Earnings Transcript for LSAK - Q4 Fiscal Year 2024

Operator: Hello, everyone and welcome to the Lesaka 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, ir.lesakatech.com. Additionally, Lesaka 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 US dollars under US GAAP. However, it is important to note that our operational currency is South African Rand and as such, we analyze our performance in South African Rand. In this presentation, we will discuss our results in South African Rand, which is non-GAAP. This assists investors' understanding of 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 Rand. Taking a quick look at today's agenda, Ali Mazanderani, Chairman of Lesaka, will give a quick overview of the year and quarter. Steve Heilbron, CEO of Merchant Division and Head of Corporate Development will provide an update on the Merchant Division, followed by Lincoln Mali, CEO of Lesaka 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 ended June 30th, 2024. Thereafter, Ali will turn and talk about Lesaka's outlook, which includes fiscal 2025 guidance. With all that said, I'd now like to turn the call over to Ali.

Ali Mazanderani: Good morning, and good afternoon. We're reporting another successful year for Lesaka. Group adjusted EBITDA increased 55% to ZAR691 million, in line with our guidance for the year. At an operating income level, we have managed to turn around a ZAR275 million loss in FY 2023 to a profit of ZAR67 million this year. Fundamental earnings per share turned positive to ZAR1.06 , improving by ZAR3.72 per share. Our net debt to group adjusted EBITDA ratio improved to 2.5 times from 4.5 times a year ago. The first chapter of the Lesaka 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 call. 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, Lesaka 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. FY 2024 affirms opposition as the leading independent fintech in southern Africa in terms of both revenue and EBITDA, an impressive achievement. Steven, 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.

Steven Heilbron: 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 Lesaka 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. Adumo Payments offers payment processing, integrated payments and reconciliation solutions to SME merchants in South Africa, Namibia and Botswana. The well-known hospitality platform [GARP] (ph) 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 the 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 VAS 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 transfer separately, as it is a volatile throughput and is 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 Touchside sites. Pre-acquisition, 2,300 of the Touchside 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 Touchsides officially joined Lesaka 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-on-Q4 performance in FY 2023, given that we were targeting our back book 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 30% year-on-year, is of a 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 FY 2023, FY 2024 growth is largely attributable to new client acquisitions. We are anticipating good growth from our card acceptance business in FY 2025. 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 VAS 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 Adumo 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] (ph) 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 $3 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 disbursed 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 range. 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 this 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 behavior 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 Funder South Africa 2024 by Wealth & 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 Adumo 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 billers 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, VAS throughput showed good growth of 10% and bill payment was up an 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 Nuets, 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 Nuets, Kazang Pay Advance and bulk VAS purchases, EBITDA was up 15% for FY 2024. We expect our merchant segment adjusted EBITDA growth for FY 2025 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 Lesaka. 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.

Lincoln Mali: Thank you, Steve. Firstly, I'd like to thank our consumer team for delivering an excellent set of results for the year, characterized by four consecutive quarters of improved revenues and profitability. The consumer business today is unrecognizable compared to three years ago when the strategy was set and the turnaround commenced. During this period, we had to

Naeem Kola: Thank you, Lincoln. The 2024 financial year has been another year of progress for Lesaka, delivering on what was committed in terms of group adjusted EBITDA, guidance, balance sheet strength, and M&A activity. At the same time, we have continued to reinforce our group corporate and governance structures, making numerous key appointments to our group and divisional leadership teams. Black Economic Empowerment is a key strategic priority for us, and we set out to achieve a Level 4 rating in fiscal 2024, which was achieved in Q2 2024. Our revenue grew 11% for the year, but was negatively impacted by the change in sales mix of airtime revenue, recognized as principal versus agent in our merchant VAS business. This does not impact our profitability. Our EBITDA grew 55% to ZAR691 million for the year, achieving midpoint of guidance range with our operating income turning positive for the first time in five years and improving by ZAR343 million to ZAR67 million. Our cash flows, debt ratio and balance sheet continue to improve. Cash provided by operating activities in FY 2024 improved to ZAR538 million compared to ZAR7.4 million a year ago and an outflow of ZAR565 million two years ago. I will go into more detail shortly. As a reminder, Lesaka is a domestic filer in the United States. We report results in the US dollars under US GAAP. However, our operational currency is South African Rand, and as such, we analyze our performance in South African rand. We have continued to deliver consistent growth in revenue, growing at 11% on an annual basis, from ZAR9.5 billion to ZAR10.6 billion, which was marginally lower than our guidance range. Year-on-year, merchant revenue grew 12% and consumer revenue grew 15%. As discussed in our previous results presentation, we saw an increased percentage of pin-less airtime and data bundles being sold versus pin-based airtime. For pin-less sales, we act as an agent capacity only recognizing the commission earned as revenue. For pin-based sales, we act as principal and recognize the total face value as revenue. This has a material impact on the revenue but no impact on gross profit. Pin-less airtime was higher than pin-based airtime compared to the assumptions when we set out our guidance last year. Looking at group adjusted EBITDA, we achieved a 55% increase in FY 2024 to ZAR691 million, which was the midpoint of our guidance. From a quarterly perspective, EBITDA grew 30% year-on-year. As you heard earlier from Lincoln, the Consumer Division had a stellar year, with adjusted EBITDA up over fourfold, ZAR274 million, and for the quarter, almost doubling adjusted EBITDA to ZAR90 million compared to Q4 2023. As Steve mentioned, the merchant division adjusted EBITDA was affected by various items which lowered our growth to 4% for the year, including Nuets volatility, the Kazang Pay Advance suspension, and bulk VAS purchase opportunities. Excluding the impact of these items, the merchant business grew merchant adjusted EBITDA 15% for the year, and the management expects merchant adjusted EBITDA to grow at approximately 20% for FY 2025. Despite good growth in our business and continued investment into the reinforcement of our group corporate and governance structures and systems, I am pleased our group cost reduced 10% year-on-year. We have seen good momentum into FY 2025, which is reflected in the Q1 guidance Adi will talk to later. Turning to our GAAP income statements and segmental EBITDA analysis. For FY 2024, the improvement in operating income from a loss of ZAR275 million to a profit of ZAR67 million was an excellent result. Operating income includes ZAR43 million of one-off transaction costs related to the acquisition of Adumo in 2024 and a one-off non-cash impairment charge of ZAR126 million in 2023 related to the Nuets impairment. Adjusting for these items, we still improved operating income by ZAR260 million for the year. Further, included in operating income is the non-cash PPA amortization of approximately ZAR270 million in both FY 2023 and FY 2024. Our net loss before tax narrowed to ZAR239 million for FY 2024 compared to a net loss of ZAR579 million a year ago, a ZAR340 million year-on-year improvement. Excluding the impact of non-cash PPA amortization charge and the one-off transaction cost in 2024, our loss before income tax would be a profit of ZAR31 million for FY 2024. This compares to a net loss before tax of ZAR184 million in FY 2023, excluding the impact of PPA and the Nuets impairment. Fundamental earnings per share is the most appropriate measure of Lesaka's per share performance in management's view. It excludes one-off items, non-repeatable items, PPA amortization, and other non-cash items and gives a clear measure of underlying performance of our business. This graph clearly demonstrates the progress Lesaka has made from a loss of ZAR2.66 per share in FY 2023 to a profit of ZAR1.06 per share, an improvement of ZAR3.72 per share. For the quarter, we improved ZAR1.18 per share from a loss in Q4 2023 to a profit of ZAR0.42 per share for Q4 2024. Basic earnings per share, which does not account for the non-cash PPA charge and other one-off items, improved by ZAR4.82 per share for the year to a loss of ZAR5.07 per share. I am extremely encouraged by the improvement in our cash flow generated operations. Over the year, we generated an additional ZAR531 million of cash from ZAR7 million to ZAR538 million. On a quarterly basis, excluding the impact of large and opportunistic bulk VAS purchases that benefited Q4 2023, we improved from ZAR5 million cash outflow in Q4 2023 to ZAR104 million cash generation in Q4 2024. We generated ZAR211 million operating cash flow before interest paid, tax paid, working capital related items, and the movement in the loan book funding. We define this as cash generated from business operations and consider it the appropriate indicator of our conversion of EBITDA to cash. This is an increase of 21% compared to Q3 2024. We generated net cash from operating activities before CapEx of ZAR104 million for the quarter and ZAR538 million for the year. Our Q4 interest paid reflects a full payment of our quarterly interest which is why it is higher than the previous quarter where a portion of the interest was capitalized. The movement in loan book funding relates primarily to the growth in the capital disbursed on our consumer loan book growth in our consumer business. As a reminder, our Q3 2024 cash flow was significantly impacted by the quarter-end falling over the Easter long weekend, resulting us holding extra days, merchant settlements amounting to ZAR244 billion, which needs to be taken into account. We are very pleased with the overall cash generation of our business. We had over ZAR1 billion of cash on hand at the year end. Alongside our improvement in group Adjusted EBITDA, this has led to a significant improvement in our net debt to adjusted EBITDA ratio from 4.5 times last year to 2.5 times at the end of the year. We have ZAR1.4 billion of non-core assets on our balance sheet. The major non-core asset is our holding in MobiKwik. MobiKwik continues to improve its financial performance, recently delivering its first full-year profit and still plans to less on the Indian Stock Exchange as soon as practical. We remain committed to realising the value from this asset through an orderly disposal process. Capital expenditure for the quarter amounted to ZAR87 million with ZAR70 million relating to growth CapEx, primarily in the merchant division relating to Kazang devices and cash flows, both of which deliver strong IRRs and will support our growth over the medium term. We also made investments in our technology infrastructure. Overall, we are very pleased by the performance during Q4 and full year 2024. We have a very strong base to grow from and the addition of Touchside and Adumo provides the technology and scale to accelerate our growth over the medium term which Ali will provide more details on.

Ali Mazanderani: Thank you Naeem. The Adumo acquisition which is expected to close in October 2024, will enhance our platform, adding customers and products as well as meaningful scale. The completion of this transaction marks the beginning of a new chapter in the Lesaka story. As we alluded to on the previous earnings presentation, we will use the transaction as a catalyst to approach the market with a more customer-centric operating model. From a financial reporting standpoint, we will continue to maintain the consumer and merchant split. However, starting next quarter, we will present our KPIs and performance with a more granular breakdown. Our consumer segment will remain substantially the same, however the perimeter will be expanded to include the Adumo Payouts business. This business provides cash incentives to employees of companies in a store of value, typically a scheme branded card, in a similar way to a grant payout except the payment originates from a corporate rather than SASA. This will enlarge our addressable market and provides us with a meaningful beachhead into the broader consumer market. While there is significant room to grow our existing grant recipient revenue, both through increasing our market share and increasing our average revenue per user, we will build out on our consumer proposition to serve additional use cases and address a much bigger total addressable market. We expect that over time we will serve new segments of underserved consumers organically and potentially through acquisitions. We have demonstrated our ability in the consumer space to not just win market share against traditional incumbents, but to do so profitably and sustainably. With the incorporation of Adumo, Lesaka will serve approximately 1.7 million customers. We think this is just the beginning and we have earned the right to raise our sites. In our merchant segment, the Adumo transaction provides the opportunity to segment the business into three component parts, organized around distinct customers

Operator: Thank you, Ali. We're now going to open up the Q&A session. [Operator Instructions] The first question is coming from Rajiv Sharma of B. Riley.

Rajiv Sharma: Hi. You have alluded to further bolt-on and transformative M&A. Can you elaborate on the group's M&A strategy and how you're thinking about the funding of these opportunities and any potential dilution? Hello?

Operator: Raj, we're just working on an audio mic issue. Stand by.

Ali Mazanderani: Raj, would you mind repeating that question?

Rajiv Sharma: Yes. Congratulations on solid results and guidance. You've alluded to further bolt-on transformative M&A. Can you elaborate on the group's M&A strategy and how you're thinking about the funding of these opportunities?

Ali Mazanderani: So from a funding perspective, if I heard the question correctly, it was, how do we intend to actually fund these transactions? So first of all, we're very cognizant of the debt ratios that we've put forward and we remain incredibly disciplined in that respect. So the group, we've talked about maintaining our debt ratios in the region of 2 times in terms of debt to EBITDA. Everything that we do is accretive. And separate to that, we have a very supportive shareholder base. So, I think funding is rather not really going to be an issue in terms of the targeted transactions. You saw we recently did the Adumo transaction, where we're going to be putting 17.3 million shares into the market and we funded that transaction with ZAR230 odd million of cash. So again, we've got a number of very exciting opportunities. If you look just over the last period, if you just look over the last period, we've actually brought the Connect transaction into the group and integrated successfully. In the [indiscernible] review, we brought Touchsides in, and separate to that, we are very excited about the Adumo transaction, which will now close on the 1st of October.

Operator: Great, thank you. We’ll now take our second question, which is submitted by Frank Geng from Briarwood Chase Management. You indicated that you'll be updating your medium-term financial objectives in Q2 of 2025. Can you provide some color on what metrics will be covered and if it's fair to expect that these medium-term financial objectives will be higher more ambitious than the medium-term objectives provided a year ago.

Ali Mazanderani: Can you guys hear me okay?

Steven Heilbron: Yes.

Ali Mazanderani: Okay. Firstly, just to give a bit of colour, the Adumo transaction is expected to complete in October, so we think that it is appropriate to update the medium term subsequent to that, which is what we outlined. We've already stated that we will be providing GP guidance from Q1, so you should also expect that in that medium term update, we will also be providing GP. I think rather than commenting on the specificity of what that will be ahead of time, I think it is worth noting that the like-for-like growth that we are putting in our FY 2025 guidance at the midpoint of the range, excluding the Adumo transaction, so the underlying growth of the Lesaka business, adjusting also for the way that interest is expected to operate in the consumer business going forward is 30% year-on-year, which is more than the medium term guidance that we had previously provided.

Operator: Great, thank you. We have a second question from Frank Geng at Briarwood. The full year 2024 merchant division results included quite a few moving parts. Is it fair to conclude that the [indiscernible] offering in the informal market and the Connect in the context of the persistent challenging operating environment for these merchants delivered strong growth? Please comment on the outlook for this division going forward on a normalized basis.

Steven Heilbron: So let me take that question. I mean, to start with, as we presented, the normalized growth rate in the merchant division is 15% for the year ended FY 2024. Let me also remind -- if I can also remind you that that is of a significant growth in the prior year. Also if you have a look at the year under review you will see that our VAS throughput increased by 43% for the year ended FY 2024 and our card throughput was up by 30%. So we had relatively muted growth in cash and credit, but those strong growth rates supported the underlying 15% organic and this is -- as we look into FY 2025 from an organic perspective we are very comfortable with that as a sustainable growth rate. During the year as well, we've just taken the Touchsides business in and as Ali mentioned from 1 October we will be closing the Adumo transaction. So at an organic growth rate at 15% both historic and going forward there's a strong comfort and momentum.

Operator: Great, thank you Steve. Our next question is a live one from Theo O’Neill with Litchfield Hills Research. Theo, we're going to unmute your line and please go ahead.

Theo O’Neill: Thanks very much. I've got two questions. My first question -- first congratulations to the consumer segment which demonstrated some solid growth here. And so, thinking about the future, how should we think about the future growth which seems finite if you're just servicing the grant -- servicing grant recipients.

Ali Mazanderani: We can't hear. Yes, we can't hear what the question is. Should I check the...

Operator: Can you hear me?

Ali Mazanderani: Send the question, because we can't hear the question.

Ali Mazanderani: Theo, we hear you. I'm just not sure it's broadcasted where they're sitting.

Steven Heilbron: Thank you. Thank you for the question. If you think about our current market share at 11%, we have about 1.3 million active permanent grant recipients in about a 12 million base of grant recipients. The post office has got about 28% market share of that and they are shedding customers in that space. We think that there's still a lot of room to grow in that space. Secondly if you think about our cross-sell opportunities we are only penetrated into 40% of our base in lending and only above 30% in insurance which gives us a lot of opportunities for cross-sell. Thirdly, we have introduced new VAS, value added services products into that base which means there's a lot of opportunity to grow. But what excites us about the future is that, the Adumo pay out gives us 250,000 new customers who are non-grant customers. These customers are customers as Ali pointed out earlier of large corporates that pay out their employees on meeting certain metrics either for safety or anything like that. We now have an opportunity to sell our products into that base and that provides us a beachhead into a non-grant future. We see ourselves finding pockets of underserved beyond the grant space. So yes, there is a lot of room for us to grow in the grant space, but we're starting to put on opportunities to look beyond the grant space and look at other pockets of underserved customers.

Theo O’Neill: Okay, thanks. I have one more question. Could you just give us some comments on CapEx plans for 2025?

Steven Heilbron: The question was from Theo, can you provide some info on CapEx plans for fiscal 2025?

Ali Mazanderani: I'm not sure whether they can hear you. WhatsApp the question? WhatsApp the question to Naeem?

Naeem Kola: Theo, would you mind asking the question again?

Theo O’Neill: I was wondering if you could give us some insight into CapEx plans for 2025?

Naeem Kola: All right, thank you. I think that's Theo. Theo, thank you for the question. In terms of our CapEx plans for 2025, as I've highlighted in my presentation with CapEx, with the business, we remain focused on growth CapEx. So we would be expecting to spend a fairly similar CapEx amount for FY 2025. And this will be mainly spent within the merchant business, specifically within our Main Street business, which is a Kazang business for investments in our POS, and that is mainly related to growth of our merchant base. And then also with regards to the cash business, as Steve highlighted, the market is looking a bit more favorable and the economy is looking better. So we also investing within that cash structure. So I would say that, CapEx spend on -- on growth CapEx would be very similar.

Theo O’Neill: Thank you very much.

Operator: Okay. And our final question here comes from Jared Houston at All Weather Capital. Ali, how are you thinking about reflection in the group's debt levels? Will the further improvement in net debt to EBITDA be driven mainly by EBITDA growth, or can we expect some debt reduction at a group level? Where do you see the direction of leverage ratio when considering your outlook?

Ali Mazanderani: Well, I'm going to let Naeem actually answer the question, but just to kick it off, we are intending to manage the business at that 2 times ratio as a whole. The consequence of our existing debt position and the Adumo transaction completing and the guidance that we've provided would result in a materially lower net debt to EBITDA ratio than we currently are, but maybe if Naeem you can unpack that.

Theo O’Neill: Yes, sure. Jared, thanks. Just to give a better understanding, if you look at our FY 2024 balance sheet, we've had significant progress in terms of releasing close on to about ZAR140 million of the [South Sea] (ph) stock that we've been holding for a few years. I think that cash and the funds that we've generated from that has given us the ability to reduce some of our capitalized interest expense. We're sitting now with around ZAR30 million of the South Sea stock. That was quite a significant cash inflow for us. We've also moved a year ago from a leverage ratio of 4.5 times to about 2.5 times is what we've closed at the end of FY 2024. And I think as Ali has stated in terms of our group debt restructuring, there is some further benefits that we'll get from an interest -- reduced interest cost going forward into FY 2025. And post the Adumo transaction, if we achieve the midpoint of our guidance, as well as the restructuring of our consumer loan book into a separate structure, we should be getting to -- our target is to be at a leverage ratio below 2 times.

Operator: Thank you, Naeem. Thank you, Ali. That's going to bring us to the end of the webcast today. We've run short on time. We had a few technical difficulties at the end that we worked through, but we will be following up with anybody who had a question that wasn't asked. So please stand by and thank you for your participation. This concludes today's webcast.