Lesaka Technologies Inc (LSAK) 2026 Q1 法說會逐字稿

Welcome to Lesaka 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. (Event Instructions) Press release and investor presentation are available on our Investor Relations website at ir.lesakatech.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 is 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 Lesaka'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 one and quarter three results, coupled with a more comprehensive update in quarters two and four. You can find more details in our usual disclosures in our 10-Q submission to the SEC. This is available on our website.

I'm 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 ZAR1.53 billion, a 45% increase over last year. Group adjusted EBITDA landed at around the midpoint of the guidance range at ZAR271 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 nonrecurring items.

Our adjusted earnings, which we believe is the most appropriate measure of our overall financial performance, has grown by 150% to ZAR87 million for the quarter. On a per share basis, our adjusted earnings has effectively doubled, up from ZAR0.54 to ZAR1.7.

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 ZAR1.53 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 noncore businesses, invested significantly in our platforms, and completed the Recharge acquisition. The ZAR222 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 ZAR271 million, approximately achieving the midpoint of our guidance. Merchant segment adjusted EBITDA was ZAR162 million, an increase of 20% on Q1 FY25. The majority of the year-on-year increase is due to Adumo, 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 Kakhisokowale, and are excited to drive growth in a market we believe is ripe for disruption.

Consumer again delivered a standout performance with segment-adjusted EBITDA increasing 90% to ZAR150 million. We expect this trend to continue in the medium term, and Lincoln will discuss our growth in our active consumer base and innovations to our onboarding system continue to yield effective results in ARPU and product penetration.

Enterprise delivered ZAR22 million 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 ZAR30 million 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 ZAR64 million this quarter, elevated relative to prior quarters. This included some nonrecurring finance and administrative charges. We expect group costs to trend towards a quarterly run rate of ZAR55 million. Our adjusted earnings per share showed a continued upward trend, almost doubling year-on-year to ZAR1.07 for the quarter. This demonstrates our ability to ensure accretive 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 ZAR341 million for the quarter, closely tracking our quarterly EBITDA evolution. We reinvested ZAR122 million of that cash flow into growing our lending books and ZAR106 million to fund our net interest costs.

Capital expenditure for the quarter was ZAR90 million, of which ZAR51 million was spent investing in growth. This consists primarily of continued expansion of our Smart Safe product, capitalization of software development, and funding additional merchant acquiring devices.

We expect our annual capital expenditure to remain below ZAR400 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 adjusted 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 Adumo acquisition has contributed to our business. We processed ZAR9.2 billion this quarter, up from ZAR4.2 billion 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 multiproduct 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 multiproduct 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 quarter one financial year 2026, up 10% from last year. Cash deposits in this part of the market consists of lower values, but higher frequency. This results in lower stand-alone 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 vault top-up micro merchants 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 TPV, 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 ZAR201 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 2026, with the division delivering another excellent result for the first quarter. During quarter one, we continue 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 nonpermanent 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 Postbank as its customers shift towards better value propositions. More than 20% of the Postbank migration chose Lesaka, 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, [Bongwe].

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. Three, Lesaka has invested in staff training and a remuneration structure that incentivize onboarding and engage clients.

Our ARPU has increased 13% year-on-year to ZAR89 in quarter one. The rise in ARPU has been driven by the success of cross-selling of our lending and insurance products, aided by the rollout of Bongwe, 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 readvance rate on loans is high, exceeding 75%. Originations for quarter one amounted to ZAR820 million compared to ZAR462 million last year, and our closing book almost doubled to ZAR1.1 billion from ZAR564 million 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 ZAR4,000 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 tenor 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 written premiums increasing 38% year-on-year to ZAR120 million for the quarter, with a number of in-force policies rising 27% to approximately 589,000 policies. Similar to lending, our insurance products are customized and priced specifically for the grant beneficiary market. We offer a traditional funeral plan and a pension 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 Naim noted during our full-year results presentation in September, the Enterprise division went through a transformative year in financial year 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 ATB 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 Lesaka, 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 ZAR11.9 billion. As a reminder, we earn a fixed fee for bill payment, while other payment earnings are based on the value of the transaction.

Lesaka Utilities is a recharger business we acquired last year. We sell prepaid electricity meters and prepaid electricity vouchers. Utilities TPV increased by 21% year-on-year to ZAR396 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 purchased through the Lesaka 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 has been a top-up in the last month.

We've made substantial progress in the integration of the recharge 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 and our quarterly guidance.

Good morning, and good afternoon to all of those joining us. Our progression towards one Lesaka 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 Lesaka 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 Lesaka 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 Durbin 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 FY 2026. 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 Cell C, to monetize our equity position with an underpin of ZAR50 million 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 Lesaka platform, we are also simplifying representation to focus on the structural drivers of our revenue. Lesaka 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 Lesaka 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 AGP 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 ARPU is based on three products. ADP and utilities, which are a function of TPV and take 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 ZAR1.575 billion to ZAR1.725 billion, the midpoint of which implies a year-on-year growth of circa 20%. We are also providing a group-adjusted EBITDA range of ZAR280 million to ZAR320 million, 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. (Event Instructions)

Ross Krige, Investec Securities.

Good afternoon, everyone. Thanks very much for the call. Yeah, So 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 out 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?

That has an additional component, which is we did have some nonrecurring costs within the net 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 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 2025 numbers, and we're guiding the market to at the midpoint of the range, group adjusted EBITDA of north of 40% year-on-year. So you can get a better idea of underlying growth through that.

Thanks Ali. Understood. 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 Adumo. So the 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. 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 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 a relevant 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. 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 4 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 the customer propositions. So that's the unification we speak about of our merchant business.

Within those operations, there will be some reengineering 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. Ali, 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 significant savings to emerge over the next -- 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. But I do encourage you to look at it at 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 Jon at All Weather. Please can you take us through the Cell C potential IPO? Happy -- 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 our operations is not a core part of the Lesaka 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 Cell C 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 Cell C 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 a 5% holding. To echo Ali's sentiment, we are absolutely delighted with a successful Cell C listing, and we have aligned our economics very much around that. The market will adjudicate what the appropriate fair value for Cell C is, and therefore, our implied stake. And we've got some optionality around that where we've secured a minimum value of ZAR50 million for our stake should Cell C list this year, of course, with upside if our effective holding ends up being worth more than that.

Thank you, Dan. Thank you, Ali.

Theo O'Neill, LHR Research.

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 that. 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 the reference that we believe that this business is a business in 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. Lincoln answer that one.

I think that we've indicated before that we still see some runway in growing our business, taking more share from the Post Bank. As we mentioned earlier, our share is 14%, yet we're --

On the way to was that evolution.

taking 20% of the customers coming out of the Post Bank. And we think that with the remaining customers, as they move, a larger percentage will come to us. Secondly, if you look at our penetization 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 ground 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 rate. In fact, we feel like we're expanding that run rate.

Okay. Thank you very much.

Thank you, Theo.

James Stark, Morgan Stanley.

James, your line is live.

James, are you there, or?

Okay, while we wait for James, let's move to the next call on the webcast Q&A. This one is from [Javid Bostan], at All Weather. Could you provide a comment on the recent ramp-up in fintech interest in South Africa, for example, Ekoka 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 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? 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. Okay.

James, your line is live.

That's fine. Let's go on to the next question on the webcast Q&A. This one is from Sven Thorson at Anchor Securities. Good afternoon. Combining the midpoint of your Q2 guidance and reported Q1 adjusted EBITDA equates to about ZAR570 million, leaving ZAR780 million to be realized in the last two quarters to achieve the midpoint of your full year guidance. This implies ZAR390 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 math’s are 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 the growth evolution of our EBITDA. I think we did mention that there were some nonrecurring costs that are embedded. Our run rate EBITDA at this juncture is closer to ZAR300 million if you excluded those nonrecurring costs.

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.