Hello, everyone, and welcome to Lesaka Technologies 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 in to the Zoom conference call dial-in numbers provided. Management will address any questions you may have at the end of the presentation. For those joining us via webcast, you can ask your questions by using the raise your hand button in Zoom. And for those joining via the Zoom conference line, you cannot ask your questions live today. The webcast link Zoom conference call dial-in numbers as well as our press release and supplementary investor presentation are available on the Investor Relations website at ir.lesakatech.com. Additionally, Lesaka filed its Form 10-Q after the U.S. market closed yesterday, which is also available on the 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-Q 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 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 currency fluctuations between the U.S. dollar and the South African rand. Taking a quick look at today's agenda. Chris Meyer, Group CEO of Lesaka, will start with an overview of performance highlights for the first quarter of fiscal 2024 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, followed by Lincoln Mali, CEO of Lesaka, Southern Africa, who will take us through the Consumer Division's performance this quarter. Naeem Kola, Group's CFO, will present the detailed overview of our financial performance for the 3 months ended September 30, 2023, before handing back to Chris to update you on the Q2 and full year guidance and open the floor for any questions you may have. I'd like to now turn the call over to Chris.

Good morning and good afternoon, and welcome to our first quarter 2024 earnings webcast and conference call. Today, I'm pleased to present the continuation of the growth in our Merchant division, and another quarter of continued improvement in the Consumer division as both our turnaround efforts and growth initiatives bear fruit. Lesaka is a leading fintech in Southern Africa with over 1.3 million grant beneficiaries using our EasyPay Everywhere financial services platform and over 84,000 MSME merchants using our fintech solutions to grow their businesses. Our dual-sided consumer and merchant ecosystem penetrates deep into South Africa's informal markets, providing us with an opportunity to meaningfully drive financial inclusion across previously underserved communities. South Africa's economic environment remains difficult, which has made executing our strategy more challenging. Despite seeing a reduction in load shedding this quarter, the effect of high interest rates, inflation and unemployment continue to negatively impact the wider South African economy. And with this in mind, these results demonstrate not only the resilience of our business model, but also the resilience of our customers and the value they have placed on our services. We achieved an important milestone this quarter. I'm very pleased to report that at an operating income level, we did a profit for the first time in 5 years. And while it's just over ZAR 4 million this quarter, it is evidence that the strategy set by our Board to develop this financial technology platform, servicing the digital and cash needs of South Africa's consumers and merchants can generate significant shareholder value and is starting to pay off. It is also the first quarter that is directly comparable to the prior year, with the Connect Group included for the full period in both quarters. The improvement from an operating loss of ZAR 80 million to…

Thank you, Chris. Before I run through our Q1 performance, I will briefly outline our merchant strategy. We have a comprehensive product portfolio covering both cash and digital and formal and informal markets. Our 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. As I referenced at our recent annual results, this shift opens up opportunities for us to pioneer informal markets and disrupt the incumbents and the traditional ways of transacting in the formal markets. We rely on being innovative and responsive to the needs of our merchants with quick development turnaround times and the ability to get products onto the street without delay. We take calculated risks, we learn quickly, and we are adaptable. We are instilling this culture across the group as we fight for success in these competitive markets. Critical to our strategy is the holistic offering we have for our merchants. We have numerous competitors on an individual product basis, but our holistic solution is proving to be both durable and an effective differentiator. As a fintech company, our approach is unique and disruptive from cash lots and immediate digitization, quick access to capital for growth opportunities, a comprehensive VAS product suite to attract consumers to merchant stores to a supplier payment platform and industry-leading payment technologies, we offer solutions that make a meaningful difference to our merchants' daily trading, risk management and business administration. We will entrench and extend our position in the informal and formal MSME markets by continuing to embed ourselves as a critical partner to our merchants by offering real value. We offer 4 primary solutions to our merchants. Our portfolio of products result in increased consumer adoption, driving higher volumes…

Good morning and afternoon, everyone. Thank you, Steve. I'm pleased to report continued profitability in the Consumer Division with another increase in segment adjusted EBITDA. As the only financial service provider focused exclusively on grant recipients, we have dedicated 100% of our resources to understanding and servicing their needs as effectively as possible through product design fit-for-purpose distribution networks and service channels. At our fourth quarter results, I spoke about the various initiatives that we have implemented to address this, including increased marketing and budget, investment in our sales force with incentivization focus on active account based growth, improved onboarding systems, reducing friction on activations, incentives to promote customer switching, brand renewal and repositioning to enhance customer experience and convenience and continued engagement with SASSA in support of their programs. I'm pleased to report that we are starting to see some very encouraging results coming through. These are part of wider initiatives to fundamentally change the Consumer Division to a sales and customer-focused business. We have seen a broader step change in account openings over the past few months as our initiatives start to pay off. Our gross account activations were 76,000 for the quarter which is an improvement from the 45,000 in the first quarter last year. It was encouraging to see a reduction in churn, which resulted in a net account activation of over 42,000 compared to 2,700 in quarter 1, 2023. Natural chain is a factor of the ground space as child support grant cease when a child turns 18 and as mortality impacts old aid grant recipients. We estimate this to be approximately 10% to 12% per annum. I'm excited about the growth we have seen coming through, which evidences the persistence our teams have shown over the past few quarters. I've already referenced our EPA…

Thank you, Lincoln. As Chris said, the first quarter of fiscal 2024 year reflects positive operational momentum in both divisions translating into financial performance despite the challenging trading environment. We again delivered against what we set out to do with revenue reported at the upper end of our guidance and group adjusted EBITDA within our guidance for the quarter. The Consumer Division is seeing signs of increased momentum in our key revenue drivers and the overall trends in our merchant division remain positive. It is also important to note that we incurred ZAR 6.1 million of restructuring costs mainly in the merchant ATM business without which we would have exceeded our EBITDA guidance. As a reminder, Lesaka is a domestic filer in the United States. We report results in U.S. dollars under U.S. GAAP. However, our operational currency South African rand and as such, we analyze our performance in South African rand. This is the first quarter that is directly comparable to the prior year with Connect Group included in full for both periods. Looking at the consolidated income statement for the quarter, we grew revenue by 19% to ZAR 2.54 billion compared to Q1 2023 and 2% compared to Q4 2023. In U.S. dollars, we reported consolidated revenue of $136 million for the quarter, up 9% compared to $125 million in Q1 2023 which is reflective of the 9% weakness in the ZAR against the U.S. dollar over the period. At an operating income level, we achieved an important milestone for this quarter, reporting a profit of ZAR 4.2 million for the quarter compared to a loss of ZAR 80 million in Q1 2023. Depreciation and amortization of ZAR 109 million for Q1 2024 include ZAR 67 million related to the amortization of acquired intangibles. Related to the Connect…

Thank you, Naeem. Turning to our guidance. I would like to provide our quarter 2 revenue guidance of ZAR 2.65 billion to ZAR 2.75 billion and group adjusted EBITDA of ZAR 170 million to ZAR 180 million. I would also like to reaffirm our full year 2024 revenue guidance of ZAR 10.7 billion to ZAR 11.7 billion, and group adjusted EBITDA of ZAR 680 million to ZAR 740 million. Our outlook provided does not include the impact of any M&A transactions that may occur. Thank you for attending the presentation of our first quarter results for the period ended 30 September 2023. And I would like to invite you to ask any questions you have at this stage. Thank you.

[Operator Instructions]. The first question is going to be a live question from Raj Sharma of B. Riley.

Yes. I wanted to understand, first of all, on the consumer side, what are the consumer dynamics of adding the EPE accounts in -- can you talk a little bit about the immediate opportunity set that's available for customer acquisition and also the cadence of the churn going forward. I believe it can be pretty up and down in the last several months. But could you talk a little bit about the natural/deliberate churn on the accounts and where do you see that going? And then I have a follow-on question on the Connect side.

Thanks, Raj. I'll take the question on churn. And then I'm going to ask Lincoln maybe to speak a little bit about the growth opportunity in the market as we see it. So we'll take it the other way around, if you don't mind. So just in terms of churn away, we think about it as, firstly, there's what we would call natural attrition in the grant space. And that really is to do with in the old-age grant category, firstly is if a grant recipient passes away. And then the other natural -- piece of natural attrition is in the child grant beneficiary space where the child achieved the age of 18, and therefore, the parent no longer qualifies for that grant. Those natal attrition categories account for approximately 10% to 12% churn -- natural churn in the grant space each year. And if you look at our numbers, that is generally the churn that we are seeing. We're seeing about 10% to 12% churn in our numbers at the moment per annum. In Q4, we did have a spike in churn, and that was mainly to do with some cleanup that we did in the account base with some dormancy, which we do from time to time. So that was a decision on our part. It was an action we took at the time. But that -- and that is why we saw some spike in churn for that quarter. This quarter, we back to what we would consider sort of the normal ranges. Lincoln, if you want to pick up the question on the growth opportunity and the immediate focus in that regard.

Yes. So Raj, if you remember the conversations we've had over the previous quarters. The first phase of our turnaround was on us taking out cost out of the business, training our staff, repositioning our brand, improving the relationship with SASSA and stakeholders. And as we indicated, those -- that part we've been able to complete. We now focus on growth and we've got 2 growth opportunities. The first one is that every month, you have customers or grant recipients who getting a new grant and we are always positioning ourselves to be one of the key financial institutions that are able to attract that customer base to come to us versus going to somebody else. The second one are those customers that are leaving the post office. And so those two combined opportunities are giving us the opportunity to be able to position ourselves to take advantage of those. So if you look at this quarter, we've been able to have gross activations of 76,000 for the quarter and the net number is 45,000. And we're starting to see that momentum because of our sales initiatives, our rebranding exercise, our communication and marketing, we think we are well poised to be able to grow our customer base much more than we had done in the previous year. So those opportunities are there for us, and we are able to take advantage of them.

Great. And could you also talk a little bit about this on the Connect side, Steve, the Kazang Pay Advance pulling it back. Is it -- was it competitive pressure? Could you give more color on that? Was it a competitive product? Or was it purely just your own product that needed to be revamped?

Sure. Raj, so I think as I mentioned in our presentation, we have a philosophy of experimenting with product. The -- on the back of our Kazang Pay product, our advanced product is something that we brought to market last year. We had a number of vintages based on certain algorithms that we launched, and we were not happy with the performance of those loans. Now as I mentioned, on an overall basis, we made a small profit but we decided to pull the product back into the warehouse. We're going to make some tweaks and relaunch the product into what is a healthy Kazang Pay base, but we need to tweak some of the data points and some of the learnings in the credit piece. So we were just not happy with the response that we were getting. So we felt to pull back, reengineer and we will relaunch. But we are excited today, if I can just say, I think we're still quite excited about the opportunity. And we see an experiment like this not as a failure, but as part of the learning, which is true to really the culture that we've been talking about present -- from each quarter presentation to the next.

Our next three questions we have came over the Q&A widget. So I'm going to go one by one. Guys, can you give us a sense of the time line for potential M&A, your thoughts on the market and how you would go about funding any potential transactions, what you're looking for?

Steve, do you want to take the question? M&A time line and thoughts on the market?

Yes. So I think timing is always very difficult to talk to. I think at this particular point, it's fair to say that we are engaged with specific targets. These are very real opportunities. We're making very, very good progress. We would -- we are expecting and hoping that we will close on transactions within the Q4 financial -- sorry, within the FY '24 financial year. In terms of funding those transactions, again, this will be a combination really of really using our own equity, raising equity and a combination of debt. Some of the transactions we are looking at will involve a straight share swap.

I think if I could add to that, for us, we have a number of important parameters that we put around the funding strategy, the capital market strategy pertaining to M&A, we've spoken about a focus on our debt levels and EBITDA to debt ratio. So that's an important thing. Secondly, value will always be a key determinant. And thinking about relative value to our shareholders and the relative value of our share at any point in time. So we're very mindful around accretive opportunities and disciplined M&A underpinning anything that we might bring to the table.

If I can maybe just add to what Chris is saying is besides being accretive, the core thrust is either bolt-on to create scale in the areas that we currently pay -- play, but also critical to this is the addition of merchant services in new product offerings to our existing client base in terms of focus on the merchant space. And I think we did say the majority of our focus from an M&A perspective is on the merchant business.

Thanks for that color. Moving to the Consumer business, how much of consumer growth is coming from Postbank?

So I'll start to maybe approach the question and I'll maybe bring Lincoln in. So there's no empirical evidence of exactly where growth comes from. We have anecdotal evidence speaking to our customers as we onboard them, and we can see what's going on in the market. we can see the significant reduction in numbers in terms of Postbank's customer base, that is public information. So yes. I think Lincoln talked about 2 categories. Category 1 is new grant recipients entering the base. And that is about a 10% number per annum coming into the universe of grant recipients. And then there's this trend moving away from the Postbank post office. I think on the whole, that trend is -- of moving away from the post office is the biggest trend, and that is the opportunity that is most present for us. And that is something that we're obviously very well focused on and positioned for.

Yes, if I could just add to that. What's important for us is how we become competitive and how we have a value proposition that appears to customers, so that we're not just relying on something goes wrong with the post office. We want customers to be attracted to us to want to see a very proposition that speaks to them. And we want them to want to come to us. And we're getting a lot of referrals from our existing customers to other customers because of the services that we provide. We're also getting a lot of traction from our engagement with community leaders and all of that. So all of that work helps us to position ourselves well. So if there are troubles in the post office, obviously, it will count in our favor. But our focus is making sure that we are relevant and we give a proposition that makes sense for customers. Because if we just only rely on problems in the post office, if the post office fixes this problem, then we don't have our room to grow. So there is a competitive market out there with banks and retailers, and we want to be one of those that are preferred by customers because of our value proposition.

Next question was submitted from David Garrity. Congratulations on a solid quarter and the good news on the reduction of funding costs. On the midpoint revenue guidance that you've given, you indicated about 12.5% year-over-year growth. This is lower than previous year's growth. What are the factors leading to this?

So I think -- David, thank you very much for the question. I think firstly, you must remember that prior year -- so the growth between FY '22 and FY '23, you need to take into account the inclusion of the Connect Group for a partial period. So the addition of the Connect Group into our numbers last year make it very difficult to make a like-for-like comparison when we look at FY '24 and beyond. And that is why we gave guidance at the start of the year, so last quarter, around expected revenue growth, medium-term targets of around -- I think we said 18% to 20%. So that would be our full year sort of expectation around guidance where we said our full year revenue expectation of between ZAR 10.5 billion to ZAR 11 billion. And we also gave, if you recall, an indication of a medium-term outlook beyond that. So we believe the guidance we're giving today in terms of next quarter is consistent with that medium-term outlook and full year guidance. And I also think what's important is to highlight is we're coming into Q2 and Q2 for us is seasonally an important time. Seasonally, it's our busiest time, particularly in our merchant business. And you would have seen that highlighted in the slides in the presentation earlier. So I think we need to look at the revenue guidance within that context as well.

The next question is going to come in from the phone from Theodore O'Neill at Litchfield Hills Research.

Congratulations on the good quarter. My question is about ARPU in the consumer segment. You're showing a 12% growth year-over-year in ARPU. And I was wondering a couple of questions around that. Should we expect that number to slow given the economic headwinds? And then as we think about that number going forward, do you target a growth rate for that or an absolute number to achieve in ARPU? Just wondering if you could talk about those issues.

I'm happy to take the question. Theodore, thanks for the question around ARPU. So for us, yes, we're happy with the growth that we've seen in ARPU. For us, the focus is actually around penetration into our customer base in terms of the ancillary products that we provide. So just to remind the primary base, our focus is around the EPE account and where we were -- and transactional fees on the account. And from there, we look to offer both insurance and credit to our customer base. And our focus is growing the penetration levels. And the growth in ARPU has come from moving our insurance penetration levels from -- we spoke about moving from 25% to 30%. If you look back 18 months ago, that number was around 20%. So we've seen very good growth in penetration and insurance. And we've maintained a penetration of around 40% on our loan book, even with the growth that we've seen in the customer base. So those are the drivers. We haven't set a target, if you like, in terms of overall penetration. I think it's too early for us to set that out, but that should give you a sense of what's been -- what's underpinned the overall increase in revenue primarily.

Can I maybe also add that in these difficult times, we are also watching the quality of our businesses. And even during this difficult time, the loan loss ratio has remained stable but we continuously watch the quality of our book, and we have not seen any material deterioration in that regard. And also in the insurance side, we still have high collection rates in that space that are above industry norms and even our lapse rates are well below what's happening in the industry. So therefore, for us, we are watching not just growth, but also quality of that growth. And therefore, as Chris was saying, and ARPU that is resilient during these difficult times.

A few more here that have been submitted over the chat. How does the removal of Kazang Pay Advance impact growth in the Merchant Division in the next few quarters on other revenue lines?

Steve, do you want to pick that up?

Yes. So I think let me start off by saying that essentially, the momentum and numbers that we have disclosed support the guidance that Chris has given in terms of Q2 and FY '24 guidance. So we have factored all of that into the numbers that we've presented. I'm hoping, and we are hoping that we can bring Kazang Pay Advance back to the table. We would like to try and do that in Q3 or early Q4. The impact of that from a profitability perspective, though, I think will be enjoyed more in FY '25. So as we mentioned earlier, we pulled the product. It's more or less P&L neutral over the period. We -- as I mentioned in our presentation, we made a provision on a conservative basis in Q1 of ZAR 3 million, which affected the Merchant segment adjusted EBITDA. We believe that we are adequately provided at the end of that quarter and we look to -- we're now tweaking the product and we'll bring it back.

Great. And our final question today. Can you offer an update on MobiKwik performance and its listing plans?

Yes, we'll do. I'm happy to take that. Maybe quick. So I think overall performance in the business continues to be good. They have reported positive EBITDA for, I think, at least 2 consecutive quarters and the cash generative. So the focus in the MobiKwik business, when we talk to management and founders is building a track record of EBITDA positivity and cash generation to put them in a position to list the business. We spoke to them recently. They reaffirmed to us their intention is to look to IPO the business. The expected range that we understand it is in the second half of calendar 2024. So somewhere after June, probably around September, that is their focus. And so we remain positive in terms of the overall -- our overall exposure to MobiKwik and the direction of travel of the business.

Well, great. Thank you, everyone. We've hit our hour mark. So we're going to wrap it here. And a reminder to everyone after you disconnect, there will be a replay of this webcast on the Lesaka Investor website. If there were any remaining questions, someone from the IR team will reach out to you shortly to answer them. We thank you, everyone, for your participation.