q2 earnings call. Read on for the main highlights of the call.

Lesaka Technologies Delivers Strong Quarter Amid Merchant Headwinds

Lesaka Technologies’ latest earnings call painted a distinctly upbeat picture of the company’s operational and financial trajectory, with double‑digit revenue growth, outsized EBITDA gains and strong momentum in both the Consumer and Enterprise segments. Management highlighted a scalable platform, improving margins and solid cash generation, while also acknowledging short‑term pressure in the Merchant division and the lift from non‑recurring items that made the headline numbers look even better. Strategic progress on Bank Zero and the One Lesaka consolidation reinforced the long‑term story, even as the company prepares for near‑term marketing and regulatory costs.

Robust Top‑Line Growth Anchors the Quarter

Lesaka reported group net revenue of ZAR 1.6 billion for the second quarter, up 16% year on year and squarely within prior guidance. This growth underscores the resilience of the group’s diversified model, with strong contributions from Consumer and Enterprise partially offsetting softness in Merchant. For investors, the in‑line delivery against guidance helps build credibility around management’s execution and forecasting, particularly as the company scales its platform and integrates new strategic initiatives.

EBITDA Expansion Signals Operating Leverage

Adjusted EBITDA surged 47% year on year to ZAR 304 million, slightly above the midpoint of guidance and a clear indication of operating leverage beginning to come through. This expansion reflects both revenue growth and improved efficiency, as margins widen even while Lesaka continues to invest in growth areas like smart devices and software. The EBITDA performance is a core part of the bullish narrative: the company is not just growing, it is becoming structurally more profitable.

Earnings Per Share Jumps More Than Sixfold

Adjusted earnings climbed to ZAR 111 million, with adjusted EPS leaping from ZAR 0.21 to ZAR 1.34 year on year—more than a sixfold increase. While investors should note that one‑off items helped boost the quarter’s bottom line, the magnitude of the EPS improvement nevertheless points to a business that is gaining scale, cleaning up legacy issues and translating operational progress into shareholder‑relevant metrics.

Consumer Division Emerges as Growth Engine

The Consumer segment stood out as the key growth driver. Net revenue in Consumer rose 38% to ZAR 567 million, supported by a 21% increase in the active consumer base to more than 2 million users. Average revenue per user climbed 15% to ZAR 91 per month, showing that Lesaka is not only adding customers but also deepening engagement. Segment adjusted EBITDA more than doubled to ZAR 159 million, underscoring the profitability of this expanding franchise and reinforcing Consumer as the company’s primary engine of value creation.

Consumer Lending Scales Rapidly

Lending within the Consumer arm delivered standout growth, with record originations of approximately ZAR 1.2 billion, up 88% year on year, and an outstanding loan book of about ZAR 1.5 billion, up 106%. Notably, 40% of new originations came from a newer 9‑month product, suggesting product innovation is gaining traction. For equity holders, this scaling credit book offers a high‑yield growth vector, though it also raises the usual questions around credit quality and risk management that investors will continue to monitor.

Enterprise Revenue Accelerates and Platform Deepens

Enterprise net revenue jumped 67% year on year to ZAR 217 million, reflecting strong demand for Lesaka’s payment and platform capabilities. The company’s proprietary payment switch processed more than 40% of card total payment volume (TPV) in‑house this quarter, a key milestone that enhances margin capture and operational control. With total payment volume through the Enterprise platform reaching ZAR 11.9 billion, up 18% year on year, the division is solidifying its role as a strategic, scalable infrastructure asset within the group.

ADP and Supplier Payments Build Scale

Within Enterprise, the ADP (Advanced Digital Platform) business showed strong traction. ADP‑specific TPV grew 27% year on year, while supplier payments processed through ADP increased 48%, with the supplier base exceeding 1,900 partners. This deepening network effect is important: as more suppliers and merchants join the platform, Lesaka’s ecosystem becomes harder to displace and more valuable, potentially lifting margins over time as volumes continue to climb.

Strategic Milestones: Bank Zero and One Lesaka

Management underscored two key strategic milestones. First, Lesaka received Competition Tribunal approval for its planned combination with Bank Zero, which is expected to deliver meaningful funding and balance sheet benefits once fully approved and implemented. Second, the company has begun consolidating its operating brands under the One Lesaka strategy, aiming to present a unified face to customers and the market. Together, these moves are designed to simplify the group structure, reduce friction in cross‑selling, and unlock lower‑cost funding for future growth.

Operating Efficiency and Capital Discipline Improve

Operationally, the company continued to drive efficiency. Operating margin improved from roughly 15% a year ago to 19% in the latest quarter, while last‑twelve‑month CapEx as a percentage of EBITDA fell from around 46% to 33%. Group costs were reduced to ZAR 50 million for the quarter, showcasing tighter cost control. For investors, these metrics signal that Lesaka is becoming more disciplined in capital allocation and operating spend, laying the foundation for sustained margin expansion.

Strong Cash Generation Supports Growth Investments

Lesaka generated ZAR 419 million in cash flow from operations during the quarter, providing ample funding for both growth and balance sheet strengthening. Capital expenditure totaled ZAR 84 million, including ZAR 48 million directed toward growth initiatives such as Smart Safe rollouts and software capitalization. This mix suggests a balanced approach: investing sufficiently to support future earnings growth while not overextending the balance sheet.

Merchant Revenue and ARPU Under Pressure

Not all segments moved in the right direction. Merchant net revenue declined 2% year on year, and merchant ARPU fell 10% to ZAR 1,835. The drop was driven by weaker airtime volumes and margin compression in ADP and acquiring activities. This reflects a challenging competitive environment and price‑sensitive merchant base. For shareholders, the Merchant segment is currently a drag on growth and a key area to watch as management executes its transformation plan.

Merchant Transformation Weighs on Profitability

The Merchant division’s adjusted EBITDA decreased 6% to ZAR 170 million, as the business undergoes a strategic transformation. Management signaled that Merchant growth is likely to remain flat for the rest of the fiscal year, with a more meaningful recovery only expected in FY27. While this long runway may test investor patience, it also implies that near‑term earnings headwinds are largely known and incorporated into the strategic roadmap rather than surprise negatives.

Pricing Pressure and Margin Compression Persist in Merchant

Competitive dynamics remain tough in the Merchant market, with ongoing pricing pressure and margin compression in both ADP and acquiring. These trends are weighing on near‑term economics in the segment, limiting Lesaka’s ability to fully translate volume into profit. The company appears to be prioritizing scale, platform stickiness and long‑term strategic positioning over short‑term margin maximization in this space, a trade‑off that investors will have to evaluate against the broader group performance.

Non‑Recurring Gains Boosted Q2 Results

Management acknowledged that Q2 results were flattered by two significant one‑off items: proceeds from exiting its Cell C stake of ZAR 50 million and the release of a ZAR 65 million CPS accrual. While these gains enhanced reported earnings and cash flow, they do not reflect ongoing operational performance. Investors parsing the quarter will need to strip out these non‑recurring benefits to assess the underlying run‑rate profitability, which, while strong, is not as elevated as the headline numbers might imply.

Regulatory Approval Still Needed for Bank Zero

Although Competition Tribunal approval for Bank Zero marks an important step, the transaction still requires clearance from the Prudential Authority. The timing and final terms remain open, and these factors will influence the ultimate balance sheet and funding advantages Lesaka can extract from the deal. Until that approval is secured, the Bank Zero benefits remain a medium‑term catalyst rather than an immediate driver of financial performance.

Rebranding Costs Set to Pressure Near‑Term Profitability

As Lesaka rolls out its One Lesaka strategy, it expects to incur marketing and rebranding costs in the range of ZAR 50–75 million over the next two quarters. These expenses are excluded from adjusted EBITDA guidance but will affect reported profitability if and when they are incurred. The short‑term impact on earnings is effectively an investment in brand consolidation and market presence, aimed at supporting long‑term growth and cross‑segment recognition.

Forward Guidance Points to Continued Double‑Digit Growth

Looking ahead, management guided Q3 net revenue to ZAR 1.65–1.80 billion, implying around 27% year‑on‑year growth at the midpoint, and adjusted EBITDA of ZAR 300–340 million, about 37% growth at the midpoint. For the full year, Lesaka reaffirmed its net revenue outlook of ZAR 6.4–6.9 billion and adjusted EBITDA of ZAR 1.25–1.45 billion, equating to roughly 21–30% revenue growth and 36–57% EBITDA growth. This guidance excludes any impact from the Bank Zero transaction and assumes CapEx remains below ZAR 400 million per year. Management also expects leverage, currently at 2.5x, to trend down toward a medium‑term target of 2x or below, and sees the Enterprise segment delivering ZAR 40–50 million in EBITDA per quarter in the near term. Overall, the outlook reinforces the narrative of sustained double‑digit growth with improving profitability and a gradually de‑risking balance sheet.

In summary, Lesaka’s earnings call presented a company in the midst of a robust growth phase, powered by a standout Consumer business and a fast‑scaling Enterprise platform, underpinned by improving margins and solid cash generation. While the Merchant division remains a near‑term weak spot and some of the quarter’s strength reflects non‑recurring items, management’s strategy and guidance suggest that the core fundamentals are moving in the right direction. For investors, the story now hinges on continued execution in Consumer and Enterprise, a successful Merchant turnaround, and the eventual unlocking of strategic and funding benefits from Bank Zero and the One Lesaka consolidation.