Lesaka Technologies, Inc. (NASDAQ:LSAK) Q2 2023 Earnings Call Transcript

Frank Geng: Hi, guys. Thanks again and congrats on the quarter. Just a few questions from me. They’re somewhat related. You know, maybe first Naeem or Lincoln to you. Could you provide some rough commentary on how much working capital before the loan book funding, you’d expect to invest per year and how much that’s to maintain the business versus growing it? Second, you know, I guess, how should we think about usage of cash going forwards? And third, you know, Naeem now that you’ve extended the lending facilities, are there any other levers to continue to optimize capital structure, reduce debt repayments, reduce interest expense? And I guess what’s the new maturity on the debt? Thanks.

Chris Meyer: Thanks, Frank. So I’m going to put those questions to Naeem to respond to and just maybe help you that he can deal with it. I think the first question was around our working capital requirements in the business. And our requirements to invest in working for growth.

Naeem Kola: Yes. So look, I think, Frank, from a working capital perspective, it’s quite important to understand that the majority of our working capital is really in our VES and the Card Acquiring business. If you look at our cash management business, as well as the business related to the consumer. The working capital requirements are not that significant, because we receive the funds from the customer upfront. So those are held on a wallet. If I look at the current facilities, you will see as well that as we highlighted between quarters, we can have quite a swing in terms of the working capital requirements in the Kazang business depending on when the month end or when the quarter end. And that is managed through adequate facilities that we have in the moment in terms of cash, as well as an overdraft facility.

We do also take advantage of opportunities where we can earn higher margins, specifically on our value-added services business in terms of airtime and electricity. And in those circumstances, we would fund upfront, and that’s then specifically through cash reserve. So I think we do those only in circumstances where we can earn a higher margin and it’s a cost-effective way of increasing the margin in the business. In terms of going forward, we do not envisage a significant increase in working capital requirements. We are experiencing quite a significant growth in our Card Acquiring business. But the capital requirements in terms of working capital are well managed and within our facilities that we would be able to do in our overdraft. So I think that our longer-term view in terms of working capital is that we don’t believe there is a significant increase anticipated.

Chris Meyer: Thanks, Naeem. I think the question on debt and the change to our facilities and we’ll leave this .

Lincoln Mali: Yes, sure. Look, I think for us, firstly, we’re super excited about the fact that we’ve been able to renegotiate a position with our bankers. Number one, over the last six to nine months, it’s very indicative of the confidence that the bank is already seeing in the performance. And the extension of the facility to three years taking us up to 31st December 2025 gives us the ability to really focus on making the right, kind of, decisions in terms of capital management. And in addition to that the potential upsizing of that facility that will help us fund our loan book growth mainly on the consumer side of the business. So that is quite a significant change for us. In terms of levers, as we’ve highlighted in a number of our presentations, the focus for us in the business is really the consumer and the merchant business in South Africa.