Lesaka Technologies Q1 Earnings Call Highlights

Key Points

• Q1 revenue grew 8% to ZAR 1.58 billion, but adjusted EBITDA fell 17% to ZAR 220 million and adjusted earnings per share declined 26% to ZAR 0.72, still above guidance.
• Results diverged by segment: consumer revenue rose 24% and enterprise revenue 19%, while merchant EBITDA fell to ZAR 77 million amid margin pressure and higher costs. Management expects merchant earnings to recover from Q2.
• Lesaka maintained full-year guidance, including adjusted EPS of ZAR 7.50–8.50, and expects Bank Zero’s acquisition to close by year-end or January 2027. Net debt increased to ZAR 2.73 billion, with leverage expected to rise temporarily to about 3 times in Q2.

Lesaka Technologies NASDAQ: LSAK reported first-quarter fiscal 2027 net revenue growth of 8%, but adjusted earnings declined as weaker merchant profitability and higher group costs offset gains in its consumer and enterprise businesses.

The South African financial technology company reiterated its full-year guidance and said it expects merchant earnings to recover from the second quarter. Management also said it believes its acquisition of Bank Zero is in the final stages of regulatory approval.

Net revenue rose to ZAR 1.58 billion, while group adjusted EBITDA fell 17% from a year earlier to ZAR 220 million. Adjusted earnings were ZAR 60 million, or ZAR 0.72 per share, down 26% on a per-share basis but above the company’s guidance range of ZAR 0.40 to ZAR 0.60.

Executive Chairman Ali Mazanderani said Lesaka met its guidance on all three measures, marking its 17th consecutive quarter of meeting profitability guidance.

Group CFO Dan Smith said Lesaka now deducts network fees, including interchange passed to other parties, from net revenue in corporate card acquiring, as it already did in community acquiring. Prior periods were restated on the same basis. The change reduced reported net revenue but did not affect adjusted EBITDA or adjusted earnings, he said.

Merchant turnaround underway

Merchant net revenue fell 7% to ZAR 675 million, while segment adjusted EBITDA dropped to ZAR 77 million from ZAR 158 million a year earlier. Smith said the decline reflected lower revenue, margin pressure and higher costs, including restructuring and duplicated expenses.

The prior-year revenue figure included ZAR 26 million from an exited ATM business and about ZAR 19 million from a data services contract that was not renewed. Excluding those items, merchant revenue was broadly flat, Smith said.

CEO Lincoln Mali said Lesaka is reshaping its merchant team, removing duplicated costs and working to earn more revenue from growing transaction volumes in its community business. The company also launched its own prepaid voucher through its ADP business on Oct. 1.

Active merchants were flat at 133,000. Community merchants rose 2% to 109,000, while corporate merchants fell 11% to 24,000 amid competition and churn associated with the ATM exit. Mali said Lesaka does not expect its corporate merchant business to return to growth before fiscal 2028.

Mazanderani said merchant adjusted EBITDA is expected to exceed ZAR 130 million in the second quarter and reach a record for the segment in the fourth quarter. He said the previous peak was above ZAR 180 million.

Consumer and enterprise growth

Consumer net revenue increased 24% to ZAR 668 million, supported by growth of 37% in lending revenue and 42% in insurance revenue. Segment adjusted EBITDA rose 38% to ZAR 206 million.

Active consumers increased 11% to 2.1 million, and consumer lending originations grew 39% to ZAR 1.14 billion. The outstanding consumer loan portfolio rose 41% to ZAR 1.58 billion. Insurance gross written premiums increased 46% to ZAR 167 million.

During the question-and-answer session, Mali said an increase in the simple interest rate from 12% to 15% applied only to the company’s ZAR 5,000 loan over nine months. He said Lesaka priced for a modest increase in expected risk associated with that product.

Enterprise net revenue increased 19% to ZAR 263 million, while segment adjusted EBITDA rose 28% to ZAR 29 million. Smith said higher volumes and improved take rates helped the business, although some anticipated ADP revenue had taken longer to materialize.

Funding needs and Bank Zero

Lesaka invested ZAR 253 million in its lending books during the quarter, contributing to a net operating cash outflow of ZAR 113 million. After capital expenditure, the outflow was ZAR 261 million.

Net debt rose to ZAR 2.73 billion from ZAR 2.46 billion in June, taking leverage to 2.2 times from 1.9 times. Smith said he expects leverage to rise temporarily to about 3 times in the second quarter as lending increases during the festive season. Cash conversion is expected to remain under pressure in the second quarter before improving in the second half, he said.

Mazanderani said the Bank Zero transaction could still close by the end of the calendar year, although it may be more prudent to expect completion by the end of January 2027. Management expects the bank’s deposits eventually to fund Lesaka’s lending books in place of borrowed money. Smith cautioned that the benefit depends on completion and subsequent migration of the books.

Smith said Lesaka’s provision coverage was 5.5% for its consumer loan book and 19.3% for its merchant book. More than 99% of the consumer book was performing, compared with about 85% of the merchant book, he said.

Guidance maintained

For the second quarter, Lesaka forecast net revenue of ZAR 1.62 billion to ZAR 1.72 billion, group adjusted EBITDA of ZAR 280 million to ZAR 320 million and adjusted earnings per share of ZAR 1 to ZAR 1.40.

The company reiterated full-year guidance, inclusive of Bank Zero, for net revenue of ZAR 7 billion to ZAR 7.7 billion, group adjusted EBITDA of ZAR 1.45 billion to ZAR 1.6 billion and adjusted earnings per share of ZAR 7.50 to ZAR 8.50.

About Lesaka Technologies (NASDAQ:LSAK)

Lesaka Technologies, Inc is a financial technology company that provides digital payments and financial services in southern Africa. The company serves both consumers and businesses, with offerings designed to facilitate electronic payments, money transfers, banking access and cash management in markets where traditional financial services may be less accessible.

Lesaka's consumer-focused services include transactional accounts, payment solutions, money transfers and other financial products delivered through digital channels and its service network.

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