Lesaka Technologies Q3 2026 Earnings Call Summary

1Key Financial Results and Metrics

Net Revenue: Increased by 16% to ZAR 1.58 billion, slightly below guidance of ZAR 1.65 billion due to weaker performance in the Merchant division.

Adjusted EBITDA: Reached ZAR 337 million, a 45% year-on-year increase and at the top end of guidance.

Adjusted Earnings: Rose 246% from ZAR 43 million to ZAR 148 million; adjusted earnings per share increased from ZAR 0.52 to ZAR 1.80.

Net Debt to Adjusted EBITDA: Improved to 2.1x, nearing the target of 2x.

Cash Flow: Generated ZAR 608 million in operating cash flow, with ZAR 365 million from business operations.

2Strategic Updates and Business Highlights

Business Integration: Focus on creating a unified "One Lesaka" brand, with a rebranding campaign underway.

Merchant Division Changes: Exited the ATM business and sunsetted the Switchpay product to focus on higher-return opportunities.

Consumer Division Growth: Active consumers increased by 19%, with a significant rise in cross-selling of loans and insurance products.

Enterprise Division: Continued growth with a 51% increase in net revenue, aided by the acquisition of Recharger and strong organic growth.

AI and Blockchain Initiatives: Plans to leverage AI for operational efficiencies and explore blockchain for payment solutions.

3Forward Guidance and Outlook

Revenue Guidance: Updated to ZAR 6.2 billion to ZAR 6.5 billion for FY 2026, implying 20% year-on-year growth.

Adjusted EBITDA Guidance: Tightened to ZAR 1.25 billion to ZAR 1.35 billion, suggesting 43% year-on-year growth.

Adjusted EPS Guidance: Raised to ZAR 5.50 to ZAR 6.00, indicating over 150% growth year-on-year.

Profitability: Expected to achieve net income profitability for FY 2026, the first since the company's inception.

4Bad News, Challenges, or Points of Concern

Merchant Division Performance: Net revenue declined by 4% to ZAR 751 million; expected to remain flat in the next quarter.

ARPU Dynamics: Aggregate Merchant ARPU decreased by 7% due to a growing base of lower-ARPU community merchants.

Competitive Pressures: Noted a decline in the number of active corporate merchants, attributed to increased competition and strategic focus on community merchants.

Economic Headwinds: Concerns about the impact of rising fuel prices and broader economic conditions on consumer disposable income, although no immediate negative impact on credit quality was reported.

5Notable Q&A Insights

Consumer Margin Expansion: Analysts inquired about the potential for higher EBITDA margins in the Consumer division, with management affirming expectations for continued margin growth.

Merchant ARPU Outlook: Questions regarding future ARPU dynamics highlighted the potential for stabilization or pressure based on the mix of community versus corporate merchants.

Impact of Middle East Conflict: Management reported no significant adverse effects on credit quality or collectability, although there are broader economic implications.

Bank Zero Integration: Expected to enhance cross-selling opportunities in the Merchant space, particularly for SMEs.

Provisioning Levels: Management indicated that current provisioning levels for the Consumer loan book are conservative and may be revisited at year-end based on credit experience. This summary encapsulates the key financial metrics, strategic initiatives, forward guidance, challenges, and insights from the Q&A session, providing a comprehensive overview of Lesaka Technologies' performance and outlook for Q3 2026.