Lesaka Technologies, Inc.

Hello everyone and welcome to the Lasaka Technologies webcast and conference call for the fourth quarter of fiscal 2024. As a reminder, the webcast is being recorded and the presentation can be accessed through the webcast link as well as dialing into the Zoom conference call dial-in numbers provided. Management will address any questions you may 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 teleconference line, you cannot ask a question 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.lasakatech.com. Additionally, Lasaka filed its Form 10-K after the U.S. market closed 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-K regarding the risks and uncertainties associated with forward-looking statements. Also, as a domestic filer in the United States, we report results in U.S. dollars under U.S. GAAP. However, it is important to note that our operational currency is South African Rand, and as such, we analyze our performance in South African Rand. In this presentation, we'll discuss our results in South African RAN, which is non-GAAP. This assists investors' understanding of our underlying trends in our business. As you know, the company's results can be significantly affected by the currency fluctuations between the U.S. dollar and the South African RAN. Taking a quick look at today's agenda, Ali Mazerandi, Chairman of LASAKA, will give a quick overview of the year-end quarter. Steve Halbron, CEO of Merchant Division and Head of Corporate Development, will provide an update on the Merchant Division, followed by Lincoln Molley, CEO of Lysaka Southern Africa, who will then take us through the Consumer Division's performance. Naeem Kola, Group CFO, will present a detailed overview of our financial performance for the three months and year end of June 30th, 2024. Thereafter, Ali will turn and talk about Lysaka's outlook, which includes fiscal 2025 guidance. With all that said, I'd now like to turn the call over to Ali.

Good morning and good afternoon. We're reporting another successful year for LASAKA. Group-adjusted EBITDA increased 55% to R691 million in line with our guidance for the year. At an operating income level, we have managed to turn around a 275 million rand loss in FY 2023 to a profit of 67 million this year. Fundamental earnings per share turned positive to one rand and six cents, improving by three rand and 72 cents per share. Our net debt to group adjusted EBITDA ratio improved to two and a half times from four and a half times a year ago. The first chapter of the Lestaka story has been written. For me, the story began four years ago when I presented the transformation strategy for the business at the Q4 2020 Earnings School. It was given shape in April 2022 with the joining of the Connect Group. The past four years have been about setting the foundations, building a team and forging a business out of a collection of assets. The execution has not been perfect. And without doubt, there are many things we could have done better, things we could have done faster and more efficiently. This is part of the maturity curve we are on, and we have to hold ourselves to the highest standard. That said, we should recognize that while in a previous incarnation, NetOne may have listed almost 20 years ago, Lissaka has many of the characteristics, challenges, and opportunities of a scaling startup. There should be an expectation that we still have much to learn with the good news that we are learning fast. The company beats with enthusiasm and optimism. It believes it will define a fantastic future, both for its customers and for itself. Reflecting on the past four years, all involved should be pleased and proud to be associated with what has been achieved to date. FY2024 affirms opposition as the leading independent fintech in Southern Africa in terms of both revenue and EBITDA, an impressive achievement. Stephen, Lincoln, and Naeem will now go into more detail on the underlying financial and operational performance of the business over the last year. After that, I will lay out how we will organize ourselves going forward to take advantage of the enormous opportunity ahead of us and provide financial guidance for FY 2025. Over to you, Steve.

Thank you, Ali. We've had a busy year and quarter in the Merchant Division. Whilst competing in this dynamic, fast-paced market, we have executed two acquisitions during the year. TouchSides efficiently joined Lasaka in May 2024 and has been integrated into our micro merchant pillar. This is a very exciting platform for us. There's limited Kazang TouchSides customer overlap. It brings day one 6,400 new sites and further growth opportunities for our Kazang business. Through this acquisition, we have entered a vibrant vertical in the informal sector, being the licensed tavern market, in which we will now deepen our penetration. Further to this, the data monetization opportunity, its technology and expertise that this investment brings enhances our offering to our merchants and their suppliers. The data and insights gathered from our deployed terminals carry significant value and potential to be monetized through relationships with a range of clients including FMCG companies, retailers, wholesalers, route to market suppliers and financiers. We have received shareholder and competition commission approval for the ADUMO acquisition. We are completing the remaining procedural CPs and anticipate closing at the beginning of October 2024. This is a transformative acquisition which substantially broadens the scale and opportunity in our merchant offering. Edumo Payments offers payment processing, integrated payments and reconciliation solutions to SME merchants in South Africa, Namibia and Botswana. The well-known hospitality platform GARP allows us to enter a new market vertical, being the hospitality sector. GARP is the leading provider of integrated point-of-sale software and hardware to this segment in Southern Africa, servicing 9,000 customers in 24 countries with on-the-ground operations in South Africa, Botswana and Kenya. These acquisitions have bolstered our existing SME business penetration through Connect and Kazang. We are now a leading provider in both the SME merchant and micro merchant market. We have restructured and rebranded our enterprise offering and are starting to build additional scale through Prism and EasyPay Enterprise. We continue to look at further acquisitions that add scale or enhance our ability to solve for merchant pain points or both. As Ali mentioned, our improving financial strength and shareholder support gives us significant flexibility in this regard. Turning to our KPIs, it's been another year of growth. As a reminder, we offer a wide range of VAZ products through our Kazang device to help our merchants attract customers to their stores, including airtime, data, electricity, gaming, lotto, money transfers, and bill payments. We have over 1,000 suppliers loaded onto our supplier payment system compared to approximately 600 suppliers 12 months ago, allowing our micro merchants to significantly reduce risk and administration and improve efficiencies in their operations. We have shown international money transfers separately as it is a volatile throughput and is a very low margin business. Q4 on Q4, our core VAS and supplier payments throughput increased 31% with a two-year compounded annual growth rate of 45%. Turning to the performance for the year, FY 2024 was up 43% on FY 2023 with a two-year compound annual growth rate of 49%. As previously outlined in results presentations this financial year, we are focusing on higher ARPUs and profitability per device. This has involved uplifting our devices from lower turnover sites and deploying them more profitably. This strategy is maximizing average revenue per device and has delivered very positive results for us demonstrated by these excellent growth rates. Our devices in the field grew 17% to over 87,500, which includes the acquired TouchSight sites. Pre-acquisition, 2,300 of the TouchSight sites already had a Kazang device, creating an immediate opportunity to roll out an additional 6,400 sites into the acquired platform. This comprises the rollout of the traditional Kazang offering, which includes VAS, card acceptance and supplier payments. Our teams are pushing hard at the cross-sell opportunity since TatSai has officially joined Asaka in May. However, we are also continuing to deepen our penetration in the tavern vertical with our comprehensive offering, increasing our overall growth opportunity. After a stellar Q4 and Q4 performance in FY 2023, given that we were targeting our backbook of existing merchants, coupled with the fact that Kazang Pay was relatively new to market after its launch in 2021, throughput for Q4 2024 was strong, increasing by 20%. This represents a two-year compound annual growth rate of 47%. Similarly, looking at the year, the card throughput growth rate for FY 2024, an increase of significantly larger base with a two-year compound annual growth rate of 60%. As a reminder, we are able to convert Kazang devices into Kazang Pay card accepting devices through a simple onboarding process without any hardware changes. As mentioned, whilst we focused on the larger merchants and the back book initially, resulting in a 97% growth in FY2023, FY2024 growth is largely attributable to new client acquisitions. We are anticipating good growth from our card acceptance business in FY2025. As with VAS, we have over 6,400 TouchSides merchants which we will be looking to bring onto the Kazang Pay platform, which is a significant and immediate opportunity for us alongside our organic growth into the tavern vertical. Devices deployed grew 15% this year with a two-year compound annual growth rate of 51%. As with our VAAS device strategy, we are focusing on higher quality ARPU per device with poor performing sites being uplifted and deployed into higher turnover, more profitable merchants, which is reflecting in our throughput KPI. For our card acceptance business, the introduction of the ADUMA acquisition from Q2 2025 brings exciting opportunities with the scale and solution sets that this brings to our platform. Our cash management solutions business reflects a more muted growth rate with a two-year compound annual growth rate of 3% Q4 to Q4 and 5% compound annual growth rate for the two years to FY 2024. It's very important to look at this result in the context of the operating environment for our customers. This business has a large exposure to the formal SME sector, which over previous years have been particularly hard hit by COVID, high interest rates, high inflation, load shedding and depressed consumer spend. Whilst these businesses have faced the challenges mentioned above over the past three years, we are more optimistic about the outlook. We are seeing a reduction in churn attributable to fewer bankruptcies and expect this trend to continue. We have restructured our sales approach and have recently introduced a new innovative vault offering for the micro merchant base, which continues to see good momentum. Our vaulting solution brings significant efficiency gains to informal merchants as they don't have to travel to banks to deposit cash. They can go to their closest merchant in the community with a Kazang vault and drop their cash. This is immediately available in their wallet for working capital, supplier payments or VAS purchases. We believe we make a real difference in our micro merchants operations as we build Kazang merchant communities, enhance risk management and facilitate immediate cash availability. Our cash business remains a vital product in our merchant offering and is a key differentiator for us in the digitization of cash. Whilst there is a trend towards digital payments, cash to date remains the most significant portion of retail transactions, more notably in the informal markets. Our credit business is primarily exposed to the formal SME sector. As our merchants have battled through the economic headwinds, their credit scores have suffered, leading to many not meeting our credit criteria. This has resulted in lower advances and book size. However, this has maintained the quality of the book. We are anticipating an improvement in this business with load shedding easing, inflation back in range, and an expectation of some interest rate relief this year. We have now distributed three billion of funding to our merchants since we launched this product, which has been a game changer in providing them with capital to grow their businesses. Capital Connect Credit Dispersed has a two year compound annual growth rate of 9% from FY 2022 to FY 2024, despite the challenging credit environment and with no material impact on our loss rate in this business, which remains well below our target rate. We recently launched a new product, Fuel Connect, which is being well received and we anticipate this improving activity and returns in the merchant lending business. As a reminder, we suspended Kazang Pay Advance, which focused on micro merchants early in FY 2024 and have shown the impact separately on the slide. We continue to explore other options with respect to this offering and we have recently gone live with a pilot phase of this product for micro merchants. We are monitoring payment behaviour and applying stricter lending criteria before an anticipated commercial relaunch later in fiscal 2025. I'd like to congratulate the team on the recently awarded Best Retail FinTech Funders South Africa 2024 by Wealth and Finance. Capital Connect is an extremely innovative merchant solution, providing funding up to 5 million, often within well under 24 hours. With new products in the formal and informal space, and the acquired merchant base that Aduma and GARP brings, supported by an improving interest rate environment, we anticipate an improved lending performance in FY 2025. Our EasyPay enterprise market solution is strategically important and we continue to enhance our technology and management structures. The new operating model, which Ali spoke to, will increase focus and improve performance of this business. Servicing over 750 customers and with over 600 builders on the platform embedded into all major retail systems, EasyPay has an extensive footprint and content that would be very difficult to replicate. The reduction in Q4 throughput is primarily attributable to exiting a large contract that was no longer commercially viable for us. Despite the loss of throughput, there is no impact on profitability. On an annual basis, the mix of throughput was flat. However, within this result, VAZ throughput showed good growth of 10% and bill payment was up and encouraging 15%. In our switching business, we have recently launched our new technology, Prism Switch, which we are confident will accelerate growth in this business. For the quarter, merchant revenue grew 10% year on year. At an EBITDA level, normalizing for the impact of NUITs, Kazang Pay Advance and Bulk VAS purchases, EBITDA grew 6% in Q4 2024 compared to Q4 2023. For the year under review, revenue increased 12% and EBITDA 4% to $624 million. Normalizing for Newets, Kazang Pay Advance, and Bulk VAS purchases, EBITDA was up 15% for FY2024. We expect our merchant segment adjusted EBITDA growth for FY2025 to be in the region of 20%. In conclusion, today our merchant division, including the Touchsides and Adumo acquisitions, services in excess of 120,000 merchants and processes more than $270 billion in throughput annually. The augmentation of these product offerings positions us well for growth and further efficiencies in our payments ecosystem. I'd like to take this opportunity to welcome Paul Kent, the CEO of Adumo, to Lusaka. We are very excited to have him and his team on board. Paul will be overseeing the merchant pillar in our merchant division on completion of the Adumo acquisition. With that, I'd like to hand over to Lincoln to take you through the consumer division results.