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Income Taxes | 12 Months Ended
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Jun. 30, 2025
Income Taxes [Abstract] |
Income Taxes | 18. INCOME TAXES Income tax expense The table below presents the components of (loss) income before income tax (benefit) expense for the years ended June 30, 2025, 2024 and 2023: 2025 2024 2023 South Africa $ (34,317) $ (4,405) $ (21,308) United States (12,322) (8,705) (10,755) Other (1) (59,307) 312 (203) Loss before income tax (benefit) expense $ (105,946) $ (12,798) $ (32,266) (1) Amount for the year ended June 30, 2025, includes the impact of the change in fair value of equity securities discussed in Note 6 related to MobiKwik. Presented below is income tax expense (benefit) by location of the taxing jurisdiction for the years ended June 30, 2025, 2024 and 2023: 2025 2024 2023 Current tax expense $ 5,757 $ 5,766 $ 6,317 South Africa 5,582 5,634 6,317 Other 175 132 - Deferred tax (benefit) expense (23,955) (2,712) (7,442) South Africa (13,817) (2,716) (7,490) United States (10,120) - - Other (18) 4 48 Foreign tax credits generated – United States - 309 115 Change in tax rate – South Africa - - (1,299) Income tax (benefit) expense $ (18,198) $ 3,363 $ (2,309) There were no changes to the enacted income tax rate in the years ended June 30, 2025 and 2024 in any of our major jurisdictions. The South African corporate income tax rate reduced from 28 % to 27 %, effective from July 1, 2022, for all of the Company’s South African subsidiaries with income tax years commencing on July 1, 2022. The change in the income tax rate was enacted on January 5, 2023, and accordingly all deferred taxes assets and liabilities were remeasured to the new tax rate on that date. This resulted in the inclusion of an income tax benefit of $ 1.3 million in the Company’s income tax (benefit) expense line in its consolidated statements of operations for the year ended June 30, 2023, as a result of the reversal of a portion of the deferred tax assets and liabilities recognized as of December 31, 2022. 18. INCOME TAX (continued) Income tax expense (continued) The Company’s current tax expense for the year ended June 30, 2025, was higher than the previous year due to the higher taxable income generated by the Company’s subsidiaries during the year ended June 30, 2025, primarily due to the acquisition of Adumo and Recharger, and improved profitability generated from the Consumer operating segment, compared with the year ended June 30, 2024. The Company’s deferred tax (benefit) expense for the year ended June 30, 2025, was higher compared with the previous year due to reversal of the deferred tax liability (a benefit) related to the change in the carrying amount of our entire investment in MobiKwik, the inclusion of the deferred tax benefit recorded during the year ended June 30, 2025, related to the amortization of intangible assets recognized due to the acquisition of Adumo and Recharger and the reversal of $ 12.8 million related to certain valuation allowances created in prior years following (i) an improvement in profitability of certain of the Company’s subsidiaries and (ii) a change in judgment on the need for a valuation allowance of $ 11.4 million related to an entity which the Company believes has achieved sustainable profitability. During the year the Company recognized a benefit for operating loss carryforwards generated of $ 6.8 million where the related deferred tax asset was not offset by a valuation allowance. During the year the Company recognized a valuation allowance related to an operating loss carryforward of $ 6.0 million following a determination by the management, after considering both positive and negative evidence, that the operating loss carryforward would not be realized. The Company’s deferred tax (benefit) expense for the year ended June 30, 2024, was lower compared with the previous year due to the inclusion of the deferred tax benefit recorded during the year ended June 30, 2023, related to the amortization of intangible assets recognized due to the acquisition of Connect. Deferred tax expense (benefit) for the year ended June 30, 2024, also includes lower prepaid expense balances as of June 30, 2024 which reduces the deferred tax benefit. During the years ended June 30, 2025, 2024 and 2023, the Company incurred net operating losses through certain of its South African wholly-owned subsidiaries and recorded a deferred tax benefit related to these losses. However, the Company has created a valuation allowance for certain of these net operating losses which reduced the deferred tax benefit recorded. Net operating losses and associated valuation allowance created during the year ended June 30, 2025, were lower then in previous periods due to the improvement in operating performance by the Company’s subsidiaries. A reconciliation of income taxes, calculated at the fully-distributed South African income tax rate to the Company’s effective tax rate, for the years ended June 30, 2025, 2024 and 2023, is as follows: 2025 2024 2023 Income taxes at South African income tax rates 27.00 % 27.00 % 27.00 % Non-deductible interest expense (1.29) % (24.55) % - - Movement in valuation allowance 5.62 % (22.15) % (17.66) % Non-deductible transaction costs (4.19) % (5.91) % - - Goodwill impairment (4.22) % - - - - Capital gains tax rate differential - - 1.62 % (0.51) % Prior year adjustments 0.22 % (1.37) % 7.60 % Non-deductible items (3.23) % (1.11) % (13.28) % Foreign tax credits 0.03 % 0.19 % - Foreign tax rate differential (2.77) % - (0.02) % Change in tax laws – South Africa - - 4.03 % Effective tax rate 17.17 % (26.28) % 7.16 % Percentages included in the 2024 column in the reconciliation of income taxes presented above are specifically impacted by the loss incurred by the Company during the years ended June 30, 2024. For instance, for the year ended June 30, 2024, income tax expense of $ 3.4 million represents ( 26.28 %) multiplied by the loss before tax (benefit) expense of $( 12,798 ). Movement in the valuation allowance for the year ended June 30, 2025, includes the impact of the reversal of the allowances created in previous periods related to certain net operating loss carryforwards which the Company believes are no longer required following improved and sustained profitability generated by certain of the Company’s subsidiaries. Non-deductible items for the year ended June 30, 2025, includes transactions costs and interest expense incurred which the Company cannot deduct for income tax purposes. 18. INCOME TAX (continued) Income tax expense (continued) Movement in the valuation allowance for the year ended June 30, 2024, includes allowances created related to certain net operating loss carryforwards generated during the year. Non-deductible items for the year ended June 30, 2024, includes transactions costs and interest expense incurred which the Company cannot deduct for income tax purposes Movement in the valuation allowance for the year ended June 30, 2023, includes allowances created related to certain net operating losses incurred during the year. Non-deductible items for the year ended June 30, 2023, includes the goodwill impairment loss recognized and interest expense incurred which the Company cannot deduct for income tax purposes. Deferred tax assets and liabilities Deferred taxes reflect the temporary differences between the financial statement carrying amount and tax bases of assets and liabilities and carryforwards measured using enacted tax rates in effect for the year in which the items are expected to reverse. The primary components of the temporary differences and carryforwards that gave rise to the Company’s deferred tax assets and liabilities as of June 30, and their classification, were as follows: June 30, June 30, 2025 2024 Total deferred tax assets Equity investments $ 29,475 $ 28,786 Capital loss carryforwards 7,094 9,253 Net operating loss carryforwards 63,740 42,025 Foreign tax credit carryforwards 12,300 32,527 Provisions and accruals 6,648 3,294 Other 4,604 4,494 Total deferred tax assets before valuation allowance 123,861 120,379 Valuation allowances (107,252) (114,687) Total deferred tax assets, net of valuation allowance 16,609 5,692 Total deferred tax liabilities: Intangible assets 36,403 29,918 Equity investments - 10,354 Other 1,573 102 Total deferred tax liabilities 37,976 40,374 Reported as Long-term deferred tax assets, net 12,554 3,446 Long-term deferred tax liabilities, net 33,921 38,128 Net deferred tax liabilities $ 21,367 $ 34,682 Decrease in total net deferred tax liabilities Equity investments, an asset Equity investments as of June 30, 2025 and 2024, comprises the temporary differences arising from the difference between the amount paid for Cell C in August 2017 and the its financial statements carrying amount as of the respective year end, of $ 0.0 million (nil), and the difference between the amount paid for CPS in 2004 and the its financial statement carrying amount as of the respective year end, of $ 0.0 million (nil). The change in Equity investments also includes the impact of currency changes between the South African Rand against the United States dollar. Capital loss carryforwards Capital loss carryforwards as of June 30, 2025 and 2024, comprises the temporary differences arising from the disposal of Finbond which resulted in the generation of capital loss carryforwards in South Africa of $ 17.7 million and capital loss carryforwards in the United States of $ 15.5 million. Capital loss carryforwards in South Africa do not expire, and capital loss carryforward in the United States expired after five years, between 2026 and 2030. The change in Capital loss carryforwards also includes the impact of currency changes between the South African Rand against the United States dollar. 18. INCOME TAX (continued) Deferred tax assets and liabilities (continued) Decrease in total net deferred tax liabilities (continued) Foreign tax credit carryforwards Foreign tax credit carryforwards as of June 30, 2025 and 2024, comprises foreign tax credits generated from distributions from Lesaka’s subsidiaries. The tax credits as of June 30, 2025, expire in June 2026. During the year ended June 30, 2025, foreign tax credits of $ 20.2 million expired. Net operating loss carryforwards Net operating loss carryforwards have increased primarily due to pre-existing net operating loss carryforwards recognized by certain subsidiaries as of the acquisition date of these subsidiaries, as well as due to losses incurred by certain of the Company’s subsidiaries and the impact of currency changes between the South African Rand against the United States dollar, which was partially offset by net operating losses carryforwards utilized during the year following improved profitability generated by certain of the Company’s subsidiaries. Intangibles assets Intangible assets include intangible assets recognized related to the acquisition of Adumo and Recharger during the year ended June 30, 2025 (refer to Note 3), and Connect during the year ended June 30, 2022 and have increased compared to June 30, 2024, due to the acquisition of Adumo and Recharger, which was partially offset by the amortization of the intangible assets. Equity investments Equity investment includes our investment in MobiKwik (refer to Note 9) as of June 30, 2024. The Company disposed of its entire investment in MobiKwik during the year ended June 30, 2025, and have released the deferred tax liability previously recognized. Decrease in valuation allowance At June 30, 2025, the Company had deferred tax assets of $ 16.6 million (2024: $ 5.7 million), net of the valuation allowance. Management believes, based on the weight of available positive and negative evidence it is more likely than not that the Company will realize the benefits of these deductible temporary differences and carryforwards, net of the valuation allowance. However, the amount of the deferred tax asset considered realizable could be adjusted in the near term if estimates of taxable income are revised. 18. INCOME TAX (continued) Deferred tax assets and liabilities (continued) Decrease in valuation allowance (continued) At June 30, 2025, the Company had a valuation allowance of $ 107.3 million (2024: $ 114.7 million) to reduce its deferred tax assets to the estimated realizable value. The movement in the valuation allowance for the years ended June 30, 2025, 2024 and 2023, is presented below: Total Equity investments Capital loss carry- forwards Net operating loss carry- forwards Foreign tax credit carry- forwards Other July 1, 2023 $ 109,120 $ 27,782 $ 8,485 $ 38,381 $ 32,599 $ 1,873 Charged to statement of operations 5,061 - 665 3,163 - 1,233 Reversed to statement of operations (1,865) - - (1,793) (72) - Foreign currency adjustment 2,371 1,004 103 1,215 - 49 Net change in the valuation allowance 5,567 1,004 768 2,585 (72) 1,282 June 30, 2024 114,687 28,786 9,253 40,966 32,527 3,155 Charged to statement of operations 6,241 - 977 4,063 - 1,201 Reversed to statement of operations (12,846) - - (10,685) - (2,161) Utilized (25,528) - (3,226) (2,002) (20,227) (73) Acquired in business combinations 22,976 - - 20,354 - 2,622 Foreign currency adjustment 1,722 690 90 887 - 55 Net change in the valuation allowance (7,435) 690 (2,159) 12,617 (20,227) 1,644 June 30, 2025 $ 107,252 $ 29,476 $ 7,094 $ 53,583 $ 12,300 $ 4,799 Net operating loss carryforwards and foreign tax credit carryforwards South Africa Net operating loss carryforwards generated in South Africa of $ 212.1 million are carried forward indefinitely, but the loss carryforward that may be used against future taxable income is limited to 80% of taxable income before the net operating loss deduction. United States Net operating loss carryforwards generated in the United States of $ 30.8 million are carried forward indefinitely, but the loss carryforward that may be used against future taxable income is limited to 80% of taxable income before the net operating loss deduction. Lesaka had no net unused foreign tax credits that are more likely than not to be realized as of June 30, 2025 and 2024, respectively. Unrecognized tax benefits As of June 30, 2025 and 2024, the Company had no unrecognized tax benefits. The Company files income tax returns mainly in South Africa, Botswana, Namibia and in the U.S. federal jurisdiction. As of June 30, 2025, the Company’s South African subsidiaries are no longer subject to income tax examination by the South African Revenue Service for periods before June 30, 2020. The Company is subject to income tax in other jurisdictions outside South Africa, none of which are individually material to its financial position, statement of cash flows, or results of operations.

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