Lesaka Technologies, Inc.

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Hello, everyone, and welcome to LASAKA's fiscal second quarter 2023 earnings webcast and conference call. My name is Rob Fink, and I am part of the newly appointed IR team here in the U.S. As we get started, I just want to remind everyone that this 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 provided. Management will address any questions you may have at the end of the presentation. To ask a question, you must be logged into the webcast, and you can use the raise your hand button on the bottom of your screen to indicate your interest in participating in the Q&A session. If you have joined via the Zoom teleconference line, you cannot ask a question live, but we would encourage you to reach out to the IR team if you have questions following the completion of this call. The webcast link, Zoom conference call dial-in numbers, as well as the earnings press release and supplementary investor presentation are available on LISACA's investor relations website at ir.lisacatech.com. Additionally, LISACA filed its Form 10-Q after the U.S. market closed yesterday, Tuesday, February 7, 2023, which is also available on the investor relations website. As a reminder, during this call, management will be making forward-looking statements, and I ask you to look at the cautionary language contained in LASAKA's Form 10-Q regarding the risks and uncertainties associated with forward-looking statements. Also, as a domestic filer in the United States, LASAKA reports results in U.S. dollars under U.S. GAAP. However, it is important to note that the company's operational currency is South African Rand, and as such, management analyzes their performance in South African Rand. In this presentation, we will discuss results in South African Rand, which is non-GAAP. Doing so assists investors understanding the underlying trends in the business. As you know, the company's results can significantly be 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 LASAKA, will begin today's call with performance highlights for the second quarter of fiscal year 2023 and review LASAKA's progress against its key strategic objectives. Steve Halbron, CEO Connect and head of the Merchant Division, will provide an update on the Merchant Division, which has produced just a stellar set of results this quarter. Lincoln Molley, CEO of LASAKA South Africa, will then provide an update on consumer division, which has passed a key milestone this quarter. And then Naeem Kola, Group CFO, will present an overview of LASAKA's financial performance for the three months ended December 31st, 2022. Chris will then conclude the results presentation with a discussion on LASAKA's outlook before opening the call for Q&A, where we welcome any questions you may have.

Thank you, Rob. Good morning, good afternoon, and welcome to our second quarter 2023 earnings webcast and conference call. Our FY23 Q2 results represent a significant milestone for Lysaka in a number of ways. Our performance this quarter provides clear evidence of the successful turnaround in our consumer division, which has delivered its first adjusted EBITDA profitable quarter in years. At the same time, the strong outperformance in our merchant division is testament to the robust growth fundamentals underpinning the Connect acquisition and the overall momentum we are seeing in our merchant division. The merchant division has delivered an excellent set of results this quarter. topping our guidance and showing growth of 19% compared to a quarter ago being FY23Q1. This has been driven by the Connect Group, which has become the cornerstone of our merchant division as we rapidly expand our merchant customer base in Southern Africa. The Merchant Division is at the forefront of our mission of providing financial inclusion through our full service offering across cash and digital, serving the use of both while also facilitating the shift towards digital that is taking place. We are seeing this play out in a number of areas. For example, in our card acceptance business, where we've seen card payments through our merchants in the informal sector more than double compared to a year ago. And also in terms of the growth in our credit offering to MSMEs, including Capital Connect and Kazang Pay Advance, where we've advanced R262 million this quarter, an increase of 16% compared to a quarter ago, being FI23Q1. The merchant division has performed ahead of our expectations. The growth drivers and secular trends underpinning financial inclusion, cash management and digitization for MSMEs are clear. We therefore believe the conditions for continued growth remain firmly intact. So turning to the performance of the consumer division. We are very pleased to be able to deliver the first adjusted EBITDA positive quarter for the consumer division in years. The consumer division delivered segment adjusted EBITDA of 10.1 million rand for Q2 FY2023 compared to a segment adjusted EBITDA loss of 23.9 million rand for Q1 FY2023. This is a watershed moment for the business. And in reflecting on the work of the last 18 months, where we have been very clear on how we plan to return the consumer division to profitability, we view the set of results as testament to the successful implementation of a rigorous plan that was based on the complete transformation and optimization of our branch and distribution footprint and driven by a mission of delivering financial inclusion to our customers across South Africa. Consumer division has been fundamentally transformed and we have built a strong and stable foundation to grow our customer base and deepen our product offering. We will achieve our growth objectives through a combination of firstly shifting our points of presence to where our customers want to be, which is in retailers. Secondly, by improving the customer journey through digitization and streamlining our processes And thirdly, by further enhancing our value proposition as we shift our product and pricing proposition to recognize and reward our most loyal customer base. Lincoln will provide more detail on these focus areas later in our presentation. And so the third area I would like to highlight is how our improved operating performance has also meant we are generating positive cash flow in the business and have been able to further optimize Lasaka's capital structure. Our banking partners have agreed to further extend the Group's lending facilities on more favourable terms, increasing flexibility, adding further liquidity and providing greater capacity to fund growth. For FY23 Q2, we saw R60 million of cash generated from operations and we ended the quarter with R722 million in unrestricted cash, compared to R543 million a quarter ago. We continue to focus on reducing our net debt to EBITDA ratio in step with the growth of the business and with our net debt to EBITDA ratio reducing to 3.3 times from 5.9 times in FY23Q1. And Naeem will address this in greater detail later in the presentation. Given the momentum in our Merchant Division and the strong foundation for growth in the Consumer Division, we are reaffirming our guidance which we provided for FY23. We believe the growth drivers remain intact and we are confident the momentum will continue. In September 2022, we provided further earnings guidance for the first time since the transformation and repositioning of Lusaka began. Our guidance was for group revenue to be in the range of R2B to R2.3B for FY23Q2. We are pleased to be able to report revenue of R2.4B which exceeds the upper end of our guidance. Revenue growth was driven predominantly by the stellar performance in the merchant division, primarily the Connect Group. We also guided for group-adjusted EBITDA to be in the range of R116 million to R123 million for Q2 FY2023. And we have delivered R130 million in group-adjusted EBITDA for the quarter, which surpassed the upper end of the guidance provided by 6%. This represents a significant turnaround on the loss of R84 million recorded in Q2 FY2022. Our performance, specifically in the consumer division and also across the group, was supported by well-controlled costs, including our group cost line. Lusaka is a full-service fintech platform serving the needs of consumers and merchants, and we are also facilitating the secular shift to digital that is currently taking place. We are increasing our points of presence across our ecosystem in the form of branches, retailer pay points, ATMs, satellite kiosks, and merchant devices, and these increase to more than 72,000 by quarter end. Building momentum in our footprint raises our standing as a player of scale in the market and creates growth opportunities across our ecosystem. Our Q2 FY 2023 results demonstrate that we have set a solid foundation for growth in this market and we are very excited about this. And with that, I will hand over to Steve to discuss the performance and opportunities in the Merchant Division. And as a leadership team, we are very pleased that Steve has extended his contract with Lusaka for the next three years, continuing in his current role as head of the Merchant Division and also taking on additional responsibilities at a group level. Lusaka certainly stands to benefit from his continued involvement. And Steve, over to you to take us through the Merchant Division's performance. Thank you.