Lesaka Technologies, Inc.

hello everyone and welcome to lasaka 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.lasakatech.com. Additionally, Lasaka 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 Lasaka, will start with an overview of performance 2024 in a review of Lasaka's progress against its key strategic objectives. Steve Helbron, CEO Connect and head of Merchant Division, will provide an update on the Merchant Division, followed by Lincoln Mollie, CEO of Lasaka Southern Africa, who will take us through the Consumer Division's performance this quarter. Naeem Kola, Group CFO, will present a detailed overview of our financial performance for the three-months-end your 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. Lusaka is a leading FinTech in Southern Africa with over 1.3 million grant beneficiaries using our Easy Pay 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 on 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 place on our services. We achieved an important milestone this quarter. I am very pleased to report that at an operating income level, we delivered a profit for the first time in five years. And while it's just over 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 80 million rand to an operating profits of 4.2 million rand is testament to the commitment and efforts of our employees in turning around the consumer division and growing the merchant division. We are proud of these achievements. So turning to our revenue and group adjusted EBITDA for the quarter. We grew revenue at 19% year on year from 2.1 billion Rand to 2.54 billion Rand, which is at the upper end of our guidance range. And this was achieved through a 20% increase in merchant revenue and a 13% increase in consumer revenue. Lincoln highlighted some of our new consumer growth initiatives during our annual results presentation in September. And it is pleasing to see that they are already starting to have a positive impact on the consumer business. Group adjusted EBITDA came in at the midpoint of our guidance. And it is important to note that we incurred 6.1 million Rand of restructuring costs, primarily in the merchant ATM business, without which we would have exceeded our adjusted EBITDA guidance for the quarter. and Naeem will unpack the financials in more detail later. But overall, I'm very encouraged by the performance our businesses are delivering. Our vision to build the leading fintech providing cash and digital solutions to small merchants and consumers in Southern Africa is firmly in our sights. M&A will play a role in achieving this vision, and we continue to evaluate opportunities that will enhance our market positioning. And this includes bolt-on acquisitions that will provide scale to our existing offering, as well as those that will help us broaden our product offering to our clients. Our M&A focus is primarily on our merchant business. We have successfully turned the consumer division around and have recorded four consecutive quarters of adjusted EBITDA profitability. And we have also fundamentally transformed this business into one which is customer oriented and sales focused. We are seeing early traction in improved customer acquisition and account activations, which is very encouraging and is evidence of the significant efforts made by our consumer team over the past few quarters. From a balance sheet perspective, our positive cashflow from operating activities generated 63 million Rand this quarter compared to an outflow of 131 million Rand in Q1 last year, demonstrating just how far we have come in one year. Our net debt to EBITDA ratio reduced to 3.1 times at quarter end, with our near-term target being below 2.75 times, and we expect to achieve this in fiscal 2024. We continue to focus on our non-core asset disposals, which will further improve our balance sheet strength and debt ratios when complete. As mentioned in our Q4 results, we have signed a share repurchase agreement in respect of our interest in Finbond for a cash consideration of approximately 64 million rand, which we will utilize to partially settle debt. In November 2023, Finbond released a firm intention announcement regarding the repurchase transaction, and we expect a meeting of Finbond shareholders to be held in December 2023 to approve the transaction. This means the transaction is expected to close in December 2023. Lysaka is a leading player in the sectors in which we choose to participate. We will be launching our quarterly Lysaka Informal Economy Index tomorrow, 9 November, utilising our unique data sets and insights into the informal and township markets in South Africa, combined with relevant thought leadership. There is very little empirical data available in this important sector of our economy and that which is readily available is often contradictory. We hope to bring more consistency to defining the informal market and the understanding thereof through our work in this space. We are entering an exciting period at Lusaka with the turnaround of the consumer division and an integrated connect group Lusaka is poised to capitalize on its leading position in South Africa's informal markets and scale the depth and breadth of its fintech platform in the next phase of its development. And with that, I would like to hand over to Steve to take you through the performance of our merchant division. 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 a durable and an effective differentiator. As a FinTech company, our approach is unique and disruptive. From cash vaults and immediate digitization, quick access to capital for growth opportunities, a comprehensive VAERS 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 four primary solutions to our merchants. Our portfolio of products results in increased consumer adoption, driving higher volumes of sales for our merchants. We provide merchants with a device linked to a digital wallet from which they can pay suppliers, sell many VAERS products, make bill payments for customers, take payments via card swipes or tap and pay, whilst providing instant settlement. A partnership with an informal merchant usually starts with a VAERS device. This drives growth across all products. By way of example, more than 60% of Kazang merchants that have our VAZ device have converted to also utilizing our Kazang Pay card offering. Many of them are utilizing our supplier payment platform to improve efficiencies and reduce cash risk. These deeper relationships with our merchants increase our value and our stickiness to them and underpin our strategy. From a VAAS device perspective, we have increased our estate by 34% year-on-year and by 3% quarter-on-quarter to over 77,000 devices. Focusing on device growth, core to our device placement strategy is the decision to focus on quality business, which is reflected in a healthy throughput and margin per device. This drives profitability, which I will talk to shortly. In line with the strategy, we uplift unprofitable devices which can arise from a number of factors. Two contributing factors are increased competition, which results in a drop-off in usage, or the optimization of our fleet following on from a specific campaign. I mentioned at our last results that during Q1 to Q3 of the 2023 financial year, we installed a large number of devices at informal merchants in order to support supplier payments to a few major FMCG companies that we partnered with. This has resulted in a more than double year-on-year increase in our supplier payments throughput. The supplier payments platform is an important value-add service to our merchants as it significantly de-risks their operations from a cash perspective and reduces admin time. We have a number of large FMCG partners on board, which is driving increased adoption and usage and is resulting in growth. We continue to bring new suppliers onto our platform. During the last two quarters, we have focused on optimizing this new fleet by removing devices from the low profitability sites, which has impacted quarterly device growth on a net basis. This pattern of onboarding and then cleaning up is an expected occurrence in the Kazan business when any major partnerships are initiated or cashless delivery routes on existing partnerships are expanded. Turning to VAS throughput, we saw a 20% year-on-year increase, with the quarter being flat compared to Q4 if you include international money transfers. There has been a significant change in product mix relating to international money transfers, which impacted our quarter-on-quarter growth. International money transfers have reduced 80% year-on-year and 71% quarter-on-quarter due to a change in the regulatory environment in South Africa, which has impacted the industry as a whole. Fortunately, this is a lower margin product for us and we have not seen a material impact on overall gross profit. Excluding IMT, our core VAERS throughput increased by 58% year-on-year and showed quarter-on-quarter growth of 12% or 48% on an annualized basis. The gross profit of our VAS business in Q1 2024 increased 8% compared to Q4 2023, representing a healthy quarter-on-quarter growth. In our card acquiring business, our installed card-enabled devices increased to 46,600 units, representing a 68% year-on-year growth and a 4% quarter-on-quarter growth of a much higher base. This device growth demonstrates continued adoption of card payments in the informal economy and the frictionless process of converting VAS devices to POS devices. From a throughput perspective, we saw a 56% increase year on year. On a quarterly basis, throughput grew 6% or 24% annualized. These are very good numbers considering the pressure our merchants' customers are under at this present time. Our VAS and card throughput and margin growth shows good momentum that supports the growth rates we communicate to the market in our guidance. Our cash vaults or cash digitization is primarily exposed to the formal SME market, which has been more severely impacted by load shedding, interest rates and consumer pressures than the informal market. Year on year, we saw a 1% increase in throughput on our vaults, with the number of cash vaults increasing by 5%. On a quarterly basis, we have seen good momentum in Q1, with throughput up 3% over Q4, or approximately 12% annualized. We are effectively putting a bank in our merchants' stores and positively enhance their risk profiles whilst also driving operating efficiencies. As we extend the solution across the informal market, we anticipate making a real difference in our merchants' lives by enabling them to dynamically compete and grow. High inflation coupled with high interest rates is impacting our formal and informal credit businesses. As I mentioned earlier, we innovate and execute quickly, but if we don't achieve the desired result, we don't hesitate to change course. Our informal sector credit offering, Kazang Pay Advance, is not proving effective in its current form and as such, we have withdrawn the product and gone back to the drawing board. The reductions in origination of new loans, loan book and disbursements are primarily a result of this decision. By many accounts, we are at or near the top of the interest rate cycle, and with recent inflation data showing an encouraging downward trend, we anticipate a more favourable operating and trading environment for our merchants, which may allow for a resumption in credit growth later in the year. Our EasyPay enterprise market solution, which offers VAERS, switching and bulk payments in the formal market through our retail partners, experienced pressure during the 2022 and 2023 financial years. Despite this, we deem this platform to be strategically important and we have invested in the technology and changed our management structures. With over 600 billers on the platform, which are embedded into all major retail systems, it has an extensive footprint that would be very difficult to replicate. Whilst this business is not a material profit contributor at this stage, we are encouraged by its recent performance with throughput increasing by 8% quarter on quarter and we believe it can make a meaningful contribution in the medium term. The economic environment remains challenging and I am pleased with the yearly and quarterly throughput and device growth that has been achieved under the circumstances. We have a few exciting innovations in our development cycle. In this FinTech enabled environment, innovation and agility are critical to long-term success. We are in the fortunate position to have the financial strength, skill and a large installed client base across which we can continue to innovate, experiment and drive growth. The merchant division delivered a 20% revenue increase year on year and 5% quarter on quarter. Considering the headwinds our merchants faced over this period, we are very pleased with this result. From a segment-adjusted EBITDA perspective, we reported an 11% increase year-on-year with a 3% decrease quarter-on-quarter. Our first quarter profits were impacted by a few items which pulled us back. Firstly, as a result of the suspension of our KazangPay advanced credit offering to informal merchants, we provided for expected credit losses on the remaining outstanding exposures at the end of the quarter. Whilst we made a small profit overall on Kazang Pay Advance, providing for the outstanding loans in this quarter was necessary and conservative. The impact of withdrawing Kazang Pay Advance on our quarter-on-quarter segment adjusted EBITDA was approximately $3 million. Secondly, we restructured our ATM business when it was integrated with the Cash Connect business. This resulted in a one-off restructuring charge of R4.6 million this quarter. Our innovative ATM recycler is generating significant interest as an alternative to vaults for our merchants. Adjusting for the effect of these two factors results in a quarter-on-quarter segment-adjusted EBITDA growth of 3% in Q1. As mentioned in previous presentations, we do take advantage of bulk deals in our VAERS offering from time to time, which improves our profitability. These deals can be material and Naeem separately discloses these in his slides each quarter, given the impact on group cash flow. Our Q4 results included a benefit from such deals, but we had no repeat of this in Q1, which also contributed to a lower growth in segment-adjusted EBITDA than we had hoped for. Whilst individually not material, the combined effect of the above had a negative impact on the quarter-on-quarter profitability comparison. However, the underlying profitability of our business remains strong. In conclusion, we are very pleased with the top-line growth and profitability achieved in Q1, considering the challenging environment. I'd like to hand over to Lincoln to take you through the Consumer Division results and strategy.

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 are 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, branch renewal and repositioning to enhance customer experience and convenience, and continued engagement with Sasa and 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 one 2023. Natural churn is a factor of the grant space, as child support grants 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 account growth, but it is important to maintain this momentum and further increase activations, which provide us with a base to cross-sell and grow ARPU. We ended the quarter with over 1.3 million active EPA customers, of which approximately 85% are core permanent grant recipients. This represents a 13% year-on-year growth. Our easy-paying loan book increased 20% year-on-year to R423 million at quarter end. Gross advances for the quarter of R353 million were up 22% compared to Q1 last year. Our loan loss ratio remained stable at approximately 6% on an annualized basis. Our insurance product continued its good growth, increasing to 359,000 active policies at quarter end, a growth of 34% from last year. Our insurance book penetration increased from below 25% last year to approximately 30% at the end of quarter one. Our insurance offering to grant beneficiaries we serve continues to grow well above the key industry statistics, demonstrating the value placed on our funeral insurance offering by customers. We've grown our in-force funeral policy holder book by 18% compared to the funeral policy industry as a whole, which has contracted. Furthermore, the industry reported an annual lapse rate of over 22%, whereas our annual lapse rate is around 7%, an indication that our clients retain their policies for longer and are less likely to replace our policies with those offered by our competitors. We are pleased with the quality of both our lending and insurance books, as we are managing to maintain the low loss ratio and high collection rate despite the increasingly tough economic environment. On the back of efficient cross-selling, our ARPU has improved from approximately 74 rands per month last year to over 83 rands per month at the end of this quarter. For quarter one, we saw a 13% increase in revenue to R291 million compared to last year. Our primary profitability measure, segment-adjusted EBITDA, continued to show excellent improvement, achieving a R46 million profit for this quarter from a R24 million loss last year. Compared to Q4 2023, EBITDA was flat. However, if adjusted for restructuring and once-off expenses of R2.9 million, Q1 EBITDA would have been 6% higher. The improvement in our revenue and right-sized cost base see the positive jaws delivering improved profitability. In conclusion, I'm very pleased with the first quarter results, especially the increase in EP account openings that we have seen during this period. The improvements in our products, distribution, and technology are bearing fruit, and we are well-placed to quickly and sustainably expand our share of the Grand Recipient Market in South Africa. I would like to hand over to Naeem now, who will take you through the income statement and balance sheet in more detail.

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 6.1 million rand of restructuring costs, mainly in the merchant ATM business, without which we would have exceeded our EBITDA guidance. As a reminder, LASAKA is a domestic filer in the United States. We report results in U.S. dollars under U.S. GAAP. However, our operational currency is South African REN, and as such, we analyze our performance in South African REN. 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 R2.54 billion, compared to Q1 2023 and 2% compared to Q4 2023. In US 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 US dollar over the period. At an operating income level, we achieved an important milestone for this quarter, reporting a profit of R4.2 million for the quarter compared to a loss of R80 million in Q1 2023. Depreciation and amortization of R109 million for Q1 2024 include R67 million related to the amortization of acquired intangibles. Related to the Connect Group acquisition, acquired asset amortization reflects the accounting treatment for acquired assets, which is both a non-operational and a non-cash accounting charge. In September 2022, we sold our interest in carbon, a non-core equity-accounted investment. The second tranche of the equity payment of R4.7 million fell due in the quarter and has been received, and thus we reversed the allowance for doubtful loans receivable of R4.7 million created in fiscal 2023 upon the sale of the interest. This reversal is included in the caption, Reversal of an Allowance for Adopted EMI Loans Receivable, in our condensed consolidated statement of operations. Our net interest expense decreased to R83 million in Q1 2024 from R86 million in Q4 2023. Through further cash optimization measures across the group, Q1 2024 versus Q1 2023 is mainly impacted by the increase in the benchmark interest rate in South Africa in Q1 2024 compared to Q1 2023. In the prior period, we reported progress made in the rationalization of investment in Finbon, another non-core investment. We have entered into agreement to exit this position and receive a cash consideration of approximately R64 million in December 2023 when this transaction is expected to close. The loss from equity-accounted investments in the income statement relates to the impairment loss on fund-borne investment of approximately R22 million recognized during the quarter. The impairment arises because we are required to eliminate the foreign currency translation reserve held against the fund-borne investment due to the expectation that the position will be sold by the end of December 2023. Overall, we expect no impact on the net asset value. Fundamental loss per share, which excludes non-operating items, continues to narrow, improving 94% compared to Q1 2023 to 8 SA cents per share. In management's view, this is the appropriate earnings per share measure given the adjustment for ones of non-repeatable items, NPPA amortization, and other non-cash items. As mentioned, at an operating income level, we hit an important milestone this quarter, reporting an operating income of R4.2 million compared to a loss of R80 million in Q1 2023, which is largely attributed to the improvement in the consumer division's operating performance. After adjusting for amortization of acquired intangibles of R67 million, and non-operational and non-cash accounting charge, we have delivered an R84 million improvement to operating income compared to Q1 2023. At a divisional level, Merchant delivered a 20% revenue increase year-on-year and 5% quarter-on-quarter, a robust result given the challenging operating environment for merchants we serve. In the consumer division, revenues grew 13% year-on-year. We are seeing very good momentum in EPE account activations driven by our new consumer growth initiatives highlighted by Lincoln earlier. This is a positive indicator as it is the foundation for building further annuity income in our consumer revenue base. Year on year, the merchant division reported a segment adjusted EBITDA of 150 million rand for the quarter to September, 2023, compared to 135 million rand in Q1, 2023. The consumer division delivered segment adjusted EBITDA of 46 million rand for Q1, 2024, compared to a loss of 24 million rand in Q1, 2023. I will unpack the sequential quarterly results at the division level on the next slide. Group costs of R34 million reduced 14% compared to R39 million in Q1 2023, mainly due to lower external audit, legal and consulting fees. Group-adjusted EBITDA for the quarter increased 126% to R163 million and came in at the midpoint of our market guidance for group-adjusted EBITDA. Consumer revenue decreased 6% quarter-on-quarter to R291 million from R309 million in Q4 2023. Adjusting for ATM revenue related to third-party acquired transactions which are reported in the Merchant Division for this quarter, consumer revenue would have increased by 4% in the quarter. Merchant segment adjusted EBITDA of R150 million increased 11% year-on-year, although decreased 3% compared to R154 million in Q4 2023. Steve addressed this in detail in his merchant overview, but the primary reasons are restructuring costs in the ATM division, provisions related to the Kazankpay advanced product, and the lower revenue of bulk VAS deals and resale of airtime vouchers during Q1 2024. Excluding the impact of the restructuring costs and the Kazankpay advance withdrawal, merchant segment-adjusted EBITDA would have increased 3% quarter-on-quarter to R158 million. In the consumer division, we anticipate the momentum in EP account activations to translate into continued improved segment-adjusted EBITDA as we scale our consumer financial services platform. Fundamental loss per share continues to narrow, improving 94% to 8 SA per share compared to a loss of 136 SA per share in the first quarter of 2023. Quarter on quarter, this is an 89% improvement from a loss of 76 SA cents in Q4 2023. From a cash flow perspective, we saw continued momentum in achieving positive net cash provided by operating activities of R63 million in Q1 2024 compared to net cash used by operating activities of R131 million in Q1 2023. Q3 2023 and Q4 2023, after adjusting for bulk vest purchases, will reflect a similar cash generation of between 50 to 60 million rand per quarter. Looking further at how our net cash utilized in operating activities per cash flow statement compares to cash generated from business operations. We generated R184 million operating cash flow before interest paid, tax paid, working capital related items and movement in loan book funding. We define this as cash generated from business operations and consider it an appropriate indicator of our conversion of EBITDA to cash. In Q1 2023, we generated 73 million rand, an increase of 111 million in a year. In our merchant card acquiring business, working capital requirements are relatively small. We estimate that approximately every 100 million rand in throughput growth requires 3 million rand in additional working capital. The negative 51 million rand working capital in Q1 2024 relates to month end falling on the weekend and this requires mainly Kazang business to pre-fund VAS purchases to ensure we meet volume requirements over the weekend. Our net debt to EBITDA ratio is calculated as the net debt at a specific date divided by the annualized group adjusted EBITDA for the quarter. For Q1 2024, this improved to 3.1 times due to improved EBITDA performance in the quarter compared to 3.2 times in Q4 2023 and 5.9 times a year ago in Q1 2023. As mentioned in Q4 2023, we are very pleased with the conclusion of our new funding arrangements, which are now finalized. Our lenders have agreed to reduce the margin on facilities G and H by 75 basis points on the basis of improvement of a net debt to EBITDA ratio. Reducing our net debt remains a strategic objective for the group. If we achieve a net debt to EBITDA ratio as defined in our loan agreements of below 2.75 times, this will result in a further 100 BPS deduction in the margin on facilities GNH. Capital expenditure in Q1 2024 amounted to R53 million. As we previously highlighted, this is mainly growth capex related to the Merchant Division. Our growth capex delivers a strong IRR on capital invested. In conclusion, Q1 2024 is evidence of the continued improvement in operational and financial performance and delivering against the guidance we set out for the quarter. Thank you. I will hand over to Chris for his comments on the outlook for Q2 and the full year results.

Thank you, Naeem. Turning to our guidance, I would like to provide our quarter two revenue guidance of R2.65 to R2.75 billion and group adjusted EBITDA of R170 to R180 million. I would also like to reaffirm our full year 2024 revenue guidance of 10.7 to 11.7 billion rand and group adjusted EBITDA of 680 to 740 million rand. 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'd like to invite you to ask any questions you have at this stage. Thank you.