Lesaka Technologies, Inc. (LSAK) Earnings Call Transcript & Summary

Good afternoon, and welcome to Lesaka's Investor Day. I am Phillipe, Head of IR at Lesaka. The format today will take form of a presentation by Ali and Dan, followed by a Q&A session. As a reminder, during this webcast, we will be making forward-looking statements. Please review the cautionary language contained in the presentation relating to the risks and uncertainties associated with forward-looking statements. Over to Ali.

Good afternoon for those in the room, and good morning for those of us who are joining from the U.S. and anywhere else in that time zone. Welcome to Lesaka's Capital Markets presentation. We signaled that we were going to be doing this presentation at the last quarterlies. And really, we felt that since the evolution of the business, we haven't -- the evolution of the business being, really from my perspective about 4 years ago, when I joined the Board as a Non-Executive Director and VCP invested. We haven't really had the opportunity to stand back and to present to the investor community exactly what it is we're doing, why we're doing and where we see ourselves going. And we realized that we actually have quite a lot to say, and it's a bit of a challenge to do justice to that, not only when we're delivering on our quarterlies, but to be honest, even within the constraints of what we have available to us today here. We have people in the U.S., we have people in South Africa, and the time window is really only a couple of hours when we get everybody together in one go. So what we've elected to do is to break down the story into different components. The first part is what the focus of it is today, which is really focusing on the business, our positioning and the opportunity set ahead of us. And we will have a separate session in the second half of the year where we do more of a deep dive on some of the numbers and the underlying unit economics so that we'll touch on the high-level financial performance. We also felt that even within the time available we had to us now, we weren't going to be able to go through all of the granularity. So we had posted on our website at the end of last week a set of presentations, which Lincoln, Dan, myself and Steve provided, which I'm sure all of you guys have had the opportunity to and enjoyed looking at over the weekend. But if you haven't, then you can refer back to them, and they'll give you more context. I will, for the sake of today, start by going through a high-level presentation of how we see the business and the opportunity ahead of us. Dan will give a little bit more meat around the performance associated with that. I'll then conclude, and we'll open up to questions afterwards. It will be about 45 minutes of presentation and about 45 minutes of Q&A, and we're very much looking forward to that and to discussing in more detail. So without further ado, I will start by introducing myself for those of you who don't know me. So I'm a fintech investor/entrepreneur, and I have been for much of the last 20 years. I was brought up in South Africa. It's my home and where my heart is. But I found myself being intimately involved in building leading fintech businesses around the world in India, in the Middle East, in North Africa and Latin America and more recently in Europe. I was -- I have held various roles, but most recently, I was the founder, and I'm still the Chairman of a business called Teya, which is one of Europe's leading financial technology businesses. It's a great delight for me to be in South Africa because really, the evolution of that journey started in South Africa. It started with me as a young consultant working within FirstRand with an F&B, I'm thinking about how I wish to spend my future. And it became abundantly clear to me that one of the defining themes of our generation was going to be the digitization of commerce, that this was going to be something that was going to go on for decades to come, was going to compound. And much like the creation of physical infrastructure, was going to create a digital infrastructure that was going to transform the way every human operated, whether they were from a low-income emerging market or whether they are from the rich world. And so I wanted to dedicate my life to that theme. And I also wanted to understand who was most -- who is best positioned to win in that construct. And it became abundantly clear to me that independent players that were not held back by legacy technology, that were not defending profit pools, they were afraid we're going to be cannibalized that were network-neutral were ultimately going to be the winners. And that's why I started as a private equity investor, it was because that was the best way of playing that theme. And so it transpired. Those businesses that I've been involved with, they have been multibillion-dollar platforms and enormous successes within their respective markets. And my move back to South Africa and my involvement with Lesaka was really a representation of the fact that I thought the time was right for here, for the place that I knew best. And that was a very exciting and compelling reason. So I joined the business as a nonexecutive, as I said, 4 years ago, at the time where we really framed the Lesaka journey. And then in February of last year, I took over as the Executive Chairman. So I've effectively been in situ for about a year. And so I thought this is also an opportune time to give my perspectives on that. So let's start with why we think we have a right to win, and there's maybe 3 key takeaways from this presentation. The first is that the Southern African market is the most -- amongst the most attractive fintech opportunities in the world. It's -- Africa is the fastest growing according to many experts in the field, BCG Payments report registers it is as the fastest growing region of the world. And within the African construct, Southern Africa has a dynamic that makes it specifically attractive, which is that there is an existing scale profit pool. So you don't just benefit from the underlying tailwinds of the digitization of the society. You also have the opportunity to take existing share from players who are operating with what I believe to be very, very poor propositions that attract very, very high pricing relative to what should be offered to the customers. And also businesses that are structurally disadvantaged to take -- to basically evolve and innovate in that construct. And I'll give you more context on that. But a few data points just to hold in your mind. The majority of transactions in this region of the world and then South Africa, even despite the evolution of the financial services industry here are still conducted in cash. That's an extraordinary situation for us to be in, in 2025. And in addition to that, about 80% of SMMEs in the country don't accept digital money. They only accept cash as a medium of exchange. Those 2 data points, which are from the SARB's last review in and of themselves represent an enormous opportunity ahead of us. But when you look at the market, you can also see that the non-bank players are very small. And Lesaka I think has a great opportunity, partly because of the scale that we've managed to bring together. We have the right constituents in terms of product. We have the right constituents in terms of people. I'll touch on these later. And I think we have also an opportunity given the fact that we have this dual listed environment and able to access capital markets, I think, with less friction outside. It gives us, I think, the ability to continuously augment where we are today. And as you'll hear me iterate later on, this position of being a network-neutral plan, independent player, not captive to a bank or captive to a telco or captive to a retailer provides a structural advantage in addressing this digitization story. It has been thus in almost every country in the world that I've operated in, I'm pretty confident it will be thus in South Africa as well. And I think we are already demonstrating that. And I think that the third point I want to take away -- you guys to take away from this is that we have been able to show, albeit we are very early in that journey, how we can win in that construct. We've demonstrated a track record that I think is testament to the strategy we laid out. And we've also demonstrated that we do what we say. We've achieved our profitability now for 10 consecutive quarters. And as a management team, I think we are very committed to making sure that we take stakeholders along the journey so that they can understand the underlying business and drivers. So from my presentation today, I'm going to go through 7 slides, 6, me first, and then I'll hand over to Dan and then 1 concluding. The first is just reiterating the scale of the opportunity and the growth associated with it, where we play. The second is registering that we have a position that is structurally advantaged from the incumbent players in the market. And the third is that we believe that Africa's evolution is expected to follow a familiar path and we can draw corollaries with other markets. And you can, in fact, get, I think, a good sense of what is likely to happen in terms of the structure of the market going forward from that basis. Fourthly, I want to represent that while the opportunity exists, we have to seize it. And I think we have a set of people here that are really an extraordinary collective with an experience that I couldn't -- I'm very proud to be amongst and where I feel like if there is a group of people who have that opportunity, this is them. And the next point is we have a clear strategy. We have discipline and guardrails associated with what we're doing so that we don't get ahead of ourselves so that we commit to that strategy. And then it's been translated, as I said, into a track record, and I'll leave you with what I think is the so what, why should you guys be really caring about this business, monitoring this business in the coming months and years. So on the opportunity, we've sized the serviceable addressable opportunity today in South Africa at $4.4 billion. And I want to frame that in a couple of context. The first thing is $4.4 billion, I should say. The first thing I want to say is that's the serviceable addressable opportunity. I believe as we evolve and as we continue to augment our product offering, that will increase. And obviously, that serviceable addressable opportunity is growing. We play in 3 segments as we organize ourselves, the Merchant segment, the Consumer segment and the Enterprise segment, and we can touch a little bit on those later. But I think that the presentation we posted on our website gives a lot of granularity as to what underpins those segments and our relative competitive mode in those segments. But what I want you to take away here is that the market itself is growing double digits independent of our ability to take market share and independently, our ability to grow our scope. We are in a double-digit market because of the digitization of society. And as a consequence of that, we find ourselves with the wind at our back. And so as a structural advantage player, we should expect that we'll be able to take market share as we have indeed been doing. And our market share today is circa only 7% of the addressable markets we're in. We break that down by the different segments. But I think that the compelling kind of fact I have from other environments is you expect the leading fintechs in the markets, I mean to evolve, to have market share certainly of north of 10%. They're often closer to 20%, 30% of their respective markets. So we have the opportunity to grow with the market which is already a large market, but we also have the opportunity to take share from players in that market. And the reason we think we have the opportunity to take share and to disrupt is because firstly, the -- I suppose the structural edifice in which we base our business model are quite predictable. Cash is going to decline in use in the society. I think that the trajectory of travel is very clear. The only question is the velocity, and all indicators are that the velocity in the markets we are in will accelerate over time. The other thing is that the market share of nonbank participants, people who aren't structurally captive to a parent who is trying to defend a profit pool who has an existing legacy technology that they have to defray the costs of, who have other alignments and other incentive structures, has been clear. When I started investing as a private equity investor in this space, banks dominated the digital acceptance volumes globally. Today, it's the nonbanks, and the trajectory has been clear in every market. And even in South Africa, that has been the trajectory. It's just the position in the South African market is far less evolved than in other geographies. So today, banks still dominate the merchant acceptance space, and that is not the case in the other geographies that I've operated in. And you can see there's big volumes to play for. And that -- those volumes are registered by players who are operating with legacy platforms who are trying to leverage existing distribution models which are suboptimal for the needs of their customers. We can touch a little bit on that. And we're also doing so not by pricing the relationship, but by pricing the product. And it's a very important lesson of other markets in the world that the winners have not been the cheapest providers. You can look at the U.S. or you can go to Europe, the winners have been the providers who have given the most value to their customers. You can see that very clearly in the evolution of businesses like Block or like Toast in the U.S. And we do have some interesting comparables that we can make as to understand where South Africa might be on its journey or Southern Africa, and there's adjacent anglophone geographies, which is really the markets we focus on. Today, our existing markets, and we are in 5 markets today with people on the ground, and we do sell into other adjacent markets within the southern and in the case of Kenya, East Africa as well. It represents a population of about 250 million people, which is larger than, say, for example, the Brazilian market, and we don't think that there's material difficulty from a regulatory or other perspective from operating in adjacent geographies. I think time zones and language are probably the biggest things that you need to be cognizant of as you're doing this. The second thing to recognize is that the banks will dominate relative to what we see in other markets. And that's not just in the payments volume, that's also in the credit provisioning. And we have a lot of runway because of the cash digitization story. And the Brazilian story, for those of you who have watched it, has created many billions of dollars of shareholder value, both on the consumer neobank side, where we play, as well as on the merchant acquiring and acceptance side where we also play. And the equivalency in South Africa is a very, very small fraction of that. We are, by far and away, the largest player. And today, we are a circa $400 million market cap business. So you can see that the sort of the opportunity is in front of us there. And the way that we will participate in that opportunity is, as I say, not by pricing a product, but by pricing relationship. The core issue here is we have a very wide suite of products. Those of you who are in South Africa in the room can see some of them outside. And in the merchant space, that includes a merchant acquiring product. That's where you accept Visa or Mastercard and you settle a merchant. We provide software propositions that help our merchants to operate their businesses more effectively to engage with inventory management and other operational tools. We are then also the principal nonbank provider digitizing cash for merchants. You still need to solve that problem. It's still a material pain point for them. We also provide lending products and alternative digital payments, which is the ability to give merchants the opportunity to sell to their customers, whether it be a bill payment or other what is called value-added services like airtime top up. The important thing to bring out in this construct is there are players playing within each of those segments, but there's very few players playing across those segments across different types of customers. We have both informal and formal customers. And rather irregularly, we almost -- it's very seldom that we would be participating with a single product for a customer. So as an example, we have about 90,000 merchants in the informal sector through our Kazang brand that we provide alternative digital payments for them. About 50,000 of them are merchant acquiring customers as well. The point is we would almost sell -- we'd almost never go to a customer in that segment and provide a stand-alone merchant acquiring product. And so that's what differentiates us typically from the average, which is that it's about a relationship with multiple products which have mutually reinforcing economics and create very low marginal cost to serve and very high incremental profitability as we layer. In the consumer space, it's been exactly the same story. I'd say on the merchant space, because of the timing of the acquisitions that have brought those products in, we're still on a journey. In the consumer space, we started that journey a few years ago. And so we're actually quite advanced in that journey. And you can really see it bearing fruit in the financials that we've been providing over the quarters, where you start with the transactional account, but then you layer on lending and insurance products to those customers. And the consequence of that, as you improve the ARPU and the marginal economics of that is profound, as well as the consequence being that you will reduce churn, you will increase lifetime value. So you don't just minimize your CAC, you also maximize your LTV in those relationships. We then also got an enterprise business, which operates in a slightly different environment. We explained that in the presentations again that we put on the website, what we really think about it as a force multiplier for our merchant to consumer business. It provides us with an opportunity both to build technology that we consume ourselves and to phrase costs on that side, but also to access endpoint customers through third-party relationships so that we can further expand the value proposition. And that's a segment that while it hasn't historically been a material contributor to our EBITDA, is now starting to become a material contributor. And you're going to see that flowing through in the coming months. And that proposition is being partly delivered by the people on this team, partly delivered by the people on your screen and partly delivered by the 3,500 people who actually do the work. And I'm extremely -- as I said, I'm extremely grateful and proud to be amongst them because I've got Dan on my left, who was at VCP. And it's a great vote of confidence to have the largest -- somebody from the largest shareholder who is intimately involved in the story from the beginning, coming in as the CFO of the business, before that, was Head of Corporate Finance at Standard Bank, and it's been a real pleasure. On the journey, we've got Lincoln, who is the Head of Card and Payments at Standard Bank and whose leadership in this business has really had a profound effect, I think, on anybody who's especially seen the journey in the consumer business. And Steve, who really, as I consider the business, was -- came into its maturity with the evolution of the Connect acquisition. I mean, I think he is as much a co-founder as anything of what is being built here. We also have Naeem, who's on the line who I've worked with previously in building what was at the time the largest pan-African payments business and where we felt like we had unfinished business because the opportunity was so much greater and so much bigger. But we've got a lot of an understanding of how to that evolve. And I'm not going to go through every party, but I think we have assembled an extraordinary collective of talent with an extremely relevant and focused experience associated with the task at hand. And ultimately, I do think that, that's really what the key determination of our success is going to be. It's not because we didn't predict that cash was going to go down. It's not because we're not going to understand that merchants and consumers are going to want to have a relationship, not just a transaction on a single product. We know those are going to occur. It's whether we are going to be able to execute on that as best in class. And in order to do that, I think you do have to frame the strategic narrative of how you're going to do it and create the discipline. And it's as a next-generation player. It's as a technology-led player, where we first try and look at and address the biggest opportunities that are available to us in the under-serviced markets. There's no point in going head-to-head with competent competitors in places where they have a competitive advantage. We play in the spaces where we know there's big profit pools that have been left unattended because they either don't have the wherewithal, or structurally, they can't address those opportunities. So we want to address the most attractive segments within the consumer and merchant space and the enterprise platform in the countries we're in and the neighboring geographies. We also want to position ourselves to gain privileged access to do so to data, to do so more effectively than others. This is a technology play. And it's very important that we use the advantage we have as being an insurgent to be at the forefront of technology application to the industry we're in. And then we need to develop the superior proposition to provide the customers with the least frictionful proposition that delights them and aligns with their interests, where we partner with those customers, whether they be consumers or merchants or enterprises, to help empower them to deliver on what they need to deliver. And we combine the data-driven insights and our suite of solutions to serve in an advantaged way. Hopefully, you'll see in the presentation that we put on our website, how we do that in granularity because it's important to look at our product relative to others. You don't really -- the proof is in the eating, right? And you can see in the market share we've taken in the consumer business, you can see in the customer NPS scores, how that actually translates into real-world examples. And finally, it's a very fragmented space, and we position ourselves on the natural consolidator. In addition to the organic growth story that we have, we have the ability to get even greater returns by acquiring other businesses. We have a listed environment, which provides us with some -- do we have currency. But we also recognize that there's a lot of synergies in this space. And this is an industry that has lent itself to buy and builds over and over again. And we are, I think, not only uniquely positioned to take advantage of that, we have a group of people who have an enormous amount of experience in doing that in other environments, but we've also done it within Lesaka. There's been multiple acquisitions that I think have been successfully executed on and integrated into. And I think we see many opportunities going forward to further increase shareholder value by compounding that. And so I want to basically leave you with the reiteration that I think we have the right ingredients to compound value here, multiple levers of growth in the scale market, growing fast. We have strong free cash flow generation that underpins that as well. These are businesses that are able, especially at scale, to generate material free cash flow because you're effectively creating a virtual infrastructure. Once you have the platform in place, your ability to gain incremental economics, have operational leverage and EBITDA and operational free cash flow is fantastic. And you can see that in the relativity of other businesses, routinely, businesses in this industry have EBITDA multiples north of 30% of net revenue and free cash flow generation north of 60% or even 70% of that EBITDA. And you can augment that, as I said, by releasing the untapped synergies associated with an M&A story. And we're coming from an extremely low base. Ultimately, we are a very low market cap player relative to the size of the opportunity, the size of the profit pools exist. Yet, we are far, far bigger than any other independent player in this space, where we're already above the inflection point. And so we can deliver on a growth thesis, while at the same time, maintaining hygiene in our cash flow and our profitability. It's a very privileged situation to be in to be able to be a profitable growth story in the fintech space with a large addressable opportunity where we have the moat that we have available to ourselves. I'm going to pass over to Dan now to talk a little bit about the financial record that we've achieved thus far. Dan?

Thank you, Ali, and thank you to everybody in the room and online for your interest in support of our business. Good afternoon. I'm Dan Smith. I've worked closely with the Lesaka leadership team over the past 4 years as an investment partner in Valley Capital Partners, Lesaka's largest and anchor shareholder. It's been very exciting to have been part of the team visioning and executing on Lesaka's strategy. So much so, in fact, that I elected to join Lesaka in October last year as Group CFO to focus all my energy, full time, on the business. I have a background of over 25 years in investment banking, M&A and capital markets, mostly in the financial services sector, and that's across Africa, Europe and Asia. In my role as group CFO, my focus is on leading the Lesaka's financial strategy, steering its financial performance and purposefully managing capital allocation in order to enable the Lesaka's growth and generate strong shareholder returns. To provide some context to Lesaka's financial performance, over the past 4 years, we've been hard at work building our platforms to enable us to holistically serve consumers and businesses in both the formal and informal markets. This started with the breakout of the Consumer division in 2022 with its transformation into EasyPay, a customer- and sales-focused business. Today, EasyPay is profitable and cash generative with a significant opportunity ahead as its customer base grows and our unit economics improve. Our merchant platform was effectively established later in 2022 with the acquisition of the Connect Group with further scale and a broadening our product and service offering added with the acquisition of Adumo in 2024. These businesses are now the basis of our merchant solutions offering to our micro merchant customers through our Kazang platform and small- to medium-sized businesses through our Adumo platform. And earlier this month, we augmented the Enterprise division's alternative payment offering with the acquisition of Recharger, a prepaid electricity metering business. Our acquisitions have a specific strategic focus. They either enable scale or they add capability or they aid depth in product and service, or often, all 3 of these attributes at once. They enhance and fuel our organic growth. In the context of these acquisitions, our capital allocation is very purposeful, and we operate within disciplined parameters. We only do EBITDA accretive deals. We target a leverage ratio of 2x, and we use a balanced mix of debt and equity. Here, we also have the advantage of our listing on NASDAQ, which provides us with acquisition currency, positioning us as a natural consolidator in Africa. As of 31 December 2024, we operated at an effective leverage ratio of 2.4x. This is largely as a result of the acquisitions we've done in building our platform. This has reduced significantly over the past 3 years as we generated cash and have rapidly grown our earnings to fit our capital structure. At the end of February 2025, we completed the refinance of our group debt with the benefits of diversifying our funding sources. We increased facility headroom, created capacity for further organic and inorganic growth, we optimized the term of our debt and we reduced the overall cost of our funding. I'm pleased with this outcome and appreciate the partnership and support of RMB and Investec, our funding banks. Turning to cash flow. We're seeing the growth in improvements in our business come to fruition, with our cash flow generation from operations and cash conversion increasing significantly over the past 3 years. Excluding the impact of further acquisitions, I expect our leverage ratio to trend rapidly to our targeted 2x level. Our consistent execution of strategy is translating into a track record of improved financial performance. On an annual basis, we have seen strong net revenue growth. This compounded 60% over the past 4 years to ZAR 5.4 billion at the midpoint of our guidance to June 2025. Our profitability has improved substantially as well, with our group adjusted EBITDA guided to between ZAR 900 million and ZAR 1 billion for our current financial year to June '25 and ZAR 1.25 billion to ZAR 1.45 billion for FY '26. At the midpoint of ZAR 1.35 billion, this represents a compound growth rate and profitability of 45% over 4 years. Our margin has also improved in the current financial year, and we expect it to increase further as our platform scale. Finally, we're also seeing the realization of our strategy come together, with our EBITDA guidance for FY '25 and '26 implying an organic growth rate of between 25% and 30% on a like-for-like basis. So looking ahead to our next fiscal year, we guided the market to group adjusted EBITDA excluding the impact of further acquisitions of ZAR 1.25 billion to ZAR 1.45 billion. So what are the drivers of growth? We've distilled our business model into a few specific drivers. In our Consumer business, our key drivers are our number of customers and our average revenue per user from a transactional account, lending and insurance products. In our merchant and enterprise businesses, our key drivers are throughput and take rate. Our take rate is a blend typically of the ad valorem fees we earn. And our throughput is effectively the flows in merchant acquiring, the sale of alternative digital products, the settlement value in our cash business, utility and bill payments or prepaid electricity vended. Our group costs are fairly fixed at about ZAR 200 million. In each of these divisions, we have specific plans, but our approach is similar. We benefit from the secular tailwinds with inevitable digitization of commerce. We are executing on disrupting existing profit pools. And we're focusing on providing holistic solutions to our customers to solve multiple pain points as we increase our share of wallet and our unit economic scale accordingly. It's important to note that the growth we expect to see is coming across a diversified business serving merchants, consumers and enterprises, which is rare in fintech. Excitingly, this is only the early stages of the implementation of our strategy with a huge opportunity ahead. I hand over to Ali to summarize our investment case. We'll open up to Q&A.

I mean one of the things I wish to bring out again in that -- in the revenue models here is the diversity, not just in terms of the product offering, but also in terms of the customer base. We've got 1.7 million consumers, more than 100,000 merchants, 100-plus in different verticals, in different segments, no single concentration. And when you have that diversity of a base where you have predominantly ad valorem-based pricing, you've got incredible defensive moat associated with it. And I think that for a business of our scale, that downside protection is very irregular associated with it as well. And I think that's a fantastic place for us to start from and look forward to. I want you guys to take away really 4 things from this presentation. The first one is, to recap, we have an enormous revenue opportunity associated with this business. We're addressing a big profit pool today. And we're a relatively small share of that profit pool, but by far and away, the largest independent player addressing it. We have levers of growth in multiple directions, but just to go through a small thought experiment for you. If our existing serviceable addressable market is growing at north of 10% per annum and we are currently at 7% market share, for us to grow our net revenue effectively to a 20% per annum arrangement as indeed, we have and believe we should be able to do, I would imply only a market share growth of about 1% per year. So we go from about 7% to about 12% per year, which would be really modest relative to the levers of the winning players in other geographies in terms of how they've engaged with their structural advantage vis-a-vis incumbents. The second thing is that today, we have a net revenue to EBITDA ratio of circa 17%. It was far less than that if you go backwards. Again, my experience tells me that these are businesses which should routinely be having net revenue to EBITDA ratios of north of 30% as they mature, as they endoginize some of the costs. An increase of 1% per annum of our EBITDA to net revenue ratio from 17% to 23% would imply that an EBITDA growth of north of 30% year-on-year. So in order to maintain effectively what we've been doing this year requires very modest assumptions associated with our market share growth and the operational leverage embedded within the business model. And that gives me a lot of confidence that really, it's about us executing against that. In addition to that, the free cash flow generation that we should be able to extract from that means that, that growth should be able to be funded from an organic perspective within our own balance sheet. We don't require funding externally in order to deliver on that organic growth story. And that has also profound impacts for ultimately at maturity, what our profitability should be, and we have also registered that next year from an earnings perspective, not just from an EBITDA perspective, we expect to be profitable. And that's despite having a whole bunch of noncash items, and we're a relatively small business. There's also investments on our balance sheet which sort of move around in terms of mark-to-market. And finally, the scale associated with that. This is not a story that dies in 5 years. This is a story that compounds subsequent to that. We're really at the beginning of that narrative, not just in terms of the market share room we have, but also in terms of the adjacencies in terms of products and geographies and in terms of our ability to accelerate that growth even further through accretive M&A because I think we're extraordinarily well positioned to do so, both because of our capital market structure and because of our existing position in the market. So I'm here because I feel like this is not just an opportunity to win in a game. I think that this is an opportunity to change the game. And I think that the story that we are presenting is a story that in decades to come, will hopefully be looked back on as one of the defining financial services stories of this region of the world. I've had a lot of fun, and I'm very excited in what we've done so far, and I'm looking forward to getting started. And on that note, I will ask Phillipe to please help manage questions. I have just as an aside, asked as much as possible for this to be an organic process. I would like those questions to also really register the concerns that individuals have. So thank you.

Okay. Thanks, Ali. We will first take questions from the floor, and then after that, we'll address the questions submitted online. Online participants, please, could you enter your questions into the questions section of the webcast if you haven't done so already. Starting with the floor, any hands up? Okay. Jamie?

I'm [ Jamie Pick ] from RMB Morgan Stanley. I wondered if you could just sort of discuss -- I mean, there's a lot of moving parts. There's a lot of competitors entering and exiting the spaces in your various verticals that you're operating in. If you could just give us a sense of what do you think the landscape is going to look like in the next 24 months? Do you see more entrants coming into the space? Is this a story of M&A amongst existing competitors? And maybe you can talk to sort of what differentiates Lesaka and what gives you the competitive edge against the field?

I mean I always start the competitive question by saying I think our principal competitor is inefficiency. We're operating in a market where cash still dominates, right? So really, the principal focus of this business is and should always be how we ruthlessly drive efficiency for our customers, how we provide them with the best-in-class proposition that we can. However, there is clearly other participants in the market and existing profit pools, as you mentioned. I think it's probably easiest to break it down by the 2 largest components we have in the business, the Consumer business and the Merchant business, because they have different dynamics. But you will notice common themes. The common theme is we're not trying to price the product. We're trying to price the relationship. The common theme is we are providing customers with multiple different products to meet their needs not just with a single product. And often, we face a competitor in one segment, but they may not be providing a product in another segment for that customer. And what really differentiates us is the scale and scope of what we're able to provide. There can be players who are much bigger than us, for example, obviously, there are bigger banks that are prime merchant acquiring. But they will not be necessarily playing in a vertical like no bank in this market provides point-of-sale software that helps the businesses operate like we would under the [ Gard ] brand, as an example. The -- that's sort of a little bit more going into that. I'll hand over to Lincoln and Steve, but I'll just leave you with one reflection on what do I see as the market dynamics. I suspect that the market will mature in the construct that there will be parties who do not achieve the relevancy and the scale and the product market fit to sustain themselves. But I don't envision necessarily, just to be clear, that we will be the only winner in the structural shift. This is a huge opportunity. And frankly, it will be extraordinarily irregular if we are the only people to recognize that opportunity and take advantage of it. What I think is we're advantaged above everyone else in order to do so. But I wouldn't be surprised if other platforms evolve of relevance. Today, we are, by far and away, the largest player. And scale does matter in terms of the ability to create a value proposition that's meaningful for a customer. Maybe Lincoln, if you can talk a little bit about our differential position in the consumer space and then Steven, the merchant?

Thanks, Ali. When we started this journey 4 years ago, we started with a proposition that said social beneficiaries need choice. They need to decide which financial institution is best for them, and they should be with that institution. And we started building the business from scratch, training all of our staff, getting them to understand what it is that we want to present to a customer, change our entire distribution model from scratch, change our proposition in terms of the product, make sure that we've got digital capabilities, and then we started to compete. Four years on, we are now the third largest player in that space. And the second largest is the Post Office. And I think the challenges of the Post Office have been well documented. We now have a market share of 12% in that space. And I'm sure by the end of this month, that number would change if George were to have it. And what we offer to the client are the basic things, an ability to receive their money, an ability to manage their money, ability to borrow and ability to protect their assets. And we've been able to do that, and we've seen our cross-sell ratios really increase because people see the opportunity. The way we're also positioned is that we are where the customers are. We have hubs in places that traditional incumbents cannot go to. We have mobile teams that go to where the customers are. And we're able to engage with the customers either physically if they would want or digitally with our USSD. And we've also built other capabilities where we can open an account in 5 minutes and give somebody a card, and no other player can do that. We can be able to get our staff to see the full product set of a client with our CRM called [ Bungie ]. All of these capabilities have been built because we see that client as a client that deserves full service. And we've given ourselves the opportunity to start to think about what happens beyond social grants. So we are competing with other players. But I think for now, we've been able to take more market share from the Post Office than all the incumbent organizations that are larger, have bigger brands, bigger distributions, but we are more focused.

First one, let me just introduce myself. My background was actually -- and it's relevant to this question is I joined Investec in about 1990. I hate saying that because some of you are now working out how old I am. I'm still in my 50s. But in my mind, I'm in my 40s. Sorry to be informal. But when you get to my age, you have that luxury. And I also remember in the early '90s, I mean, we were a bucket shop in Fox Street with a couple of hundred people. I actually should have joined Standard Bank. I thought I was. Investec made such a noise in those days. I thought they were as big as -- I thought I was joining Standard Corporate Merchant Bank. But anyway, they had a fire drill, and I happened to sit next to Stephen Koseff outside on the street and tell him I was leaving, our head now our job is Standard Corporate Merchant Bank, and he gave me an opportunity to run with something. And so that was my history. But the reason I raised it -- from there, actually, I left Investec in about 2011. We initiated -- my passion was always fintech. We started the Connect Group. We scaled that business over a period of time. And in 20 -- coming up to 2022, when I met Ali and the guys at VCP, it became absolutely patently obvious to me that this passion that we had as an insurgent to do something very different and challenge the incumbent players and deliver the fintech platforms into the Southern African market, we were very much aligned, and the rest is history. To answer your questions specifically, one of the thing that I'm responsible for now predominantly is M&A within the group and also the Merchant division. But I see regularly, and I'm talking to all the time, a variety of different fintechs. Many of them I've underlined. Some are doing very well. Some have run out of road, some have run out of capital. Some business cases work, some don't. But I think to Ali's point, we've become a natural consolidator in the space. If you have a look over time, you've got the Cash Connect, the Capital Connect, the FPOS, the Kazangs, the Adumos, the GARPs, all of these businesses have been wrapped into our offering, which today, we are working very hard to introduce as a seamless fintech platform for merchants. But we see -- the point I'm making is that we are seen as a natural consolidator. There are some places, I think, where we will win. There are some places where I think we'll partner. And there will be some places that we lose as well. Just another point I want to make is it's a journey. I remember sitting with a lot of naysayers at the time going back many years where there were many areas of the markets that we entered, where people said, you're too late, it's saturated, it's dominated. It's a margin, it's commoditized, you can't compete. And we did. And we didn't just play musical chairs with market share. We actually took significant market share. And that's because many of the incumbents, it's not just legacy tech. It's legacy business models and it's legacy mindsets. And then, of course, it's passion and ruthless execution. So I think that creates the framework for what we are trying to do. To Ali's point today, we're highly profitable at a group adjusted EBITDA level. We have 90,000 merchants who have [ VAS terminals. We have 80,000 merchants who are operating with our card acquiring platforms. We're advancing north of ZAR 3 billion from a credit perspective. And from a VAS perspective, we generate north of ZAR 100 billion between our Enterprise and Merchant division. So -- and we're just getting started, and we're a minnow. So the reality is, despite the numbers that I just shared with you, we have very low market share. I think our Merchant division is less than 7% of the $2.8 billion that we've identified. And so if we make a small dent, and to Ali's point, if you look at the trend, the dominant earnings are not sitting with us. Fintech has barely made a dent in this country. And so we have the tailwinds in that respect. And to answer your question, as we see things play out over the next 24 months, we'll continue, and we've shown that we are able to consolidate. And naturally, I think the other thing that's critical is we have a DNA that will allow us to adapt. You can't -- I can't sit here and tell you what the next 24 months will look like. But what I can tell you is that we have a vibrant culture that challenges, that's always testing. We'll adapt, we're agile, and we will front up to whatever the opportunities are that exists. But the market share is not for us to lose. We are not a proxy for the market. We're a minnow. And as an insurgent, it's a lot of fun.

It's Ross Kricker from Investec. Just 2 questions from me. Just firstly, on the potential for regulatory change to allow nonbanks to play in core banking services. How do you think Lesaka specifically will benefit from that? And what do you think that your position is relative to, I guess, big retailers, and I guess maybe more specifically, Pepco and Flash? And then secondly, just on PayShap, I'm curious to hear. I guess, take-up has been fast in absolute growth numbers, but probably not as fast as certainly Lesaka probably would have liked to see. What do you think could be a catalyst for greater adoption there?

I'll quickly touch on the PayShap and then I'll go to the first story if that's okay. Thanks for the question, Ross. So on PayShap, my experience has been in building large fintechs around the world in India and Brazil, in Europe. So I'm intimately familiar with the regulatory landscapes there and the arguments that were made and what happened. And candidly, one of the reasons why, at that time, my focus was in those other markets as well was because I do think that the regulatory landscape in South Africa lagged materially behind and the opportunity set that were circumscribed. I would say that the way we think about the investment thesis is as things are, we have a great opportunity. The evolution of that market will provide us, I think, with even bigger opportunity. And I think it should evolve and the energy and the effort that the Lesaka has been putting into the PayShap is representative of that. What I'd say about my feelings towards it is it's kind of -- the issue is not PayShap per se. The issue is the digitization of commerce. PayShap is one more means in which you can digitize commerce. But the objective is to digitize the society, and PayShap is how the Lesaka has been promoting a principal area of cash digitization. And I'd say that my perspective is that this is not a chicken and egg problem. The digitization of South Africa is super clear as to what the problem is. Pretty much -- close to 90% of all adults in the country have a bank account, right? Many have many, right? So we don't have a problem that people don't have a digital store of value. What happens is 50% of the value that's deposited into those accounts is withdrawn in one go. And the reason for that is primarily because 80% of merchants don't accept digital payments. So we know exactly what the problem is. It's the distribution. It's the point of the merchant that is the problem. And when you think about that as a construct, you say, well, who has been digitizing the merchant over the last decade? It has not been the banks. None of the banks have the footprint, the proposition of the product that has really been driving that digitization journey. It's been the nonbank players. It's been the fintech players. I will say something. I'm using the word bank and nonbank here. Actually, it's not about whether you're regulated as a bank or a nonbank. It's about whether you are trying to drive innovation by utilizing modern technology and a customer-centric approach or whether you're trying to defend an existing profit pool. So I really define it as that. In the case of -- in South Africa, that digitization, we have digitized parts. That's been driven by businesses such as ourselves and others that you mentioned. That's really what's happened. And the point then around the PayShap as a medium is you have to align so that the acceptance for the nonbank participants is effectively on an equal playing field for the bank -- as to the banks so that you incentivize effectively nonbank players to accept PayShap or any other medium at the point of sale. And the second problem is you have to reduce the cost of wholesale pricing. So you have in this country, very high interchange. Interchange are higher than that exists in Europe, which is nonsensical given the cost of cash here is far higher. So if you reduce interchange, reduce wholesale pricing, for which I think the case is very clear, and you enable equal access for third-party participants to accept account-to-account payments in a sensible way, I think you'll drive the digitization journey. Whether that's through PayShap or other means, it actually doesn't really matter. But that's my perspective on that. In terms of the sort of the regulatory evolution more generally. I'm the President of an association called EDPIA, the European Digital Payment Industry Association, which represents the nonbank participants -- payment companies based in Europe at Brussels. So I'm also very steeped in the evolution that occurred there. One of the first things that I was cognizant of when I took on this role was that there wasn't a voice in the South African market for the nonbank participants. And so we created an association called ASAPP and I'm delighted that we have amongst us the President of ASAPP which is Lincoln. And so Lesaka really has a position of leadership in representing pretty much the vast majority of the volumes that are there. And so I'll ask Lincoln actually to talk to a little bit around how we see that evolution.

Yes. I just want to add 2 things to what Ali has said. So those nonbank players that Ali was talking about, we decided that it would be better if we had an independent voice in the conversation about the change in the regulatory framework. Currently, you can't fully participate in the payment system without being sponsored by a bank. So we argue that, that will not enable the innovation, the change and the digitization of e-commerce that we want. And we argued very strongly to the Reserve Bank that you could change the framework. And so all of these 8 players that were founding members of ASAPP, iKhokha, Yoko, Lesaka, Altron, Network International, Peach, Hello Paisa, all of these players came together with that objective. We've engaged the Reserve Bank, and we are happy that they've been able to put forward an exemption to the Banks Act and it covers 3 things. One is that they will regulate by activity. So there will be a number of activities. One of those activities is deposit taking, which is different from the other activities. Secondly, they've given a number of parameters of how recognition in licensing will happen for each player, and they relate to things like capital requirements, liquidity requirements, systems, efficacy and so on. And the third piece is they are also going to change how organizations like PASA are working. So we are in those conversations with them. And the second issue I want to say is that we've also been approached by the Reserve Bank to be part of a review of PayShap and its impact on efficacy. Because it's clear to everybody, it's not had the desired outcomes. I think because the design and focus has been driven by incumbent banks, which obviously would protect their current products. We're saying, let's really look at this, and going back to Ali's point, really look at it with the emphasis on what is happening on the acceptance side and what is happening on the cost of that. And so we are quite keen to participate in that. So the next few weeks will give us a sense of where the directionally there is more alignment between ourselves and the SARB about where we're going. What the SARB has indicated is that they want the coalition of the willing. They are able to negotiate with everybody, but the direction of travel is that they do want to change the payment landscape in South Africa, make it more modern, but make it more inclusive. And that's why the issues of cost become quite key in that conversation.

I think that said, the trajectory of travel is very clear. The expectation is that there will not be gatekeeping relationship. And the expectation is there should be a level playing field and hopefully, the cost of wholesale pricing goes down. With respect to how we benefit relative to retailers, to be honest, I'm not running a retailer, so the specificity of their opportunity, I'll leave them to comment on. What I would say though is 2 things. The first one is we focus on a set of products and an opportunity set that is far bigger than that, that is just the informal segment, right? While the informal segment is an attractive one because of some of the tailwinds, it's actually quite a small part of the existing profit pool today, right? So there's a breadth of solution that is specific. There's also a breadth of product that is differential. Notably, I would say, software is a key component to what we do. And the way that I understand other parties playing is often through partnerships with businesses rather than being able to provide a single interface through a single relationship and a single invoicing. The other thing that I would highlight is my experience has been that while payments markets are often the catalyst for them is often through existing product houses. Some markets, it could be banks, some markets, it could be retailers, some markets, it could be telcos. Some markets, it could be e-commerce businesses. The nature of the evolution of building digital infrastructure is you are structurally disadvantaged held captive by that association with the parent. So there's a reason why PayPal left eBay. There's a reason why Ant Financial was spun out of Alibaba. There's a reason why banks around the world have sold payments infrastructure and created independent third-party players. And there's very few examples that you'll find of the winner in these markets having been a subsidiary of a retailer. You will find examples of the incubation of a proposition being there. But then a whole bunch of things occur, including the fact that you don't like to necessarily use your competitors' rails. So if you're in a point of sale environment where you're accepting multiple different stores of value for multiple different parties, you're being network neutral in that respect, it's a huge competitive advantage. And being software led in the way that you engage with that is also a huge advantage. And those are typically not advantages that are native to retailers.

Any more questions from the floor at this stage? Okay.

I'm [ Sidi Sang ] from Kagiso Tiso Holdings. Just a question from my side. You mentioned that you offer value to customer. And this customer has been a price taker all along. So how do you guys see the ARPUs playing out over time? So once the consolidation has happened, is that declining? Or could it actually hold?

Consumer or merchant? Both? Okay. Let's start with consumer. And let's give the clearest example you can find that customers who do not have a lot of disposable income choose value over price. The clearest example I can find of that is in the SASSA grant recipients market, the Postbank is subsidized. The Postbank as a transactional account for SASSA grant recipients is free. Why are in their droves, customers coming and signing up with us when we do charge a transactional account associated with that? It's because, frankly, something that's free but not delivering value to the customer is not as valuable as something is not. There's a reason why the winners are not necessarily the cheapest. The reason is because they provide value. And it's always been a fallacy that people who are -- have less disposable income care less about value. They know value more than anybody else. They live it and they feel it. If it's not working, if it's not effective for them, they will move with their feet. So the first point is it's demonstrable in the consumer business that value matters. And it is demonstrated in that we're increasing market share at the same time as we're increasing ARPU. In terms of where that can go to, I would say that I'll just give you a thought experiment to start with. We are 6% to 7% market share today in the SASSA market alone. And there's other addressable markets around that, roughly speaking. We believe that, that market size is circa -- we have 12% of the transactional account base, but 6% to 7% of the revenue pool. So the cross-sell associated with that is quite material. And when you actually do the math to understand how much those customers get each month versus what the ARPU leakage is for us. You realize that there's quite a way to go. I don't know, Lincoln, if you want to add on that on the consumer side?

Could I also maybe add that if I look at lending, we have now 500,000 people that have with loan with us. And the loan loss ratio in that space is below 6%, which means these people value those loans because the alternative is a micro lender. No other financial institution lends in that space, we do. If I look at the funeral part, we have got 400,000 people that now have got a funeral plan. And the repayer rate is about 96%, when in the market, it's about 60%. If I look at the lapse rate, it's about 7% and the market is 24% because the people see the value. And even when you see who we compete with, we compete with large organizations that they know. But when they look at what we offer, they see the value. And so what you try and do all the time is to show the value to those customers. So we see that spend increasing, not decreasing. We see the value increasing because people can see the value. And what Ali referred to as well is that when you start to do the NPS and you get the direct feedback from the customers, they tell you why they're with us. They tell you how they are made to feel. They tell you when they walk into our branches, they tell us when, what happens when they engage with our staff. So we are building that value because the alternative for most of those people if they go to a hospital, if they go to a government department, if they go to a clinic, they know what their experience is there and we want to give them a different experience, and we think that, that value will be unlocked some more. So we see more upside than less. And we see that even in the loan space, we're only penetrated 43% in the insurance, we're penetrated more than 35%. So there's still lots of room for growth. And in the Post Office, you still have 3 million customers that are still there who still have to make a decision every day who they're going to go with. The last point I'll make is Ali talked about this thing of choice. SASSA does something remarkable that maybe society hasn't really seen it, is that they organize things called eye crops where they call in an entire community and all financial institutions go there. And they say to people, you have a choice on who to go to. And people literally vote with their feet to go to the institution that they want to go to. It's an amazing thing, and that's where you can actually see value. Who do people go to and why do they go to those organizations. We don't take it for granted. We know we have to work to retain each one of our clients, and we have to work to gain new clients.

On the merchant side, I'll just start by framing and then I'll ask Steve to add. So just recapping, we essentially have 5 products that we're offering merchants, merchant acquiring, which is the largest single contributor, but it's quite a diversified wagon wheel, alternative digital payments, which is the VAS segment fits under, credit lending to those customers, software to help them run their businesses; and cash. And we have relevant positions in each of those product offerings across our larger markets. If you're asking me the generic question of how do I think merchant acquiring will evolve as a product, which is usually what -- it's the biggest profit pool of those segments and it's where the banks play in. I would say what is merchant acquiring, right? Because if what you're saying is what you're going to provide a customer is a stand-alone terminal that's going to authorize and settle for a merchant, that should commoditize. That should be cheap, right, as a proposition because that's all that you're providing. But that's not what the winner provides. The winner doesn't provide that proposition. If what you want is an unintegrated stand-alone point-of-sale acquiring terminal, I think that there's a fair chance that the pricing goes down, but that's not what the customer is going to want either. Because increasingly, what customers want is the ability to run their business effectively. They want an integrated product. So just like I know, as certainty as night follows day, cash will go digital, so I know that the proportion of merchants in this country that will start using software to run their businesses will increase. It's happened everywhere. It will happen always because it's an automation tool associated with it. And if I again use my example, I can assure you that I can find far cheaper products, say, for example, in the U.S. hospitality market than Toast, right? In fact, I suspect it's one of the most expensive products. If you will find a stand-alone point-of-sale business that authorizes and settle from a local bank, you can get it for a fraction of the cost, right? But ultimately, that's not what the customer is buying. Why does the vast majority of new restaurant establishments in the U.S. choose a Toast? It's because they want more from their provider than that. They want a value proposition that helps them not just accept the payment but actually win. That's a partner and a relationship, not a transactional relationship. And there's no reason why South African merchants are any different to merchants in the U.K. or otherwise. And when you look at our position relative to that, for example, we have the most successful, the best, in my view, point-of-sale software business in the market in the hospitality space called GARP and it is a leader in the QSR segment. So if you're asking me, how do I think that proposition evolves, I'll say, well, if you're providing more than one product, you should actually have an expansive margin not a contracting margin. Because what you're able to do is you'll be able to create a virtuous flywheel that provides greater value for their customers, and it's the best value that they can possibly get. If what you are as a monoline product business, then you're going to fee face computing margins, and I think your position is going to become increasingly structure. But that's not our customer. If the customer wants that, that's not my customer. And that's also not where the profit pool sits. I don't know, Steve, if you got anything you want to add to that?

So yes, I think you've done such a good job, it's difficult to add to it. I think the only thing I would say is you get what you pay for. The other thing is we're pregnant with possibility. The reality is we've made some rapid acquisitions over time. If you look at our ARPU per client, our lifetime value, our cost acquisition, our unit economics, we stand now to benefit significantly from essentially putting more products and solutions, solving more pain points across that product set. And we're very focused on that. We are constructing a platform now that allows organically -- we're constructing organically and inorganically. Everything that we do, our passion is really around allowing these merchants of all sizes to better manage their businesses and everything money. And in doing that, our unit economics are improving. We're continuing to complete the puzzle. So I don't think our product sets are complete or our segmentation is complete. Some of that is being addressed organically, and some of it, inorganically. But to Ali's point, this is about a broader value proposition. I think what makes us quite unique is that we have the rare ability to service a broad spectrum of merchants almost of all sizes, which is quite unique in Africa. The other thing is we have a product -- we have a real breadth to our product offering, and every aspect of it is really as a result of solving for pain points. So many of our competitors are quite narrow in what they bring to the market and the way in which we price and we'll continue to price is around -- is really around the relationship as opposed to around the product sets.

And also, I mean, one of those products is already beyond the point of proof of concept of product market fit, right? They're above a certain scale or certain threshold, certain relevance. And that's also something it's not just -- we've got a product because a development team launched something in beta. We've got thousands of merchants using paying for appreciating.

Just to what Ali just said. So -- can you guys hear me? So take -- every one of our product sets has a point of differentiation. Take the most simplest product. If you think about an entry point, if you look at our journey, we entered the SME market through cash. Now most people would enter through digitization. That's where the -- it's more sexy. That's where everybody is innovating. But at the time that we entered, north of 80% of transactions in volume were cash in this country. And today, it's 56% of all transactions in this country in volume, not value, are still cash. When we started, we were processing ZAR 300 million a month in 2014 in cash. And today, we process ZAR 10 billion a month. And really, when we say process, what that really means is our merchants take a lot of cash, by the middle of the afternoon, they are long cash and under threat. They drop it into our environment. We take the risk. We settle them electronically into a wallet so that they can get on with life, pay their staff, order their goods, we take the risk. On the back of that, we then developed the Capital Connect product of the data so that we could give them instant access to capital. We then went into digitizing and offering not just cash acceptance, but card acceptance, but with instant settlement. And so you continue to build a moat around the customer. I know there's a question coming around in the informal market, the issue around new entrants and pricing. But it's still -- let me just explain, we fixate more on what we have than more around what everybody else does. So I think if you look at what we've created, and we've created it very deliberately in the informal market. It's not just a card, as Ali said, we're doing the card acquiring, but we're settling instantly into our wallet. We've also gone out and over time, acquired all the suppliers and merchants in that ecosystem who are part of the ecosystem. So what happens now when someone swipes a card, it's immediately in your wallet as a merchant and you immediately can settle a whole lot of suppliers in an informal market who are part of that ecosystem. For a new entrant to arrive with a card-acquiring device, it's a tough ask. It takes years to -- of investment to create, first of all, the infrastructure to receive the cash into our vaulting infrastructure. The 90,000 terminals to take the card swipe, the wallet to receive all of that and then more importantly, the entire ecosystem of suppliers and prepaid VAS that attaches to that ecosystem. And so that creates a moat. But it's price, not per product. Well, I think part of our learning to date is that we've historically naturally priced to product and we're evolving now. But as I said, we stand to gain substantially through our unit economics as our ARPU increases, our lifetime value increases and our cost of acquisition reduces and the unit economics grow. And that's without the normal organic merchant acquisition. And every day, we're acquiring new merchants in everything that we do.

We have an online question from Benjamin Isaac at Brizo Capital. As you add technical talent, do you find that young hires having an equity component of their package is attractive to them? You have talked about taking advantage of an acquisition currency. Are there any valuation rails around using equity in this way?

Okay. So let's talk -- I mean, the principal determinant to our long-term success is going to be the talent we managed to attract and retain in this business, right? People with the right mindset with the right energy. I do feel like there's often an opportunity to arbitrage energy from experience because sometimes experience has learned bad things that are hard to unlearn. But you need a mix associated. And we are positioning ourselves to ideal be the recruiter of choice for the best and the brightest graduates in the country. And I think that, that's going to be a material focus. I am personally big believer in equity incentivization. And this is a management team that have a very material alignment associated with the equity base here. The executive team of this business has north of 10% of the equity in the business. That is also quite an irregularity for other markets. So we personally are committed to that journey. The specificity of that question of around whether I think younger recruits value that equity. Honestly, it depends. And often, the answer is no. Often, it actually may have been a better decision for them to have it in a salary. However, we do have a universal ESOP because I believe that it is correct that on delivering an exceptional story people should be able to reflect back and participate in the upside as well as their base salary. So there's a -- the specificity of whether individuals value it or not really is about the individual. I'm afraid I don't, after many years, have a generic answer to this question. It's also sometimes about the culture. In terms of how we think about equity as currency. We've given some guardrails around EBITDA accretive. So provided you believe that the value equation that is existing today is correct from an EBITDA perspective, we said we won't do businesses -- buy businesses that are not EBITDA accretive. And we also won't buy businesses that are dilutive to our organic growth. Meaning it shouldn't -- as long as you achieve those hygiene factors, then it should be shareholder accretive. Now obviously, if our EBITDA multiple is in a very different construct, it may be required to reengage with that. But I think that will be a very high-quality problem. I don't know, Dan, if you have anything more you want to say about that?

Just on the talent point, anything to add is last year, we tweaked our long-term incentive program to shift it away from the typical weighting towards more senior people in the organization to broaden that out to talent pool across the organization. So that stretches from new joiners to those who have been in the organization for many years. But regardless of the level of seniority and instead focusing on reflecting on their respective value contributions in their roles within the organization.

Great. could I maybe also add just two issues which also relate to culture in terms of talent. One is tomorrow, all of our employees will be giving what Ali was talking about, a letter giving them part ownership in the company. And we will deliberate to do it differently than other BE schemes, which normally are, firstly, the most senior people in the company. We made sure that it is only to everybody else and excludes the senior people. Because we wanted to send the message that if you are going to contribute to the growth of the company, you should get the value because we are incentivized in a different way, and we didn't want to double tap. That for us is important. The second one is probably even more important, is that we want an entrepreneurial culture. Therefore, we want to attract people that want to join an entrepreneurial environment because even the organizations we buy, organizations that have done well, the worst thing for them is to come into an organization that bureaucratic, slow. And that will mean people don't feel in a sense that they want to grow in that environment. And so that's important for us as we attract talent. And third one is to find people that can work with a lot of change and a lot of ambiguity. Because we've got lots of ambiguity at Lesaka and we don't have everything figured out, but we find a way. So we want to attract those kinds of people that will not want to seek all of the answers upfront. Most of the people who've joined displays, by the time they come in here, they think, okay, they've heard everything. When they got share, they'll find all sorts of challenges. When I got a call from Ali, he promised me the moon and the stars. When I got here, there was a bit of a nightmare. But we had to work on that to get to where we are. So that's the kind of people that we want. We want to bring in people who can solve a lot of things and not really come to something where they've got all sort of clarity of what's going to happen in 2 or 3 years because there's a lot that's changing and the environment itself is changing within the company. And that's the kind of people that we want to attract. And if equity is part of that, and that's fine. But there's to be other things that you -- that bring you in here so that when the difficulties come, you know that you're ready for that and you're more resilient.

Next question from online from Peregrine. You point to highly fragmented markets in many of the subsegments, and Lesaka has a history of acquisitions. So one, where do you see the most obvious consolidation opportunity? And two, does Lesaka have the capital to lead this?

I'm going to ask Steven and Dan, I'll let you disclose private information.

So I've covered this to some extent. But let's start off -- we've made the promise to the market that everything we do will be accretive, first of all, from an acquisitive perspective. At the same time, we're very cognizant of our net debt-to-EBITDA ratios. When we gave -- in our Q2 earnings, we were at 2.4. And we've given the guidance that we will look to be holding that in the region of 2 to 2.5. When we look at acquisition, clearly, the 2 key drivers are going to be scale, so broadening out our segments and product augmentation. We can add to that as well, geographic expansion. I think as well, we will look to acquire both in -- well, across our Enterprise, our Consumer and our Merchant divisions. That's the grid against which we look at opportunity. I think right now, we -- I mean, we're very focused. So we have lined up real opportunities in all 3 of those areas that we are engaging with right now. We had this conversation 1.5 years ago that was prior to the Adumo acquisition, the Recharger acquisition and the Touchsides acquisition, Obviously, we're not at liberty to disclose what those engagements are, but we are very focused on both the organic growth of the business and the inorganic growth, which will, as I said, address the product augmentation, deepening the segments, giving more scale to the different segments, looking at the geographies and filling out the different pieces in the puzzle. So we hope over the next 12 to 18 months, to be able to close with some of these initiatives. But again, well within the rules that we've set for ourselves in terms of being disciplined around capital, debt and accretive nature of what we do.

I think Steve, the only thing I'd add to that, just double-click on scale. Scale provides us operating leverage within the business. But scale is also fundamentally quite important for us in the capital markets. At the moment, we are roughly a $400 million market cap company. We do realize that getting to a certain size attracts a different set of investors, both locally and globally, enables greater institutional investment in our shareholder base and fuels the liquidity which is often required in order to enable fair valuations and investors to come easily into and out of our stock. So alongside scale, operating scale also comes at financial scale, but carefully done within those right guardrails as we set out earlier in the presentation.

In the -- this is another one from Peregrine. In the Merchant division, how should we think about the time frame of integrating the various business lines to offer a unified front end of product -- front-end product offering to your customer? Is the integration more at a technical level or on the sales and distribution side?

So I'd say it's a good question because we are on a journey, right? There's -- we have the constituent parts in terms of the different products, in terms of the people, in terms of the strategic direction. But while we started our consumer journey in Lincoln's sleep, we've now evolved it into a place where we think that the offering is what was promised. And on the merchant side, we've made material progress in that, but there's still a destination to come to. And so what I would say is that we are already in a place where, as I said, most of our touch points, most of our customers are engaging with multiple products. So it's not a single product. So that's very clear in the informal space with Kazang as I articulated. Pretty much everybody who is a Kazang customer has got more than one product that they provide. We don't sell merchant acquiring as a stand-alone product. The unit economics really work when it is part of a collective. Similarly, in the formal sector, a material portion of the software business, the GARP business we provide has embedded payments and merchant acquiring. There'll be cash customers that will have a credit proposition. So we already have quite a lot of multiproduct provisioning, which gives us a head start. But maybe I'll let Steve talk to the hard question as to what happens next in that process.

Well, I think the answer to the question is, clearly, we're in a hurry, but we -- but I think we've got to acknowledge where we are. And you'll all understand that as you acquire and grow organically, there's a process of integration where we can create a seamless delivery to the market, both -- and then achieve both the revenue synergies and of course, organize the environment in such a way that we get the cost synergies as well. So I said earlier that we are pregnant with opportunity here. Let me give you a couple of examples. If Ali has given you one very good example where if you look at the Kazang world today, north of 60% of every single Kazang client was a VAS client to become a card acquiring client. If we look at our Capital Connect product, we have close to a 12% to 15% penetration into the cash business. In most of the other areas, those penetrations are still way too low, and that's the opportunity that I'm referring to. So we are, as we speak, going through that process of creating a single business, having a look at our brand, our organization, our delivery. We obviously look to prioritize everything digital. We like to put ourselves in a position that we have unique access to data. Our product -- the breadth of our product is clearly a differentiated benefit. And there are a couple of pieces to our puzzle, particularly in our digital delivery, that we still need to build out either organically or inorganically. So we are starting to enjoy the benefits of that as we speak right now, but these -- many of these acquisitions are very recent. And therefore, again, as I say, we're pregnant with possibility. We would expect over the next 24 to 36 months to start to benefit significantly from an improvement in our unit economics in relation to the existing customer base. And, of course, add to that the continued merchant acquisition that will go with it.

And I'd say while we're pregnant with opportunity, we're still far ahead even today of the rest of the market in that respect, right? So the fact that we're not where we want to be, I hope, is always the fact. So if we're having this conversation in 12 months' time, I want to be able to tell you that we're pregnant with opportunity for the next 36. But what I can say is I believe that from a multiproduct perspective, we're already far out there in terms of the relativity of what other providers can give.

The next question relates to the Enterprise division. Banks -- there's 2 questions here. Banks offer many of the EasyPay products on their own digital platforms. Is there not a risk that EasyPay loses market share to the banks? And then the second question is, can you unpack synergies related to the recent Recharger acquisition?

Okay. I'm going to try to take them in 2 parts. And I need also a time check. How -- am I good?

Yes, it's 4:30, we've -- this would be probably the second to last question.

Fine. Okay. So let's start with the EasyPay reference it was made there. Just to be clear, the EasyPay, the reference that was made there was not to the consumer EasyPay account. It was to our enterprise EasyPay business, which is a bill payments business that is offered to third-party enterprises. And that's often a retailer which enables or potentially a bank or other party. I would say that the first thing is contextualizing, that business is not today a material contributor to the EBITDA, but I think it has a good opportunity to be so. And that's because while there will clearly be channel shift in the behavior of consumers to engaging with a principal account in order to pay for a bill rather than necessarily engaging with a retail distribution footprint. Two things are clear. One thing that is clear is we also have a material consumer base which we can digitize and benefit from that process and provide our own customers with the ability to engage, which has a margin expansion context for us because you don't have to necessarily pay away to a channel. The second thing is our position in that value chain is actually extremely strong because of the last mile integrations that we provide. So a lot of the bank partners or the retail partners haven't actually engaged with the last mile in terms of getting the billers on board. So there's a resilience associated with that. And that, to some degree, will dovetail into the conversation around Recharger. That business is one of the largest transactional switches for electricity payments in the country. And the Recharger business is a private metering business for private landlords. We have material operational synergies associated with playing along the value chain. I would refer you to Naeem's presentation that's on our website around the Recharger transaction specifically, I'll go in more details around the logic associated with that. But essentially, what we're doing in the enterprise space is, as I said, engaging as a force multiplier. We have the opportunity to provide additional products to end consumers through a lower CAC channel than we might with otherwise. We don't want to compete with banks or telcos in spaces where we don't have a competitive advantage. And so in the SASSA environment, we clearly have a competitive advantage. We've also got a competitive advantage, we feel, in the payouts market, which is why we have another 200,000 end consumers who we engage with alongside the 1.5 million SASSA grant recipients and customers. But there's a whole bunch of other people who are engaging with utility providers. We have, I think, circa 1 million consumers who engage with our EasyPay portal in order to pay the bills. Those are very attractive real estate spaces in order to augment our offering to the end customer. And so think about those enterprise businesses, whether it's the EasyPay Enterprise platform or it's the Recharger business, as an ability for us not just to great scale and on our own cost base and extract the synergies because we are in some of those services ourselves, but also as a way of accessing end customers in a much more cost-effective manner and augmenting our existing offering, whether it be in consumer or in merchant.

Next question is from Jared James, online. Ali, you have a lot of passion for the business. How do you split your time between Lesaka and other businesses you are involved in? And how much time per year do you spend in South Africa?

Slightly personal question, but okay. Thank you, Phil, for asking it. I appreciate it. So this is my only executive role. So this is my principal day job, if you like. I do have Board relationships, which are clear. I think, frankly, that, that augments my capability and my experience to deliver here. It makes me relevant. It creates the ability to cross pollinate and to understand what happens. So I think it's to the benefit of Lesaka that I spent time -- also in terms of my geographical positioning, I was living in London when I took over in February. I've relocated to South Africa, so I live here. So this is my principal energy at the moment. And I enjoy it, right? I do have passion, but I have passion because I think that there's purpose and also the opportunity, as I said, at the beginning to really be a defining financial services story for the region and not just be an example in this country to what's possible, but also be a reference globally. I wouldn't spend my energy and time here if I didn't believe that, that was real.

And then the last question from online is from Chad at Cloud Penny Partners, the liquidity of your share on both exchanges remains low. Any immediate plans to address this?

I'd like to think this is part of those media plans. I'm hoping that it's not entirely wasted. I mean like the objective of really having this conversation is because we recognize we haven't told the story, and we recognize that also that's not going to be solved in one iteration, right? We need to frame it. We need to continue to evolve we are, as I said, going to have another conversation in the second half of the year around some of the financial metrics. But ultimately, I think telling the story and getting it out there is part of it, getting coverage associated with that. I think we also want to invest the time and energy in ensuring that the business is more fully covered, and we will be working on that. And in addition to that, scale. Obviously, as you scale the business, you have greater liquidity. I think liquidity is a consequence of doing those 2 things rather than necessarily any other. However, I would say that to some degree, I think it's partly because it's been supply constrained, and there will be opportunities going forward I think for that liquidity to improve in different guises. Should we find ourselves in a situation where there's a material acquisition target, there may be warranted conversation associated with that, should there be shareholders who have constrained time periods associated with how they can hold an asset in respect of how they feel about the long-term value. There may be opportunities in that. But I think that this will evolve over the nearer term, I don't think that the -- I hope that the situation gets better.

So those are all the questions we have time for. Thank you. And then please contact me if there are any additional questions. For those who have joined in-person, you are welcome to join us for some refreshments outside. And then we also have some of our product pods and offerings on display.