Hello, everyone, and welcome to the Lesaka Technologies Fiscal Fourth Quarter 2023 Webcast and Conference Call. As a reminder, the webcast is being recorded and the presentation can be accessed through the webcast link as well as dialing into the zoom conference call dial-in numbers provided. Management will address any questions you may during the Q&A session after prepared remarks. For those joining us via webcast live, you can ask your questions by raising your hand button in zoom, and for those joining via the zoom teleconference line, you cannot ask your questions live. The webcast link, zoom conference call dial-in numbers, as well as our press release and supplementary investor presentation are available on our Investor Relations website at ir.lesakatech.com. Additionally, Lesaka filed its Form 10-K after the U.S. market close yesterday, September 12, 2023, which is also available on our Investor Relations website. As a reminder, during this call, we will be making forward-looking statements, and I ask you to look at the cautionary language contained in our Form 10-K regarding the risks and uncertainties associated with forward-looking statements. Also, as a domestic filer in the United States, we report results in U.S. dollars, under U.S. GAAP. However, it is important to note that our operational currency is the South African rand and as such we analyze our performance in South African rand. In this presentation, we will discuss our results in South African rand, which is non-GAAP. This assists investors' understanding of the underlying trends in our business. As you know, the company's results can be significantly affected by the currency fluctuations between the U.S. dollar and the South African rand. In the presentation that accompanies this call, we will provide all financial metrics as reported in U.S. dollars in the appendix. Now, taking a quick look at today's agenda: Chris Meyer, Group CEO of Lesaka, will start with performance highlights of the fourth quarter of fiscal year 2023, and a review of Lesaka's progress against its key strategic objectives; Steve Heilbron, CEO Connect and Head of Merchant Division, will provide an update on the Merchant Division, which has produced an excellent set of results; Lincoln Mali, CEO of Lesaka Southern Africa, will provide an update on the Consumer Division, which has delivered a third consecutive quarter of EBITDA profitability; and then Naeem Kola, Group CFO, will present an overview of our financial performance for the three months ended June 30, 2023; Chris will then conclude the results presentation with a discussion of the outlook for Lesaka, before the team opens up for Q&A, where we welcome any questions you may have. I'd now like to turn the call over to Chris.

Good morning and good afternoon, and welcome to our fourth quarter 2023 earnings webcast and conference call. The fourth quarter was a strong ending to a transformative year for Lesaka. Excellent growth in the Merchant Division was driven by the Connect and Kazang businesses, and we delivered the third consecutive quarter of profitability in the consumer division, where we have executed on our turnaround strategy and are moving strongly onto the front foot. It has undoubtedly been a year of significant positive change at Lesaka, so I would like to contextualize these results. Only 16 months ago, we announced the finalization of the Connect Group acquisition and our rebranding as Lesaka, positioning us to build the leading Southern African Fintech platform focused on delivering financial inclusion to underserved merchants and consumers. And today I'm delighted to report this robust set of results for the 12 months to 30 June, 2023, especially in light of the increasingly challenging operating environment. These results demonstrate not only the resilience of our business, but also the resilience of our business, and more importantly, the value they place on our services. The tireless dedication of our employees, from whom we have asked a great deal over this period, further underpins our success. So whether providing microloans to grant beneficiaries to help them in their daily lives, or giving merchants quick access to working capital and solutions that help them de-risk their businesses and enhance operational efficiencies, our financial products and services are positively impacting previously underserved communities. We are delivering tangible evidence that our holistic financial service offerings are improving the lives of consumers and merchants across Southern Africa. And much has happened during this short period. Now, consumer and merchant customers have felt the negative effects of high inflation, high interest rates, and the…

We've just completed our first full year as the Lesaka Group, and it's been both challenging and rewarding successfully integrating the Kazang and the Connect businesses into the wider organization. Seldom do all aspects of an acquisition work as planned, but the way in which the teams have worked together and adapted to the changes has been remarkable. At the time of the acquisition, we said there was a close alignment of culture and values between the leadership teams, which has underpinned the transition and has seen us through a difficult trading environment in South Africa. The performance of Kazang and Connect have continually surpassed base case assumptions, and the Lesaka shareholders have received value for their investment, particularly given the increasingly challenging operating environment that Chris spoke about earlier. The Kazang and Connect operations have brought diversity to Lesaka with exposure to different market sectors and revenues. Before getting into the numbers, I'd like to briefly recap what we see as the opportunity in the Merchant Division. With our comprehensive product portfolio covering both cash and digital, and formal and informal markets, Lesaka's unique position allows us to benefit from both the significant reliance on cash in the South African economy and the rapid shift to digital that is currently taking place. This shift opens up opportunities for us to pioneer informal markets and disrupt the incumbents and traditional ways of transacting in the formal markets. We rely on being innovative and responsive to the needs of our merchants, quick development turnaround times and getting product onto the street. We take calculated risks, learn quickly, and are adaptable. We are instilling this culture across the group as we fight for success in these competitive markets. As Chris mentioned earlier, we are a formidable competitor in the Fintech space across…

Good morning and afternoon, everyone. Thank you, Steve. I want to contextualize our consumer situation. As you know, we focus on the social grant beneficiaries in South Africa. Their monthly expenditures have been subject to high inflation, in many cases ahead of reported inflation figures. Our customers often rely on just one grant to cover monthly essentials to keep their households going and feed their families. As the only financial institution focused exclusively on this end of the market, we dedicate 100% of our resources to understanding and servicing their needs as effectively as possible through product design, fit-for-purpose distribution network, and service channels. This focus has led to our making significant strides in the execution of our strategy. Financial year 2023 and quarter 4 have been a story of continued improvement for the consumer division. After breaking even on an adjusted EBITDA basis in the second quarter, we have recorded three consecutive quarters of increasing profitability. Quarter 4 segment adjusted EBITDA was ZAR 46 million, up from ZAR 30 million in quarter 3. For financial year 2023, we reported a segment adjusted EBITDA of ZAR 59 million compared to a loss of ZAR 329 million in financial year 2022. This swing of almost ZAR 400 million in EBITDA in one year was an incredible challenge for us, and I'm immensely proud of what the consumer team has achieved. As a positive contributor to the group, I'm confident we can take this momentum into financial year 2024, which has started with encouraging results. The revenue growth of 27% compared to quarter 4 2022 and 9% from quarter 3, 2023 is further evidence of the progress we've made. Given that, this growth is being achieved off a greatly reduced cost base, as well as in a difficult operating environment, it clearly…

Thank you, Lincoln. As Chris said, it has been a year of great achievements. We have delivered against what we set out just 12 months ago. As my colleagues discussed earlier, we exceeded our revenue and met our EBITDA guidance for the year. Given the challenging trading environment, turnaround and restructure in the consumer division, and the integration process as well as the high growth from Kazang and Connect, overall, a robust performance.\As a reminder, the Lesaka is a domestic filer in the United States. We report our results in U.S. dollars under the U.S. GAAP. However, our operational currency is South African rand, and as such, we analyze our performance in South African rand. In this presentation, we will discuss our results in South African rand, which is non-GAAP. This assists investors' understanding of the underlying trends in our business. As you know, our results can be significantly affected by the currency fluctuations between the U.S. dollar and the South African rand. Amounts reflected in South African rand in this presentation are calculated by translating U.S. dollar amounts reported using the applicable U.S. dollar ZAR exchange rate. We use average quarterly exchange rates to convert our quarterly performance presented from U.S. dollar to ZAR, and an annual average exchange rate to convert our annual amounts presented. As a result, the sum of our quarterly amounts presented in ZAR may not agree to the annual amount presented in ZAR. Q4 2023 includes pre-existing the Lesaka and Connect Group for the full quarter, as was the case for Q3 2023. However, Q4 2022 only includes the Connect Group results from 14 April to 30 June 2022. Thus, the Q4 2023 versus the Q4 2022 comparison is not an exact like-for-like comparison. From our next quarter results, all comparisons will be like-for-like,…

Thank you, Naeem. I would like to now set out our revenue and EBITDA guidance for Q1 '24 and FY '24. We will be providing guidance at a group level this year and not at a divisional level for EBITDA, as we did for FY 2023. So for FY 2024, we anticipate revenue to be within a range of ZAR 10.7 billion to ZAR 11.7 billion. This implies a growth rate of between 14% and 24% on FY 2023. At a group-adjusted EBITDA level, we expect to deliver between ZAR 680 million and ZAR 740 million, implying a 37% to 49% growth rate for FY 2024. This means that at a divisional level, we expect the merchant division-adjusted EBITDA to grow between 15% and 20%, and the consumer division-adjusted EBITDA to grow over 300% in FY 2024. For Q1 2024, we expect group revenue to be between ZAR 2.5 billion and ZAR 2.55 billion, a quarter-on-quarter growth rate of between 1% and 3%, compared to Q4 2023. This represents a year-on-year growth of between 17% and 19%, compared to Q1 2023. We anticipate group-adjusted EBITDA to be between ZAR 160 million and ZAR 165 million for Q1 2024. This is a quarter-on-quarter growth rate of between 1% and 4%, and a year-on-year growth rate of between 122% and 129%. We believe our income before tax, excluding PPA amortization and the impact of any changes in our non-core investments, will turn positive in the first quarter of FY 2024, marking another important milestone in the growth trajectory of Lesaka. I would like to outline our medium-term growth targets and what we see as achievable given our market position and the secular trends. We anticipate that a revenue growth rate of approximately 18% to 20% per annum is achievable over the medium term. Assuming gradual improvement of EBITDA margins, this would lead to a 20% to 25% growth per annum in group-adjusted EBITDA over the same period. These are very exciting numbers that we are challenging ourselves to achieve and to surpass. As we continue to innovate in the Merchant Division and start to grow our account base in the Consumer Division, we believe that Lesaka is positioned to deliver exceptional performance over the coming years. Our outlook provided does not include the impact of any potential business acquisition opportunities we may be evaluating. So thank you for attending the presentation of our annual and fourth quarter results for the period ending 30, June 2023. I would like to invite you to ask any questions you have at this stage.

Thank you, Chris. We're now going to open up the Q&A session. From Zoom, there are two ways you can participate. The first is to use the raise your hand icon, which is at the bottom of your screen. Clicking this will alert the operator that you want to be called on to ask a live question, and so you'll be placed into queue and called on. Just note, you're going to be on mute until you're called on. The second way to participate in Q&A is to use the Q&A widget, which will allow you to type in and text the question. We'll then take questions from there as well. But just note here as well, if we run into a time constraint, someone from the IR team will get back to you if your question is not asked on today's call. With that, we now begin and pause for a moment to build the queue. The first question here is going to be a live question. It's going to be Theodore O'Neill from Litchfield Hills Research.

Thank you, and congratulations on the good quarter, particularly given the economic headwinds. My first question is for Steve. Slide 10, talking about the revenue drivers. If I look on -- could you just help me with the dynamics on this? On the card acquiring chart, it shows the devices employed grew 98% and the throughput grew similarly, while for the value-added services and supplier payments, the devices deployed grew 47%, while the throughput was 30%, so it was lower than. I just wonder if you could talk me through the dynamics of how that works.

Our strategy is first to put out the terminal, so when we talk about our VAS devices growing, and I think we say we grow to 75,000. We went from 51,000 devices to 75,000. That represents the 47% growth. Our strategy is then to activate those devices into card processing. So when we refer to the fact that we grew to 44,900, that is off a prior number of roughly 21,000 odd devices, where we were able to convert the VAS devices into card processing devices. So, in summary, we grew the VAS base by 47%, but within that base, we were able to increase the card acquiring devices by 97%.

That explains it. Thank you. And my next question is for Naeem. Your target for net debt to EBITDA of 2.5x, do you have a date in mind for when you would get to that target, or if not, how do you think about the dynamics that will get you to that number?

Thank you for the question. I think the key point for us is in terms of optimizing our debt, so there are specific plans as part of our cash generation to reduce debt over a period of time. The 2.5x target is our near-term target that we are hoping to achieve, because as we mentioned, this gives us an additional $100 of saving on our Facility G and H, and it's quite meaningful in terms of the reduction of interest costs. We will be looking, and our targets indicate that we should get to that level by Q3 or Q4, FY '24.

Thank you very much. That completes my questions.

The next live question is from James Starke from RMB Morgan Stanley.

Good afternoon, gentlemen. Thanks for the opportunity. I've got a few questions. I think the first are for Steve regarding the Merchant Division, and then I've got one or two for Lincoln on the consumer side. On the Merchant Division, if you could just give us some color, Steve, perhaps around how you view the momentum from -- ?

Yes. We've lost the question. I'm not sure if you can hear it on your end.

Hi. Can you hear me?

Yes, we can hear you.

Right. Yes, so the first question for Steve is around VAS and card acquiring devices, the outlook from a tempo perspective, some color if you can maintain this sort of tempo of rollout. The other one is quite a high-level one regarding load shedding. Throughout the presentation, reference was made to the impact of load shedding, particularly in your client segment. Can you give us a sense of where you feel the level of adaptation has got to? Are your clients able to cope with sort of Stage 2 comfortably or is the Stage 4? Where are we and how far do you think they can actually build that resilience? Then on consumer for Lincoln, you mentioned the post office. Clearly, events are unfolding there quite rapidly. Perhaps you can give us some color on how you see that opportunity potentially to dislodge or take on some of those clients that may have worked with the post office in the past.

Great. So I think, first of all, let me say that for the year ahead. We - merchant division for an EBITDA growth of somewhere between 15% and 20%. Our expectation would be closer to the upper end of that. Having said that, I think it's very important to remember that the merchant division just completed a year in which it grew its EBITDA by north of 40% and it also grew its revenue by more than 25%. So, again, this is very strong growth on top of growth. Let me also say there were some one-off items in the year that we've just had which gave us that more than expected growth, that north of 40%, and, therefore, the 15% to 20% is tempered in that regard. Now, having said that, we have fairly aggressive targets to continue that rollout in terms of the broader platform of VAS devices and then, of course, the conversion to Kazang Pay and additional products. Remember, our philosophy has always been to spin off the core. So, in other words, we had our VAS business and Kazang Pay was a spin-off of VAS, and then the spin-off for deposit advance or Kazang Pay Advance was a spin-off from Kazang Pay. So, these obviously were growing off a much bigger base today. So if you go back a year, we had 21,000 card acquiring devices. We're now at 45,000. We have strong growth targets off that, but it's a smaller percentage because it's off a bigger base and, likewise, off the 75,000. All of those growth trends underpin the 15% to 20% that I started off by answering, and, as I said, our expectation is closer towards the 20% growth end. And, again, let me remind you that that is off a prior year growth number of in excess of 40% growth from a EBITDA perspective. Our momentum actually in Q1 for FY '24 also supports continued strong momentum in terms of device rollout.

The second question, Steve, was load shedding. You want to touch on that?

Yes, so load shedding, first of all, it's a difficult question to answer. I mean, I'd be more comfortable if you asked me a question on financial services than on load shedding. But let me say what we've observed is that when we start getting beyond Stage 4 and we have periods where we have up to 10 hours, not consecutive, but three sessions a day, we then start to find that there is more disruption in the market than our merchants are comfortable with. Having said that, let me also say that, our merchants are incredibly resilient. And, the last quarter of FY '24 was very testing. You'll see that in our commentary we talk about the fact that despite sustained periods of level 6 and up to 10 hours a day, we still grew our VAS throughput for that quarter, if you ignore IMTs, and there's a specific narrative we give on IMT, by more than 3%. So I think the adaptive nature showed us that even in a sustained period of level 6, we were able to grow. But to answer your question specifically, level 6 is an uncomfortable situation, and there's no question that it impacts our traders' ability to trade. It also affects consumers. It is not a sustainable -- well, it's sustainable, but it is incredibly disruptive for our merchants. Anything from level 4 down, I think we've become used to.

Lincoln, questions around the post office?

Thank you, Matt. I think at the human level, the problems of the post office are affecting grant business recipients quite badly, and there's a lot of pain and suffering out there. But there is an opportunity for consumers to make a choice, to look at alternatives. And for us, from a business point of view, the timing is perfect, because we've spent the last probably two years changing a cash logistics company to a customer-orientated and sales-focused organization. Now, we are ready to be able to offer a viable alternative to these customers. And what we've done is to invest in our marketing, both in social media, radio, and a lot of visibility out in the market. Secondly, we've trained our staff quite well and incentivized them to be able to bring more customers on board. Thirdly, we've changed our branch network to have the look and feel that's attractive to customers, so that grant customers can see that this is an organization that wants them and that can give them service. We also have got incentives for customers to be able to shift towards us, and that's something that's very, very positive for us. We've also re-looked at our value proposition, including pricing on ATMs, to make sure that customers can be able to transact with us or transact in any ATM or any POS device when they open our accounts. And the last thing I'll say is that, already in these first two months, we're starting to see that greater momentum, and we're starting to see more customers coming towards us, and we're starting to see some record sales for some of the days in the first two months. So we do think that we are going to be able to take advantage of some of the challenges that the post office is having. But at a larger level, I think SASSA is creating an environment for all financial institutions to be able to go pitch what they can sell to these customers, and we are present in almost any one of those outreaches. And that is giving us another advantage because we've got a sales force that's able to reach out to where the SASSA teams are and be able to present to customers.

Thank you.

Thank you very much. I would now like to go to some of the questions that were submitted online and via the chat box. The first question is from Raj Sharma at B. Riley, who asked about the Finbond share buyback, particularly when would the cash come in? And there is an additional question that's submitted on the same topic regarding what tax rate that investors should use for the proceeds. So if we could just combine those two in a single answer, that would be great.

Naeem, would you like to take?

Both questions? Yes. Thank you. Thanks Raj, in terms of the Finbond process, as we've mentioned, it is subject to some final shareholder approvals. We're expecting those shareholder approvals to come through in about November 2023 and the cash flow to flow to come in around December 2023. And as Chris has touched on this, we're expecting around ZAR 64 million, about $3.5 million at the current rates. In terms of the tax position on the cash flow, we're not expecting to pay any tax on the Finbond realization at the moment.

Next question is also on the topic of the non-core assets. Can you give us a, from a different questioner, can you give us an update on a potential MobiKwik listing?

Naeem, do you want to take that as well?

Sure. So, look, I think in terms of our MobiKwik investment, we maintain fairly close relationships with the company. We have monthly calls with them. What I can say is that, the performance of the business continues to be very robust. There's specific plans and they have been delivering on those plans of growth. I think as it's well known, the Indian stock market, especially the IPO market, did come under pressure. We are seeing some renewed activity on the Indian stock market. And based on our discussions with the founders of MobiKwik, together with the shareholders, they would be looking at the most opportune time to do an IPO. But I think what is quite critical for them is that they want to have a few quarters of profitable cash flow, profitable performance as well as positive cash flow before they launch the IPO. So we're not expecting anything eminent, but I think this is constantly in the thinking process of the founders and they're looking at the right opportunity.

Moving on to the next question. With the transition to -- 2023, what is guidance for 2024 revenue and profit expansion? Particularly, will the cash flow gains driven by the forecast allow for an increase in Lesaka's current share repurchase program?

Matt, I think we missed a small portion of the question, but hopefully I'll address it. And if I don't, please come back. So in terms of our growth expectations, as we said, as I said earlier, we expect revenue, medium term revenue growth to be in the range of 18% to 20%. And that should translate into EBITDA growth of between 20% to 25%. We see that as our sort of medium term expectation, which would be two to three years so beyond FY '24. In terms of specifically use of cash and as that pertains to buybacks, our priority, if I can describe it as that, is, as a growth business, is investing for growth within our business. We have, an exciting growth path in front of us. And, we've touched on the point that M&A is also an important aspect of our growth journey. So, a combination of organic and inorganic growth. And then secondly, Naeem spoke to this at length. We are prioritizing debt reduction as a core strategy. And, Naeem again mentioned the importance of our near-term target of getting our net debt to EBITDA below 2.5x, because if we can get there, there's a meaningful savings for us in terms of interest costs. We're very happy to see this recent 75 bps reduction that we've agreed in principle with our bankers that we expect to see coming-in in the next quarter. But an additional 1% is within sight over the next three quarters. And that must be one of our priorities.

Thank you, Chris, I'd like to ask one more question that was submitted before turning it back to you for concluding remarks. Sven Thordsen from Anchor Securities asks us to please elaborate on the EasyPay issues, particularly why was throughput growth so low?

Steve, take it.

I didn't quite get the end of the question.

The question around throughput, which was flat and issues in the questioners words, issues within EasyPay. Do you want to just elaborate a little bit on our thinking?

Sure. So, as we covered in our narrative, we are reinvesting in the EasyPay platform and we're quite excited about the future of that business. So some of what you're seeing when you compare FY '22 to FY '23 is a function of lost business. The issues that we have struggled with in the business to some extent are the fact that we need to reinvest in some of the technology. We also lost some key billers. A lot of that has been addressed and the year ahead for us right now, we're expecting growth in terms of both bill payment and VAS, but at the same time we are reinvesting in the platform. So it really has been a case of stabilizing, stabling our billers, developing our tech, also addressing some of the areas that from a product innovation perspective and I think all of that sits behind the reason -- the answer to your question.

One additional question, Chris, is what are you seeing on the M&A front? What are your plans over the near medium term with regards to mergers and acquisitions?

So, as we have said before, M&A does form an important element of our overall strategy. Our ambition is to build the leading Fintech platform focused on mergers and consumers in the informal economy and in the low-income groups in our country. And we do believe that an element of that will be achieved through further M&A or inorganic activity. In particular, we are actively looking and continuously evaluating opportunities where we see opportunities to add scale, adding customer numbers, or to build in terms of our proposition for our customer base, so to add additional functionality or additional services. And we see this mainly as being in our merchant division. I think our consumer division would see probably more organic growth driven, but in the merchant division where we have the opportunity to layer in more services for our merchants, we feel this is important. It goes to the core strategy of our business, which is deeply entrenching ourselves with those merchants, building, layering in services for them, so that we become entrenched in their business and help them grow and compete, as Steve said. So, continuously looking at opportunities. Our mantra on this is disciplined M&A. It needs to work for us on a number of metrics. And we will have an extremely high bar in place when we look at opportunities. But as I say, we continuously do so at any point in time.

Yes, I'd like to conclude the question-and-answer session, so that we could turn it over to Chris for concluding remarks and wrap-up this call before the market open. For those of you who have submitted questions that we did not have time to get to, we will reach out to you directly to ensure that your questions are answered. Chris, over to you for concluding remarks.

Matt, thank you. Thank you very much, and thanks everybody for joining us. As we said, 2023 has been a transformative year for Lesaka. We are extremely proud of the turnaround we've achieved, illustrated by the improvement in the last year of over ZAR 670 million in operating income and almost ZAR 440 million in net income before tax after adjustment for the amortization of required intangibles and that impairment on the UEPS business that we spoke to. Lesaka is positioned for growth. Our market opportunity is exciting, and we are fully focused on delivering to our FY '24 guidance. Thank you.