Lesaka Technologies Shines in Earnings Call with Strong Growth

Lesaka Technologies, Inc. ((LSAK)) has held its Q3 earnings call. Read on for the main highlights of the call.

Lesaka Technologies, Inc. recently held its earnings call, revealing a strong overall performance with notable growth in the Consumer division and successful acquisitions bolstering the Merchant and Enterprise divisions. Despite challenges such as MobiKwik’s share price volatility and reorganization costs in the Merchant division, the company achieved record growth in several areas and is well-positioned for future success.

Consumer Division Record Growth

The Consumer division experienced a standout quarter, achieving record enrollments in EPE transactional accounts, lending, and insurance originations. The division reported a 17% year-on-year increase in its customer base, reaching 1.5 million permanent SASSA grant recipients, alongside a 32% revenue growth year-on-year to ZAR 446 million.

Strong Financial Performance

Lesaka delivered impressive financial results with a revenue of ZAR 2.5 billion, net revenue of ZAR 1.36 billion, and Group adjusted EBITDA of ZAR 237 million, meeting guidance across all metrics. Fundamental earnings saw a significant 98% year-on-year growth to ZAR 58 million.

Acquisition and Integration Success

The strategic acquisition of Adumo has significantly expanded the Merchant division, while the acquisition of Recharger has enhanced the Enterprise division’s offerings. These acquisitions are pivotal to Lesaka’s strategy of building a comprehensive multi-product fintech platform.

Improved Debt Structure

Lesaka successfully refinanced its debt facilities, resulting in a simpler and more cost-effective structure. The advantageous pricing reduced the cost of debt from 12% to 10.7%, saving approximately ZAR 52 million annually.

Enterprise Division Expansion

The acquisition of Recharger marks a significant expansion in the electricity vending business, positioning Lesaka as a key player in this sector. The vending throughput grew by 28% year-on-year, underscoring the division’s growth.

MobiKwik Share Price Volatility

The volatility of MobiKwik’s share price led to a net loss of ZAR 311 million, significantly impacting the overall financial results for the quarter.

Merchant Division Reorganization Costs

The Merchant division incurred approximately ZAR 20 million in reorganization costs due to integration and strategic realignment processes, affecting profitability.

Challenges in Airtime and Data Sales

Increased competition in airtime and data sales constrained growth in prepaid solutions, which only saw a 4% year-on-year increase.

Enterprise Division EBITDA Decline

The Enterprise division reported an EBITDA decline to ZAR 2 million from ZAR 14 million last year, attributed to restructuring costs and exiting unprofitable legacy businesses.

Forward-Looking Guidance

Lesaka Technologies provided guidance for fiscal 2025 and 2026, reaffirming its revenue guidance for fiscal 2025 at ZAR 10 billion to ZAR 11 billion, with net revenue expected between ZAR 5.2 billion to ZAR 5.6 billion, and Group adjusted EBITDA between ZAR 900 million to ZAR 1 billion. For fiscal 2026, the company anticipates revenue in the range of ZAR 11.4 billion to ZAR 12.2 billion, net revenue between ZAR 6.4 billion to ZAR 6.9 billion, and Group adjusted EBITDA of ZAR 1.25 billion to ZAR 1.45 billion. This reflects an anticipated 12% revenue growth, 23% net revenue growth, and a 42% increase in Group adjusted EBITDA from fiscal 2025 to 2026.

In summary, Lesaka Technologies, Inc. has demonstrated robust performance and strategic growth through its Consumer division and strategic acquisitions. Despite some financial challenges, the company is on a promising trajectory with strong forward-looking guidance, positioning itself for continued success in the fintech sector.