Webcast and conference call for the first quarter of fiscal 2025. As a reminder, the webcast is being recorded, and the presentation can be accessed through the webcast link as well as by dialing into the Zoom conference call. Dial-in numbers are provided. Address any questions you may have at the end of the presentation. For those joining us via the webcast, you can ask your questions live by raising your hand in Zoom. For those joining via the Zoom tele 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.lisakatek.com. Additionally, Lesaka filed its Form 10-Q after the US market close yesterday, 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-Q regarding the risks and uncertainties associated with forward-looking statements. Also, as a domestic filer in the United States, we report results in US dollars under US 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 in understanding the underlying trends in business. As you know, the company's results can be significantly affected by the currency fluctuations between the US dollar and the South African rand. Taking a look at today's agenda, Ali Mazanderani, chairman of Lesaka, will give an overview of the quarter. Steve Heilbron, head of corporate development, 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. Dan Smith, group CFO, will present an overview of our financial performance for the three months ended September 30, 2024, and provide an update on guidance. Thereafter, we will open the call for Q&A. I'd like to now turn the call over to Ali.

Good morning and good afternoon. FY 2025 is another transformative year for Lesaka, and I'm pleased that in the first quarter, we have delivered on our representations by meeting the midpoint of our guidance at both the revenue and EBITDA level. We achieved revenue of 2.6 billion rand and EBITDA of 168 million rand, excluding transaction costs for Modumo, operating income of 30 million rand compared to 4 million in Q1 2024, and fundamental earnings of 43 million rand from a loss of 5 million rand in Q1 2024. We signposted last quarter that we would introduce in this quarter a new measure to help augment gross revenue as a representation of top-line growth. In this respect, we are disclosing for the first time net revenue, which we believe will achieve the objective better than gross profit. Net revenue is defined as gross revenue less the cost of prepaid airtime sold by us and commissions paid to third parties selling our VAS products. Our net revenue for Q1 2025 was 1.056 billion rand, representing organic growth of 16% from Q1 2024. This indicates an average EBITDA to net revenue margin across the group of approximately 16%. In Q1 2025, we see considerable opportunity to increase that margin over time as we further scale the platform, increase our competitive moat, and evolve the multiproduct offering. We are building a multiproduct platform organized around the customer. As a reminder, we have two segments of customers: consumers and, within the business segment, now further differentiated between micro merchants, merchants, and enterprises. In FY 2025, we expect the consumer segment to contribute approximately one-third of segmented adjusted EBITDA, and the business segment approximately two-thirds. Today, we serve 1.7 million consumers and 122,000 merchants. While there is an enormous opportunity for us to grow the…

Thank you, Ali. Firstly, I'd like to again formally welcome Paul Kent and the Adumo and Gough teams to Lesaka. The transaction closed on October 1, 2024. Adumo will form part of the group for the second quarter and will be reflected in our Q2 results, presented in February next year. We have already held numerous sales and product workshops and leadership interactions, including having Paul join our group EXCO. We are encouraged by these initial engagements and look forward to further developing our formal market merchant offering. I'd like to support what Ali has spoken to in a merchant context. We operate in a large and growing market within which we believe global fintech trends will play out in Southern Africa. We have invested significantly over the past two and a half years into building a platform comprising a unique comprehensive offering across the merchant spectrum. We continue to invest, innovate, and evolve to position ourselves to optimize the opportunities ahead of us. We operate in an estimated SAM of almost 900,000 merchants, who experience daily pain points and inefficiencies in running their businesses. This includes limited access to digital payments, poor cash management solutions, limited access to capital, and the lack of availability to an elastic offering. Our comprehensive merchant solutions solve for these pain points, and we are making a real difference in the lives of our merchants. Critical to our strategy is the broad offering we have for our merchants. We have competitors on an individual product basis, but our comprehensive solution is proving to be both durable and an effective differentiator. With the closing of the Adumo transaction, Lesaka now has a leading position in both the micro merchant sector in the informal market and in the small to medium merchant sector in the formal…

However,

this has maintained the quality of the book. With the commencement of a down cycle in interest rates and a more positive economic outlook, we have seen an increase in lending activity. Disbursements in Q1 were 166 million rand, with our loan book at 273 million rand. This represents an 8% increase in disbursements over the previous quarter. As a reminder, last year, we suspended Kazang Pay Advance, which focused on micro merchants. We are currently in the pilot phase of a relaunch, which we will hopefully be in a position to start commercial rollout in the second half of the year. With new lending products in the formal and informal markets that Adumo and Gough present and the cross-sell opportunities into the acquired merchant pay supported by an improving interest rate environment, we anticipate an enhanced lending performance in FY 2025. Our enterprise market solution is strategically important to us and completes our merchant offering. Our nascent enterprise business brings an opportunity to leverage larger corporate customer relationships across our broader consumer and merchant ecosystems. We continue to invest in and enhance our technology and believe this will be an important contributor in future years. The new operating model with enterprise as a distinct pillar will increase our focus and improve the performance of this business. We have a network of over 620 integrated billers and are one of the largest in the country, enabling enterprise clients to offer value-added services to their customers. We have seen a strengthening in our position in the formal VAS distribution market, with healthy growth in throughput, led by prepaid electricity purchases increasing by 36% year on year and bill payments up 18%. Our Prism solution is one of only a few providers of proprietary security technologies and opens a revenue opportunity with…

Thank you, Steve. It has been another successful quarter for the consumer business as well as a busy one. As we prepare for the rest of financial year 2025, we've already launched a new front-end platform to improve our sales capabilities and approved an enhanced learning product currently under consideration to be launched in quarter two. We welcome Steve and the Adumo payouts team to the consumer business from the first of October 2024. As a reminder, our consumer business operates in the lower LSM segments in South Africa, which is estimated to be approximately 26 million consumers. Within that, our core focus is on the grant beneficiary market, of approximately 12 million monthly grant recipients, where we estimate our market share to be approximately 11% of this market. Some examples of the pain points for grant beneficiaries include lower smartphone penetration and expensive data preventing easy use of digital channels, expensive and opaque pricing structures, limited financial services, and long waits at traditional branch networks. We have invested heavily in understanding these pain points of our clients and are continually designing and adjusting our products and distribution networks to align with their needs. For these consumers, we provide a suite of services to help them access their money, make payments, buy essential services, get credit, and protect their families. We service our existing base and attract new consumers through a national network of 220 branches, 450 ATMs, over 600 sales and service consultants, and over 100 sales and service flexi consultants. Our USSD invoice branch options are becoming very popular choices for our consumers, which I will talk about. Looking at our KPIs, we've grown our EPE customer base by 14% over the past year to over 1.5 million customers, of which 1.3 million customers or 88% are permanent…

Thank you, Lincoln. Good day, everyone. I'm delighted to be joining as CFO at this exciting stage of Lesaka's evolution. I have deep experience in M&A, capital markets, and capital allocation, and I look forward to playing a key role in Lesaka's development as we add further scale and solutions to our platform. I've been fortunate to be closely involved with the Lesaka team over the past three years in establishing Lesaka as the leading independent fintech in Southern Africa. I will be working closely with our board, investors, funders, and business leaders to ensure that Lesaka is optimally positioned to deliver on our organic and inorganic opportunities, whilst adhering to optimal capital allocation principles and a focus on shareholder value creation. As a reminder, Lesaka is a domestic filer in the United States. We report in US dollars and under US GAAP. However, our operational currency is the South African rand, and as such, we analyze our performance in South African rand. At a group level, our revenue was at the midpoint of guidance provided, at 2.6 billion rand, up 16% year on year. On a net revenue basis, we grew our top line. To recap what Ali mentioned earlier, net revenue is calculated as GAAP revenue less the cost of prepaid airtime sold and commissions paid to third parties selling our VAS products. This measure will eliminate fluctuations in revenue primarily due to the mix in pin versus pinless airtime sales and provides a better representation of our top-line growth. The consumer division continued delivering impressive growth with revenue increasing 30% year on year to 378 million rand. With the high repeat customer rate in our loan book and collection rate in our insurance book, our consumer division provides a sticky annuity base with high levels of predictability.…

Finally, as you can see from the growth trend in our group

adjusted EBITDA, we have made great progress in the past few years since we started this journey. We have added and will continue to add scale and proprietary solutions to our platform, enhancing our ability to innovate and disrupt as we entrench ourselves as Southern Africa's leading independent fintech. With that, I would like to close the presentation and address questions you may have for management. Thank you.

Results Q&A with the executive management team, led by Ali Mazanderani, executive chairman of Lesaka. He is joined by Lincoln Mali, CEO of Lesaka Southern Africa, Steven Heilbron, head of corporate development, Dan Smith, Lesaka's chief financial officer, and Naeem Kola, chief operations officer. Thank you very much for your time. Please raise your hands or post in the question chat box as we proceed with this live Q&A. Our first hand up today, Raj Sharma from B. Riley Securities. Ali, this is directed to you. Please, can you unpack what you mean as the huge pool of profits in the payment space currently sitting with the banks and waiting for disruption? How quickly will this materialize for fintechs in South Africa based on your experience and research?

Thank you, Bernadette, and thank you, Raj, for the question. Firstly, just to reiterate, our biggest competitor is really inefficiency. We strive to reduce the cost of the services we provide, and we strive to provide a suite of services that give our customers the offering that they deserve. That is the principal axis of energy. However, there is a large existing profit pool in the banking space. To give you a sense, I'll provide some sort of referencing of what that could look like. This is specific to the merchant acquiring business and ancillary services, so it doesn't represent the entirety of our time. In the merchant acquiring space, the total processed volume at retail of the big five South African banks is close to $100 billion today. It's fair to assume a net margin for merchant acquiring and ancillary services of about 100 basis points. Generally, an industry reference for that always would obviously differ by segments and by the nature of the offering. That would represent about $1 billion of annual contribution. You would expect there to be growth in that base through digitization over the coming years, and I would expect that growth to be double-digit given cash is still a dominant medium of exchange in the economy. In terms of how South Africa will evolve from a bank versus non-bank environment in that respect, I don't see any reason why it should follow a different trajectory than the trajectory that the UK or Europe or Brazil followed over the last decade and the coming decade. Those trajectories have been fairly consistent. The non-bank and fintech disruptors have typically taken between a third and half of the market over the last decade with varying degrees of speed in different markets. So I think we can expect a similar outcome.

Another question from Raj Sharma, B. Riley Securities. In the merchant division, organic growth is slower than expected, especially compared to the 20% plus growth rates that Connect was growing at when acquired. How should we be thinking about the merchant business growth rates on an organic basis? What would it be for full year 2025 excluding Adumo? Ali, I'll direct this to you, and you can direct it to your management team.

Thank you, Bernadette, and again, thanks, Raj, for the question. I'll start by answering a few points from a group perspective, and then I'll ask Steven to give some specificity in the merchant segment. Firstly, I don't think that it's softer than expected. We achieved the midpoint of our guidance, and I'd just like to reiterate that we have achieved the midpoint of our guidance not just this quarter, but for the last nine consecutive quarters. I think we've demonstrated that we deliver on what we say. In that respect, I think it was fully expected that that would be the outcome for the quarter. In terms of organic versus inorganic growth, at a group level, we achieved EBITDA of 691 million rand in FY 2025. Our guidance indicated 30% year-on-year organic growth on a like-for-like basis. If you take 691 and apply a 30% growth rate on it, you'll get to about 900 million rand. Our guidance also indicated that the interest charge in the consumer lending business that was not included in the prior years is expected to equate to about 80 million rand. So 900 minus 80 million gives you 820 million rand, and that's basically a 30% organic like-for-like growth rate for Lesaka for this year with a common base. Given that our guidance is between 900 million rand and 1 billion rand, I think from that, you can infer Adumo's contribution given the fact that it'll be consolidated for three quarters of the year.

Thanks, Bernadette. I think if I take you back to our point of departure, we've been very clear right from the outset that we were going to construct a dynamic fintech platform that focused on merchants, micro merchants, and enterprises, and that construct was going to be a function of both organic growth and inorganic activity. I think as a starter, if you look back at our track record, we have delivered in respect to organic growth and more recently, I think as well from an inorganic perspective, we have delivered all that we set out to do. Having said that, if we look at the current quarter, we had a lot going on in this quarter. We grew our net revenues by 9%. We had strong throughputs, but I don't believe that this quarter, when we compare it to Q1 2024, is a proxy for growth. We've given clear guidance that to FY 2025 June, we expect at the midpoint to hit 23% growth for the merchant division. That's in line with our historic performance. I don't think that that is slow; I think it could possibly be better. In the construct, what I would also be saying is that this is a period in which we are building the platform. Our focus is very much now around disruption, but specifically to creating bundled products. As you know, we've now deepened our merchant segments and broadened our product sets. We're putting a very strong focus into unit economics, bundling, and taking a broader offering to our clientele. I think the guidance that we've given is really the proxy for growth, and that puts the context around Q1 2024 to Q1 2025.

As a reminder, you're watching the live Lesaka Q1 FY 2025 results Q&A, and I'm joined by the Lesaka management team. Our next question on the webcast is from Theo O'Neill from LHR Research. Again, Ali, for you to direct. The consumer segment had an excellent performance. Congratulations to the team. You mentioned the launch of new products. What is in the pipeline, and can you cover the rationale and findings from your research behind considering increasing loan size and term?

Thanks for the question. I think Lincoln's probably best placed to answer that one.

Thanks, Ali. Theo, one of the things that we've made reference to is ongoing research and thinking about what's best for our clients. One of the things we found in our research was that our clients were demanding more credit than we could offer. Our limit was 2,000 over six months. What became clear was that our clients were demanding to get more of that credit. What was also disturbing was that our clients were going to unscrupulous lenders to get more credit than what we could offer them. So we started thinking about what we could do to tweak our current product to meet some of the needs of our clients within the National Credit Act and in an environment where our clients can afford it. What we are working on now is launching a product where we would move from the 2,000 limit and six-month limit to a possible maximum limit of 4,000 rands to a client in a nine-month term. We think that on average, we'll be able to have loan sizes that will increase maybe to 2,600 rands. That is what we are experimenting with. The second thing I'd like to point to in our thinking about what we want to do going forward is that we now have the Adumo team that has joined us, Steve Malambi and his team, and they have 250,000 customers in the Adumo payout business. What we're starting to do is to see what products would make sense to that customer base. Firstly, the most important thing is that this is our first bridgehead into a consumer base that does not consist of grant beneficiaries. This is an important thing for us as we evolve our platform. We are thinking of doing a number of things in that space. Firstly, it's just whether we can layer a VAS product into that customer base. Secondly, we're starting to think about a funeral product in that base, and we'll start to think about later on a lending product in that base. This allows us to think of our customer base beyond the traditional base that we've had of our grant beneficiaries. These are some of the things that we've got in our pipeline.

Sven Thorsden from Anchor Securities asking, you mentioned opportunities in the enterprise business providing an opportunity to leverage larger corporate customer relationships across the broader consumer and merchant ecosystem. Can you give us a practical example of this and explain some of the opportunities driving growth sentiment in this pillar?

Thanks, Sven. I think maybe Naeem, if you can have a go on this.

Yeah. Thank you. Hi, Sven. Our enterprise division, as we noted, evolved as a need to develop solutions and process transactions on behalf of ourselves. As a natural evolution, we're trying to move this function away from being a pure cost center to being a profit center as well. We're going to do this through building solutions for both internally as well as our external clients. Practical solutions, for instance, in relation to this is that we provide VAS and co-payment services today to our merchants. We're going to expand this to a broader customer base, which are third parties as well as corporate customers. We also do tokenization internally for security purposes, and we see a big need for this within the telcos as well as municipalities and third-party clients. These are practical examples of where we think we can drive revenues within this enterprise division on a broader spectrum as an organization.

We have time for one more question, and that is from Jared Houston from All Weather Capital. He's got a couple of questions to put to the team here. Please spend some time unpacking the increase in group costs, and is this the quarterly run rate going forward? Secondly, is included in once-off items in the appendix transaction costs for Adumo, and explain the large working capital outflow. I will reiterate if we start, please, with the unpacking of the increase in group costs.

Okay, Dan.

Take your time, please, Ali. Jared, group costs increased to 53 million for the quarter. This was a combination of new hires at a group level as well as the costs of scaling our platform. We bore these costs at a group level rather than push them down into the underlying divisions. To give you some color around the nature of these costs, they include staff costs, costs related to managing our compliance with Sarbanes-Oxley, directors' fees, legal fees, and, of course, our group US-listed audit fees. There's some more disclosure around those in the 10-Q. In terms of our guidance, we expect our group costs to be approximately 20% of our total segment adjusted EBITDA. In other words, roughly 200 million for the year. So the run rate we're currently incurring is roughly a good approximation of what one could expect for the full year ahead.

So just, again, there, Dan, if you could repeat what is included in once-off items.

In once-off items, there are two categories. Thirty million of that relates to the costs being incurred in the Adumo transaction, with due diligence costs, M&A, and legal fees, including concluding the transaction. Also, a separate category of approximately 1.8 million of costs, and those relate to some of the smaller M&A deals we did in the quarter, such as Touchside, our ESOP, as well as a couple of other smaller transactions.

And the large working capital outflow.

So our net cash generated from operations before loan book funding and before CapEx is typically a good reflection of our conversion of EBITDA to cash. In this quarter, though, we did have a very significant outflow of approximately 193 million. I really simplified it to two categories. One is the payment of our annual staff bonuses, which got paid in September of this year. Obviously, they don't come through in prior quarters. The second is the unwind during the quarter of amounts payable to third parties that we provide VAS and bill payment services to. So the previous quarter, which was the one ending June of this year, fell on a weekend, resulting in us holding significantly higher than usual cash and payables balances. These were settled on the following business day, which fell into the current quarter, leading to the large cash outflow. So this is really just simply a timing difference.

Final question, Theo O'Neill from LHR Research again. Can you provide an update on your M&A strategy? You alluded to further bolt-on and transformative M&A. Is this solely focused on South Africa or also on the rest of Africa, and how do you see yourself funding large acquisitions? Will it be mainly debt and shares, or will you be asking for capital from shareholders?

Thanks, Theo. Thanks, Bernadette. We see M&A as another lever of growth to our organic growth story. We see a material opportunity to scale the business. Indeed, many of the most successful fintechs on the continent have utilized M&A effectively in the fintech and payment space. I think it has been a very effective lever in aggregate. We were specific about saying we'll be disciplined in the process. We will only engage in material transactions that are going to be accretive. I think in terms of geographical focus area, our principal market is South Africa, but we are in a number of neighboring geographies. The Adumo transaction has increased our presence in a number of geographies. So businesses that are operating in neighboring geographies would very much also be part of the ambit of opportunity. In terms of how we would fund that, I think we'd be flexible depending on the particularities of that transaction. I think debt, shares, and capital from shareholders are all legitimate options. What I would say is that we've given a sense of where we want to be managing our debt, and we haven't got any change associated with that. But I am excited about what we can build by continuing to augment our offering. We have four subsectors, each of which has attractive opportunities available in them that can increase and improve our offering and also expand our TAM in which we can drive synergies from. I would also just finally say that I think this is a business that has demonstrated effectively its capacity to execute and to integrate, and we hope to be able to continue that.

That's all we have time for today. Thank you very much for joining us for Lesaka's first quarter live Q&A FY 2025. If you do have any further questions, please direct them to investor relations at Lesaka. Thank you very much to the team.

Thank you.