Lesaka Technologies, Inc.

Welcome to Lysaka Technologies results webcast for the first quarter of fiscal 2026. As a reminder, this webcast is being recorded. Management will address any questions you have at the end of the presentation. To ask a question live, participants are requested to join the Chorus Call line by registering via the link provided. Alternatively, please enter your questions into the Questions tab of this webcast. Our press release and investor presentation are available on our Investor Relations website at ir.lasarkatech.com. During this call, we will be making forward-looking statements. Please note the cautionary language regarding the risks and uncertainties associated with forward-looking statements as contained in our press release, presentation, and Form 10-Q. As a domestic filer in the United States, we report results in US dollars under US GAAP. It is important to note that our operational currency in South African Rand, and as such, we analyze our performance in South African Rand, which is non-GAAP. This assists investors in understanding the underlying trends in our business. I will now turn the webcast over to Dan.

Good morning, good afternoon, and welcome to Lusaka's 2026 quarter one results presentation. We have slightly changed our results presentation this quarter. I will begin today by addressing the financial performance for the group, as well as for merchant, consumer and enterprise. Lincoln will then take you through the key performance drivers for the divisions in more detail. And we will end with Ali taking you through the progress made against our strategy, unpacking our drivers of revenue and our quarter two guidance. Going forward, we intend to follow this format for Quarter 1 and Quarter 3 results, coupled with a more comprehensive update in Quarters 2 and 4. You can find more detail and our usual disclosures in our 10Q submission to the SEC. This is available on our website. I am pleased to report that we have met our guidance for the 13th consecutive quarter. Net revenue came in at the lower end of the range for Q1 at R1.53 billion, a 45% increase over last year. Group adjusted EBITDA landed at around the midpoint of the guidance range at R271 million, representing a 61% year-on-year growth. I'm happy to say that this quarter reflects an improvement in the quality of our earnings with limited accounting anomalies and non-recurring items. Our adjusted earnings, which we believe is a most appropriate measure of our overall financial performance, has grown by 150% to R87 million for the quarter. On a per share basis, our adjusted earnings has effectively doubled, up from 54 cents to R1.7. Our net debt to adjusted EBITDA is 2.5 times, an improvement from 2.6 times from this time last year, but meaningfully improved from our previous quarter of 2.9 times. As a reminder, we have maintained our medium-term target of 2 times or less, which we deem appropriate under the current structure. We expect this to continue to trend down in FY26. Taking a closer look at our net revenue performance, we delivered R1.53 billion in the quarter, a 45% increase on Q1 in the previous year. Our enterprise division underwent a significant restructuring since Q1 FY25. We closed non-core businesses, invested significantly in our platforms and completed the recharge acquisition. The R222 million net revenue reflects the new base and represents a 19% year-on-year improvement. Given the product offering, Enterprise is subject to seasonality in electricity sales and ADP, but we are pleased with the quarter-on-quarter growth, given this represents a relatively comparable period. Our consumer division has continued to grow at a record pace over the past quarters, leading to a 43% year-on-year increase in net revenue. Our merchant division net revenue is also up 43%, primarily driven by the acquisition of Adumo, which we acquired and consolidated from Q2 last year. Turning to our earnings for the quarter, Group Adjusted EBITDA increased 61% year-on-year to R271 million. approximately achieving the midpoint of our guidance. Merchant segment adjusted EBITDA was R162 million, an increase of 20% on Q1 FY25. The majority of the year-on-year increase is due to a DUMO, which is not included in the comparative quarter. As we mentioned in our previous earnings call, FY26 will be a transformative year for Merchant. We are building the foundations for future growth with a focus on three aspects in particular. Bringing several businesses together, unifying our merchant brand and product offerings to clients, and rationalizing our infrastructure in order to capture efficiencies. The integration of a variety of products and businesses in one go-to-market strategy requires a great degree of planning and disciplined execution. We are confident with the new management team we have in place, led by Kahiso Kawale, and are excited to drive growth in a market we believe is ripe for disruption. Consumer again delivered standout performance, with segment-adjusted EBITDA increasing 90% to R150 million. We expect this trend to continue in the medium term and Lincoln will discuss how growth in our active consumer base and innovations to our onboarding system continue to yield effective results in ARPU and product penetration. Enterprise delivered 22 million rand of segment-adjusted EBITDA for the quarter, up 241% year-on-year. We continue to invest in our platform and although we anticipate some volatility in enterprise quarterly earnings, we do expect an earnings uplift later in the year and into FY27 as product platforms go live. A quarterly run rate of approximately 30 million Rand continues to be a near-term target and will lead to enterprise being a meaningful contributor to EBITDA for the group. Our group costs were 64 million this quarter, elevated relative to prior quarters. This included some non-recurring finance and administrative charges. We expect group costs to trend towards a quarterly run rate of 55 million rand. Our adjusted earnings per share showed a continued upward trend, almost doubling year on year to 1 rand 7 cents for the quarter. This demonstrates our ability to ensure creative growth as part of having both an organic and inorganic strategy. Shifting our focus now to cash flow and our balance sheet health. Cash flows from business operations continue to be healthy, totaling R341 million for the quarter, closely tracking our quarterly EBITDA evolution. We reinvested R122 million of that cash flow into growing our lending books and R106 million to fund our net interest costs. Capital expenditure for the quarter was R90 million, of which R51 million was spent investing in growth. This consists primarily of continued expansion of our SmartSafe product, capitalization of software development, and funding additional merchant acquiring devices. We expect our annual capital expenditure to remain below R400 million and we remain on track to do so. Through positive increased EBITDA performance and careful cash management, we have seen a reduction in our net debt to adjust the EBITDA ratio from 2.9 times last quarter to 2.5 times. This is as planned for in the execution of our capital allocation framework and we expect continued improvement in this ratio as adjusted EBITDA increases with no material increase in debt. We anticipate that Bank Zero will allow us to fund expansionary cash flows from our lending activities with customer deposits, further deleveraging our balance sheet. This will materially increase our cash conversion rate relative to our current funding structure. I will now hand over to Lincoln, who will take you through the revenue drivers and KPIs for merchant, consumer and enterprise. Lincoln.

Thank you, Dan. Good morning and good afternoon to everyone on the call. We have changed our presentation slightly this quarter, and with Dan having taken you through the financial performance of the divisions, I will focus on the operational KPIs that drove that performance. As Dan mentioned, our merchant division is undergoing transition, integrating businesses, unifying our brand and offering, streamlining costs and infrastructure, and operating under new leadership. The year-on-year increase in net revenue and segment-adjusted EBITDA is largely due to ADUMO, which wasn't included in the prior year's figures. Looking at our card acquiring, our TPV has more than doubled, reflecting the scale the Adoma acquisition has contributed to our business. We processed 9.2 billion rands this quarter, up from 4.2 billion rands last year. The number of our devices has grown from 53,500 to almost 88,000 at the end of the quarter. We are seeing continued success across our multi-product customers who hold more than one solution. We are still in the early stage of evolving into a one unified merchant offering, but the trajectory of travel is positive. Conversely, we experienced moderately higher churn from small to medium single product merchants. This is primarily driven by price sensitivity for these merchants. However, we saw no impact to the overall TPV process, reinforcing our strategy to build deeper relationships with our clients and evolve from a single product provider to a multi-product solution partner. Moving over to Cash TPV. We continue to see a declining cash usage trend in the small to medium merchant sector. Cash primacy in the micro merchant sector, however, remains. We have increased our cash vault in the micro merchant sector to 4,600. This partly offsets the reduction in cash experienced in the small to medium sector, resulting in a modest decrease of 4%. As a result of this increased footprint, cash TPV in the micro merchant segment has grown 75% year-on-year and now accounts to 18% of all cash volumes in Q1 FY2026, up 10% from last year. Cash deposits in this part of the market consist of lower values but higher frequency. This results in lower standalone margins than in the small to medium sector of the market. This provides an important hook for merchants, who we can then sell alternative digital products, thus creating an ecosystem. Cash deposits into our vaults top up micro merchant's digital wallets, which is then immediately available to purchase prepaid solutions, make supplier payments, or transfer to a bank account for EFTs. This is a vital part of our offering. The result of this cash-led strategy is evident in ADP, where TPV grew 21% year-on-year, while devices grew approximately 9.5% to 97,500. Our supplier payment platform continued its strong growth trend, increasing 37% year-on-year, strengthened by gaining traction from the cash solution. we now have more than 1,900 suppliers on our platform, significantly reducing cash holdings and transaction risk and improving administrative efficiency for our micro merchants and their suppliers. Within prepaid solutions, we saw a 4% increase in DBV, driven by a shift in product mix with some pressure on airtime and data sales during the period, which was offset by growth in electricity purchases. In our merchant lending business, we originated R201 million for the quarter, a 21% increase on last year. We are spending time and effort to enhance our merchant lending offering as we believe this is a key axis of growth for the division. As mentioned last quarter, we have reduced the turnover threshold for our merchants to qualify for credit, but maintained our credit scoring criteria. Some of the changes include redesigning our onboarding procedures to make it more efficient for merchants to access our lending products. Our overall loan book grew 72% on a year-on-year basis. However, our penetration within the merchant base remains modest. The relatively small number of merchants holding a loan confirms that we are under-indexed in this segment and is an area of strategic importance. In our software or our GAP business, the number of sites was up 3% and our ARPU up 4% to 3,184. ARPU was impacted by lower pricing at some major customers, partially offset by increased adoption of our cloud-based integrated Unity product, which enables greater customer lifetime value, prioritizes long-term growth, and enables rapid product development. We expect the adoption of Unity to deepen market penetration at the cost of lower upfront subscription fees. This ensures we remain the preferred partner for restaurants looking to transform their success. I will now move on to consumer KPIs. I'm pleased to report that the momentum in financial year 2025 has carried into financial year 2026 with the division delivering another excellent result for the first quarter. During quarter one, we continued to expand our share of the grant beneficiary market, ending the quarter with just over 1.9 million active consumers, which is inclusive of approximately 220,000 non-permanent grant beneficiaries. This represents a 24% increase compared to last year. Net new additions for the quarter were 49,000 compared to 24,000 in quarter one, 2025. This indicates not only the effectiveness of our sales channel, but the quality of our product value proposition that drives engagement. Our market share for the permanent grant beneficiary base is 14.1% compared to 11.4% a year ago. Most of this growth has come at the expense of the post bank. as its customers shift towards better value propositions. More than 20% of the post-bank migration chose Lysaka, which is disproportionate to our market share. There have been three core drivers to our disproportionate growth. First, innovative go-to-market tools. Our agents are able to sign up clients both in our branches and in the field using proprietary digital first onboarding system, Bonway. Clients can sign up with their fingerprints and have a card in under five minutes. Two, expanding our low-cost branch network from 223 in quarter one financial year 2025 to 238 in quarter one financial year 26 and a plan of an additional 15 during this financial year. We also plan to have over 50 servicing points that will connect us to rural communities like never before. 3. LISACA is invested in staff training and a remuneration structure that incentivizes onboarding and engaged clients. Our APU has increased 13% year-on-year to 89 rands in Q1. The rise in APU has been driven by the success of cross-selling of our lending and insurance products, aided by the rollout of Bungwe, as mentioned earlier. This results in increasing engagement in our consumer base. Those consumers using all three of our products has grown to 18% of the base compared to 15% at this point last year. Our lending product has been a key driver of the consumer division's success over the past two years. This product is tailored to the needs and financial resources of permanent grant beneficiaries, including immediate access to funds, and has been very well received by our customers. Our re-advanced rate on loans is high, exceeding 75%. Originations for quarter one amounted to 820 million rands compared to 462 million rands last year. And our closing book almost doubled to 1.1 billion rands from 564 million rands a year ago. We've seen excellent growth over the past year driven by innovations in both product and distribution. The launch of a new R4,000 loan value with a nine-month term has been positively received in the market. This allows us to gain more data and continually refine our offerings. Existing clients can also originate loans digitally through our new USSD in under five minutes and get immediate access to funds, saving consumers time while engaging through low-cost digital channels. Encouragingly, our credit loss ratio remains stable and is relatively consistent to what we've experienced over the past few years. Our new lending product with larger values and longer repayment terms has thus far not had a significant impact on our credit loss ratio. As the lending product mix scales to the larger and longer-term loan product, we expect a modest but non-material increase in the credit loss ratio. We actively manage this to ensure we remain within our risk appetite. Our insurance product has been equally successful, with gross return premiums increasing 38% year-on-year to R120 million for the quarter, with a number of enforced policies rising 27% to approximately 589,000 policies. Similar to lending, our insurance products are customized and priced specifically for the grand beneficiary market. We offer a traditional funeral plan and a pensioner's plan. Our customers value these insurance policies highly and we are demonstrating continued operating leverage with collection ratios maintaining around 97%. This is exceptional for this segment of the market. With the success of our funeral plans, in quarter two, we begin to offer policies to non-easy pay everywhere account holders. It has been another very successful quarter for our consumer division. Looking at the enterprise division now, As Naeem noted during our full-year results presentation in September, the enterprise division went through a transformative year in financial area 2025, and it was only in quarter four that our results were a proper representation of its potential and a clear outline of its strategy. I'm pleased to report that Enterprise had a successful first quarter and is making good progress against its strategy. Enterprise is becoming an increasingly important contributor to the group, not only in terms of profitability, but also as a technology provider to the merchant and consumer divisions. Our alternative digital products business provides the integration technology to enable any customer in South Africa to purchase a prepaid solution, for example airtime, electricity, or facilitating a bill payment through channels such as retail distribution networks and online banking apps. We are one of the largest aggregators in South Africa. The ADB ecosystem consists of collectors and receivers. Our collectors are enterprises that act as sales and payment channels, enabling consumers, merchants and businesses to access our platform. We are integrated with major retailers, banks and numerous fintechs. On the receiver side, partners include all the mobile network operators, electricity providers, insurers, gaming and money transfer service companies. Our bill payment platform enables businesses and consumers to settle accounts with over 620 billers, including municipalities, DSTV, telcos and retailers. The extensive integration with our billing partners is a source of competitive advantage for LISACA as replicating this is very challenging. Bill payments represent over 75% of the ADP volumes and was a key driver of the 13% year-on-year growth in ADP TPV to R11.9 billion. As a reminder, we earn a fixed fee for bill payments while other payment earnings are based on the value of the transaction. Lysaka Utilities is the recharger business we acquired last year. We sell prepaid electricity meters and prepaid electricity vouchers. Utilities TPV increased by 21% year-on-year to R396 million for quarter one. Approximately 8% reflects a pass-through of the electricity price increase in August, with the remainder representing organic growth. Recurring revenue is generated through the vending of vouchers for these meters, paid through the LISACA Utilities Platform. The electricity meters are mainly sold through large retailers such as Builders Warehouse, Leroy Merlin, and Buko. Currently, we have 500,000 registered meters and 270,000 active meters, of which are up 16% year on year. As a reminder, we measure active units as meters where there's been a top up in the last month. We've made substantial progress in the integration of the recharger business into our utilities vertical, both from a product and a people's perspective. We are beginning to realize synergies from owning more of the value chain as part of this transaction and expect to see increased incremental margin as a result from financial year 2026 quarter two. Thank you. That concludes the segment operational overview for quarter one. I will hand over to Ali now to take you through the key updates in our quarterly guidance.

Good morning and good afternoon to all of those joining us. Our progression towards One Lasaka is not merely about brand. It is a critical step of strategic initiatives designed to simplify and organize the business to unlock bottom line growth, as well as helping facilitate the drivers of top line growth, which I will touch on in a minute. From a cultural and brand perspective, bringing our divisions together toward a unified Lusaka is the next necessary step of this journey. We will refresh our corporate identity to staff in November, greatly improving not just the visual representation, but also the clear articulation of what Lusaka represents. We look forward to celebrating who we are and consolidating our marketing spend to maximize the impact. Having a single, unified brand and culture will help facilitate our stated objective of building relationships with our customers rather than selling products, as well as aligning this with the representation we have to the market and to our employees. This effort extends to our physical footprint. On the office consolidation front, we have identified a new Johannesburg office. Our expectation is to have all divisions housed under one building by the fourth quarter of fiscal 26. We will also be consolidating our hubs in Cape Town and Durban and reducing our overall lease footprint from over 40 locations to approximately 20 over the coming calendar year. Over time, this will reduce our occupancy cost, but more importantly, it will create a more efficient and integrated cross-functional organization. On our strategic initiatives, the Bank Zero acquisition continues to progress well with positive momentum. While we remain subject to the regulatory process, we are on track to close the acquisition as planned. We have no change to our expected timeline of completion by the end of FY2026. We are also continuing to simplify our business and balance sheet. This includes simplifying our corporate structure by selling or exiting subscale non-core business lines and closing legal entities. In addition, we have reached an agreement with TPC, a subsidiary of Blue Label Telecoms, the reference shareholder of CELSI, to monetize our equity position with an underpin of 50 million rand should the business list in the near term, while retaining optionality on the upside of a potential IPO. This stake is currently valued at zero on our balance sheet. This streamlining will allow management to focus time and capital on our core mission. As we continue to build the LASAKA platform, we are also simplifying representation to focus on the structural drivers of our revenue. LASAKA is structured into three distinct and complementary divisions, consumer, merchant, and enterprise. This deliberate segmentation ensures each division operates with a clear strategy, targeting specific growth levers, providing Lysaka with a diversified and resilient revenue base. Our primary financial measures are aligned with this strategy. At the next investor presentation, we will reference the KPIs provided as the core drivers of our net revenue and the building blocks of our equity story. In the same way as we have been providing the number of customers and the ARPU in the consumer business, we will be providing the equivalency in the merchant and enterprise business. Our hope is that this will help simplify the explanation of how we make our money. The ARPU for each customer is a function of the individual revenue drivers for each product and amplified by the level of cross-sell achieved for that customer within that division. For merchant ARPU, our cash, card, and ADP products are a function of volumes and take rates. Our lending product is a function of origination volumes and yield, and software is a function of hardware and software fees. For consumer, we will continue to disclose ARPU in terms of transaction fees and volume for our transaction banking product, lending originations and yield for loans, and premiums and collection rates for insurance. Enterprise APU is based on three products, ADP and utilities, which are a function of TPV intake rates, and payments, which is a function of the number of transactions and transaction fee. On the expected completion of the Bank Zero acquisition, we will have additional customers and product offerings, which will augment the existing base of consumers, merchant, and enterprise clients, and augment our product offerings across all three business lines. Having evolved our team and products over the course of the last year, the focus for FY26 is on maintaining discipline, focus, and execution. We are pleased to reaffirm our FY26 annual guidance on net revenue, group-adjusted EBITDA, net income profitability, and our adjusted EPS measure. Looking forward to the second quarter, on a net revenue basis, we are providing a guidance range of R1.575 billion to R1.725 billion, the midpoint of which implies a year-on-year growth of circa 20%. We are also providing a group-adjusted EBITDA range of 280 million rand to 320 million rand, the midpoint of which implies a year-on-year growth of circa 42%. Note that the Q2 FY 2025 comparable actuals incorporates the ADUMO acquisition. We are excited for the year ahead and looking forward to continuing to deliver on our strategy and commitments. I will now turn the call over for any questions.

Thank you, Ali, Dan, and Lincoln. Participants, you are now reminded to please enter your questions into the questions tab of the webcast or ask your questions on the conference call line. Ali will route the questions to the team as appropriate. Okay, we have our first question on the conference call line. Operator, please, could you open for Ross Kricher from Investec Securities?

Good afternoon, everyone. Thanks very much for the call. Yes, I've got four questions all on the merchant segment. Maybe I'll just ask them one by one, if that's easier. Just on the sequential performance of the revenue line, so it looks like that declined quarter on quarter. So I'm just keen to unpack. Is there some seasonality in that? Is there a mix effect? Any color you could give would be useful. Thanks.

All right. There is some seasonality in that. There is also some non-core business lines that we are closing down and exiting. So yes, there's both of those.

Okay, thanks. And then maybe if I can extend that to the margin as well. I mean, I suppose there's probably a similar answer, but any comments on the change in margin, sequential change in margin?

Yeah, that has an additional component, which is we did have some non-recurring costs within the merchant business. And we made the election that we were not going to exclude these from the group adjusted EBITDA. We want to minimize any exclusions that we're providing. I think the A closer representation of the run rate can be inferred from the guidance that we're providing for the next quarter. So if you the Adumo transaction clearly is incorporated, as I said in the presentation, in the Q2 period. uh um 2025 numbers and we're guiding uh the market to um uh at the midpoint of the range uh uh a group adjusted ebitda of uh north of uh 40 percent um year on year so you can get a better idea of underlying uh growth through that thanks that you understood um on the

Then maybe I'll just ask these two questions in one. So firstly, just on the rationalization of infrastructure that you talked about. I mean, it might be too early to ask, but I don't know if you thought about what the impact on the cost base will be from any of those activities. And secondly, I guess somewhat related, but in terms of the cross-sell, so clearly there's a consolidation going on in terms of all the acquisitions done, including most recently at Duma. So that first question is more on the cost side of that and where you end up. And secondly, then on the actual sort of cross-sell part of that, where I think you've talked in the past about being able to do that. It's still early days, but just curious if there's any milestones you think you've reached, if there's any data points that we should know about there.

Thanks. So I'll start with the cross-sell question. I'll ask Dan to talk a little bit about the infrastructure rationalization. So on the cross-sell, as we sort of alluded to in the presentation, we're going to, from the next quarter, be providing the attachment rates by one, two, three, four, five products for the merchant business, as we've been doing in the consumer business, so that you can track the quarter-on-quarter evolution of that cross-sell. However, Where we are today is that the vast majority of our merchants do have an attachment rate of more than one product. The largest two contributors of products to our EBITDA in the merchant business is merchant acquiring and ADP. And there is... a high attachment rate for customers who have merchant acquiring to a second product already, the biggest one being ADP, but software is also an irrelevant attachment product. From next quarter, we'll be able to talk to the specificity of those numbers, but we do expect to materially increase that cross-sell over time. But in terms of the rationalization, I mean, we have already spoken about the fact that we believe that there's quite a material operating leverage associated with our business as we scale. But I'll let Dan augment.

Thanks, Ali. Ross, just around the overall costs, I mean, in effect, we're bringing together four businesses under the umbrella of our overall merchant division. There's a whole bunch of duplication of functions on the one hand, and there's a misalignment as the individual businesses go to market with their customer propositions. So that's the unification we speak about of our merchant business. Within those operations will be some re-engineering of platforms as we bring them together. As I said, there will also be the removal of a whole bunch of duplications of various functions. I only touched on a simple example around our office rationalization. In our Johannesburg region, we look to be in the second half of financial year, all under one roof. And later in the year, both in our Durban and our Cape Town areas as well. That will effectively enable us to move from 40-odd offices to roughly 20 as a group as a whole. So use that as a simple example. Within that rationalization, of course, there's an opportunity for significant cost savings. It's probably a little bit too early to give you some specific data points as to how much, but we do expect those significant savings to emerge over the short to medium term. And also, if I may, just come back to the margin question on the merchant side. Ross, I will guide you. We disclosed margin quarter by quarter. There is some seasonality, of course, and there's some mix effects around that. If one just looks through the overall margin trend within the merchant business, it oscillates anywhere from 19% to 25% across different quarters. So within each quarter, there are some different mix effects. I'd encourage you to look at it as a blended or smooth rolling basis rather than individual quarter by quarter.

Thank you, Dan. Ross, any additional questions? Okay, I think that means that we have answered all of Ross's questions. The next question I have is on the webcast. There are two questions that are similar from Prashendran at 361 and Jared Houston at All Weather. Please can you take us through the South Sea potential IPO? Are you happy for it to list and get out and what was the rationale to put the option in place that you have?

I'll start and then hand over to Dan as well on that. I mean, yes, I mean, I think we wish the company all the best and we are very supportive of the planned IPO. The rationale to get out is the fact that as a business, we say we are simplifying operations is not a core part of the Lissaka strategy. And so we'd much rather allocate that capital towards our core purpose. In terms of the specificity on the structure, Dan?

Yeah, thanks, Ali. The only thing I'd add to that is we currently have a 5% stake in an existing CELSI business. As part of preparing it for its IPO, there's a variety of restructuring steps, both including injecting assets, airtime and restructuring of debt, which will culminate ultimately in the conversion of a lot of that into equity to give CELSI a sustainable balance sheet. That restructuring will result in the dilution of our equity percentage stake. And so the business being listed is very different to the one currently constituted in which we have our 5% holding. To Iqalui's sentiment, we're all absolutely delighted with a successful CELSI listing. And we've aligned our economics very much around that. The market will adjudicate what the appropriate fair value for CELSI is and therefore our implied stake. And we've got some optionality around that where we've secured a minimum value of 50 million for our stake should sell C-list this year. Of course, with upside, if the effective holding ends up being worth more than that.

Thank you, Dan. Thank you, Ali. The next caller on the conference line is Theo O'Neill from LHR Research. Operator, please, could you open the line for Theo to ask his questions?

Thank you. And good day. I want to follow up on your first question about the merchant business margins. I believe you said that they range from 19% to 25%. And I'm wondering when you think about margins for the merchant business, do you think about the overall number or do you think about the individual product margins trying to stay within that range?

So it's thanks for the question, Theo. I mean, the whole evolution of the business is around trying to build relationships with customers and having multiple products associated with those customers. So I very much think about it as a collective rather than the individual margins per product, partly because the way that a customer may be paying may not be the entirety of what they're buying. And there's different aspects of them. There's an ecosystem component to our merchant business. The way that I would think about the margins in that business, I think we have in the past given a reference that we believe that this business is a business as an aggregate, we should be able to trend the EBITDA margin to certainly north of 30%. And I think we are, through the integration process, on the way towards that evolution.

Thank you, Ali.

Thank you. And I have one more question here. On the consumer side, you've successfully grown share over the years despite increased competition, and I'm wondering how long is the runway for that?

I'm going to let Lincoln answer that one.

Theo, I think that we've indicated before that we still see some runway in growing our business, taking more share from the postbank. As we mentioned earlier, our share is 14%, yet we're taking 20% of the customers coming out of the postbank. And we think that with the remaining customers, as they move, a larger percentage will come to us. Secondly, if you look at our penalization rates, it gives you an indication that there's still room for us to grow in that space, both in our lending and in our insurance. Thirdly, we've indicated that on the insurance side, we have room to sell our product to non-EPE customers. That's another opportunity to grow. But if you think of the optionality that comes with the Bank Zero acquisition, when that has been approved and consummated, it gives us an opportunity to see customers that are beyond the grant space. So when we think of our consumer business, we think of our consumer business in terms of that future that includes Bank Zero. So there's much more optionality for this business going forward.

And just to add to Lincoln's comment, part of the rationale, obviously, of the transaction is we believe that there's material complementarity between our distribution and the Bank Zero platform in being able to provide a very competitive offering in the open market. So we certainly don't feel like we're out of run road. In fact, we feel like we're expanding that run road.

Okay, thank you very much.

Thank you, Theo. We also have James Stark from R&B Morgan Stanley on the line. Operator, please, could you open the line for James?

James, your line is live.

James, are you there or not? Okay, while we wait for James, let's move to the next call on the webcast Q&A. This one is from Jared Houston at Allweather. Could you provide a comment on the recent ramp up in fintech interests in South Africa? For example, ECOCA, Optasia, and by other large traditional financial players.

I mean, I think it's representative and endorsing of the strategy that we're engaging with. I think that while there has been an increase in the interest, I'd still say that the interest and the scale of the fintech ecosystem in the country is massively underweight relative to other geographies. So I certainly... consider this to be the beginning of the evolution rather than in a particular spike. I believe that, you know, it benefits both us and it benefits the society for there to be greater innovation in the country. And frankly, I'm delighted to see successful businesses emerging in the ecosystem.

Thank you, Ali. James, do you want to try and ask your question again? Operator, could you please try and unmute James? He says that he's struggling to unmute.

James, your line is live.

Okay, that's fine. Let's go on to the next question on the webcast Q&A. This one is from Sven Thordson at Anchor Securities. Good afternoon. Combining the midpoint of your Q2 guidance and reported Q1 adjusted EBITDA, equates to about R570 million leaving R780 million to be realised in the last two quarters to achieve the midpoint of your full year guidance. This implies R390 million per quarter which is a considerable leap on Q2 which is a busy period for the group. Please elaborate on how this will be achieved. Does the base still include significant restructuring costs?

I mean, so I think your maths are all right. I would also say that as a business, this is the 13th consecutive quarter of achieving our EBITDA guidance. And we are reiterating our full year EBITDA guidance. So we have a lot of conviction associated with that. growth evolution of our EBITDA. I think we did mention that there were some non-recurring costs that are embedded. Our run rate EBITDA at this juncture is closer to 300 million Rand if you excluded those non-recurring And from that base, we are expecting to grow organically through the strategies that we've outlined in both the consumer, merchant and enterprise business. And we're excited that effectively we have the engine room that can achieve those growth rates.

Okay, thank you, Ali. Those are all the questions we have for today. James, apologies that we couldn't get your question, but we'll contact you afterwards. If there are any other questions, please reach out to me. Thank you for attending our webcast today. Thank you, Ali. Thank you, Lincoln. Thank you, Dan.