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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended
June 30, 2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from
To
Commission file number:
000-31203
LESAKA TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Florida
98-0171860
(State or other jurisdiction
(IRS Employer
of incorporation or organization)
Identification No.)
President Place
,
4th Floor
,
Cnr. Jan Smuts Avenue and Bolton Road
Rosebank, Johannesburg
2196
,
South Africa
(Address of principal executive offices, including zip code)
Registrant’s telephone number,
including area code:
27
-
11
-
343-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange
on which registered
Common stock, par value $0.001 per share
LSAK
NASDAQ
Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check
mark if the
registrant is a
well-known seasoned issuer, as
defined in Rule
405 of the
Securities
Act.
Yes
☐
No
☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)
of the Act.
Yes
☐
No
☒
Indicate by check mark whether
the registrant (1) has filed
all reports required to be
filed by Section 13 or
15(d)
of
the
Securities
Exchange
Act
of
1934
during
the
preceding
12
months
(or
for
such
shorter
period
that
the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File
required
to
be
submitted
pursuant
to
Rule
405
of
Regulation
S-T
(§232.405
of
this
chapter)
during
the
preceding
12
months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, smaller
reporting company
or an
emerging growth
company. See the
definitions of
“large accelerated
filer,”
“accelerated
filer,”
“smaller
reporting
company,”
and
“emerging
growth
company”
in
Rule 12b-2
of
the
Exchange Act (check one):
☐
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☐
Emerging growth company
If an
emerging
growth company,
indicate by
check mark
if the
registrant has
elected not
to use
the extended
transition period
for complying
with any
new or
revised financial
accounting standards
provided pursuant
to
Section 13(a) of the Exchange Act.
☐
Indicate
by
check
mark
whether
the
registrant
has
filed
a
report
on
and
attestation
to
its
management’s
assessment
of
the
effectiveness
of
its
internal
control
over
financial
reporting
under
Section
404(b)
of
the
Sarbanes-Oxley Act
(15
U.S.C.
7262(b)) by
the registered
public
accounting firm
that prepared
or
issued its
audit report.
☒
If securities
are registered
pursuant to
Section 12(b)
of the
Act, indicate
by check
mark whether
the financial
statements of the registrant included in the filing reflect the correction of an error to previously issued financial
statements.
☒
Indicate by check mark
whether any of those
error corrections are restatements
that required a
recovery analysis
of
incentive-based
compensation
received
by
any
of
the
registrant’s
executive
officers
during
the
relevant
recovery period pursuant to §240.10D-1(b).
☐
Indicate by
check mark
whether the
registrant is
a shell
company (as
defined in
Rule 12b-2
of the
Exchange
Act). Yes
☐
No
☒
The
aggregate
market
value
of
the
registrant’s
common
stock
held
by
non-affiliates
of
the
registrant
as
of
December 31,
2024
(the
last
business day
of
the registrant’s
most
recently completed
second fiscal
quarter),
based upon the closing price of the common stock as reported by The NASDAQ Global Select Market on such
date, was $
288,493,330
. This calculation
does not reflect
a determination that
persons are affiliates
for any other
purposes.
As of September 29, 2025,
83,673,097
shares of the registrant’s common stock, par value $0.001 per share, net
of treasury shares, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain
portions
of
the
definitive
Proxy
Statement
for
our
2025
Annual
Meeting
of
Shareholders
are
incorporated by reference into Part III of this Form 10-K.
1
LESAKA TECHNOLOGIES, INC
INDEX TO ANNUAL REPORT ON FORM 10-K
Year
Ended June 30, 2025
Page
PART
I
Item 1.
Business
2
Item 1A.
Risk Factors
13
Item 1B.
Unresolved Staff Comments
27
Item 1C
Cybersecurity
27
Item 2.
Properties
28
Item 3.
Legal Proceedings
28
Item 4.
Mine Safety Disclosures
28
PART
II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
29
Item 6.
[
Reserved]
30
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
31
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
57
Item 8.
Financial Statements and Supplementary Data
59
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures
60
Item 9A.
Controls and Procedures
60
Item 9B.
Other Information
64
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
64
PART
III
Item 10.
Directors, Executive Officers and Corporate Governance
65
Item 11.
Executive Compensation
65
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
65
Item 13.
Certain Relationships and Related Transactions, and Director Independence
65
Item 14.
Principal Accountant Fees and Services
65
PART
IV
Item 15.
Exhibits and Financial Statement Schedules
66
Item 16.
Form 10-K Summary
71
Signatures
72
Financial Statements
F-1
2
PART
I
FORWARD
LOOKING STATEMENTS
In addition to historical information,
this Annual Report on Form 10-K
(“Annual Report”) contains forward-looking
statements
that involve risks and uncertainties that could cause our actual results to differ
materially from those projected, anticipated or implied
in the
forward-looking
statements. Factors
that might
cause or
contribute
to such
differences
include,
but are
not limited
to, those
discussed in
Item 1A—“Risk
Factors.” In
some cases,
you can
identify forward-looking
statements by
terminology such
as “may,”
“will,”
“should,”
“could,”
“would,”
“expects,”
“plans,”
“intends,”
“anticipates,”
“believes,”
“estimates,”
“predicts,”
“potential”
or
“continue” or
the negative of
such terms and
other comparable terminology.
You
should not place
undue reliance on
these forward-
looking statements, which reflect
our opinions only
as of the
date of this
Annual Report. We undertake no
obligation to release
publicly
any
revisions
to the
forward-looking
statements after
the date
of this
Annual
Report.
You
should
carefully
review the
risk factors
described
in other
documents we
file from
time to
time with
the Securities
and
Exchange Commission
(the “SEC”),
including
the
Quarterly Reports on Form 10-Q to be filed by us during our 2026
fiscal year, which runs from July 1, 2025 to June 30,
2026.
All
references
to
“the
Company,”
“we,”
“us,”
or
“our”
are
references
to
Lesaka
Technologies,
Inc.
and
its
consolidated
subsidiaries, collectively, and all references to “Lesaka” are to Lesaka Technologies, Inc. only, except as otherwise indicated or where
the context indicates otherwise.
ITEM 1.
BUSINESS
Overview
Lesaka enables underserviced consumers and businesses in the southern
cone of Africa to manage their daily financial activities
in a better way, improving
people's lives and increasing financial inclusion in the markets in which
we operate. We
have developed a
unique ecosystem of communities that provides:
(1) over 2 million consumers with specialized
banking, credit, insurance and payout
solutions
to
help
them
manage
their
evolving
financial
needs;
(2)
over
125,000
merchants
of
all
sizes
with
payment
acceptance
solutions to facilitate
their daily commercial
activities more efficiently
and effectively; and
(3) over 750
enterprises with proprietary
network capabilities to facilitate payments between consumers and businesses
in a fast and secure manner.
We bring these communities
together within the Lesaka ecosystem by enabling them to engage and transact with each other in a
better, more
convenient and safe
manner.
For example, we
offer bill payment
solutions to consumers,
merchants and enterprises
by:
(1) connecting over
620 enterprise service
providers to our
proprietary biller network
so that
they can
offer their customers
a convenient
channel to
pay their
respective bills;
(2) enabling
over 95,000
merchants to
offer our
Alternative Digital
Products (“ADP”)
at their
locations and then digitizing any cash payments they receive through one of our cloud-connected cash vaults or recycling the cash via
an ATM
that we
may place
in their
store to
drive foot-traffic;
and (3)
offering consumers
the convenience
of paying
their bills
at a
nearby merchant
where they may
already shop frequently,
using cash withdrawn
from one of
our ATMs
or paying with
a debit card
linked to
a digital-bank
account that
we provided
to them
to deposit
and manage
the funds
from their
employer payrolls
or welfare
grants from the South African government.
To
build
and
maintain
our
valuable
and
growing
ecosystem,
we
have
over
3,500
employees
operating
on
the ground
in
five
countries, including
South Africa
(our primary
market), Namibia,
Botswana, Zambia,
and Kenya,
and we
have the
ability to
reach
deeper and more broadly into adjacent markets through a variety of strategic
partnerships. This enables us to target and serve a market
with approximately 250
million people and an
estimated serviceable addressable
market of approximately
$12 billion in net
revenue
by 2030 according to reports by Global Data Analytics, McKinsey & Company,
BDO, Genesis Analytics, the International Monetary
Fund,
the
Population
Reference
Bureau
and
internal
management
estimates.
According
to
a
report
by
Boston
Consulting
Group,
favorable secular tailwinds, have helped position
Africa as the fastest
growing fintech market globally, that projects growth in the total
African fintech revenue pool to grow by 13 times between 2021 and 2030,
as illustrated below.
3
Our Strategy
To
build our unique ecosystem
and capture this large
and attractive market opportunity,
we developed a 5-phase
strategy to win
and serve customers across a diversified range of channels and markets. These
phases include:
1.
Address
-
First,
we
develop
or
acquire
a
platform
to
address and
serve
the
specialized
financial
needs
of
a
specific
customer
segment.
Today,
we
have
three
core
platforms
allocated
to
each
of
our
reported
business
segments
(or
divisions), Consumer, Merchant and
Enterprise;
2.
Position
- Second,
we position
ourselves in
the market
to gain
access to
data that
gives us
valuable
insights into
our
customer
base.
We
develop
solutions
that
enable
us
to
learn
from
the
flow
of
funds
and
financial
behaviours
in
our
customers daily
lives to better
understand their
needs. For
example, our banking
solutions enable us
to see the
sources
and frequency of
consumer income deposits
as well as
their spending
behaviours, while our
merchant solutions enable
us to see a merchant’s cash flows and selected
spending such as inventory purchases and supplier payments;
3.
Develop
– Third,
we develop
and foster
differentiation
in the
market by
combining financial,
software and
hardware
technologies to create
integrated, end-to-end fintech
solutions that have superior
functionality and convenience
relative
to
available
alternatives.
Competitor
offerings
are
typically
provided
by
(i)
legacy
banks
with
poor
track
records
of
customer
service for
the underserviced,
(ii) government
entities, such
as the
post office,
with limited
capabilities and
R&D budgets to invest in
solutions, or (iii) a fragmented
universe of single-solution vendors
who provide more narrow
services, forcing a customer to spend more and manage multiple relationships
to meet their end-to-end needs;
4.
Combine
–
Fourth,
we
combine
our
data-driven
insights
with
our
suite
of
solutions
to
sell,
cross-sell
and
serve
our
customers
in an
advantaged way.
We
use the
advantages
embedded
in our
strategy
to (i)
drive
client acquisition
and
retention with targeted offers that may
best meet their needs, (ii) bundle or cross-sell new solutions that may be suitable
for their evolving financial journeys, (iii) underwrite and manage risk effectively;
and
5.
Consolidate
– Fifth, we
identify and execute
on attractive consolidation
opportunities with potential
revenue synergies
to grow our customer
base, extend our capabilities
and expand our ecosystem
into new areas,
and potential cost synergies
to scale our ecosystem and improve our operating efficiencies. For example, in fiscal 2025 we closed and are
integrating
two acquisitions
which expanded
our customer
base, broadened
our suite
of solutions,
and provided
additional cross-
selling opportunities, including:
a.
Adumo
–
a
payments
and
commerce
enablement
platform
that
provides
payment
processing
and
integrated
software
solutions
to
approximately
29,000
active
merchants
(as
of
June
30,
2025)
in
a
variety
of
business
verticals across
South
Africa,
Namibia,
Botswana and
Kenya.
This acquisition
has enabled
us to
extend
our
reach
into
larger
merchants
with
more
sophisticated
point-of-sale
(“POS”)
software
needs.
Adumo
was
integrated into our
Merchant Segment and has
contributed to our fiscal
2025 financial results since
October 1,
2024.
b.
Recharger
– a
prepaid electricity
platform
that provides
submetering administration
and payment
processing
solutions to
an installed
base of
over 500,000
registered prepaid
electricity meters
across South
Africa. This
acquisition has
enabled us
to enter
the private
utilities market
and extend
our payment
solutions into
a large,
new
customer
base.
Recharger
was integrated
into our
Enterprise
Segment
and has
contributed
to our
fiscal
2025 financial results since March 3, 2025.
Our Go-
To
-Market Model
To
go-to-market,
we created
a proprietary
business model
to reach,
engage and
serve our
Merchant, Consumer
and Enterprise
Segments’ customers over time. The five elements of our go-to-market model
include:
1.
Wide-Breadth of Solutions
– We
have a large and
growing suite of solutions
that we sell to
our customers at different
stages of
their financial
journeys using
a
Land and
Expand
approach.
We
start by
offering
critical financial
services
needed
to
win
a
customer
relationship
at
a
relatively
stable
customer
acquisition
cost
(“CAC”).
These
include
our
government grant and bill payment solutions for consumers, and our card acquiring and cash management solutions for
merchants. Then we offer a growing range of complementary services to expand our share of wallet, bundling or cross-
selling complementary
or adjacent
services as
a customer’s
needs grow.
We
believe this
increases the
lifetime value
(“LTV”) of our customer base with very
little incremental CAC, increasing
our LTV/CAC ratio and compounding value
over time. We
organize our solutions across our
customers’ financial lifecycles including: (1)
Receive Money
,
Manage
Money
,
Borrow Money
, and
Protect Assets
for our consumers,
and (2)
Accept Payments
,
Manage Money
,
Grow Revenue,
and
Access Capital
for our merchants.
4
2.
Differentiated Reach in the Market
– Instead of relying on online sales or using expensive bank branches, we reach our
customers
close
to
where
they
live
or
close
to government
offices
that
disburse
grant
payments
by
deploying
on-the
ground
sales teams
and
low-cost retail
offices,
or hubs.
Our salespeople
are
trained
to engage
in-person and
educate
customers on the value and advantages of our solutions in a friendly
and respectful manner.
3.
A Digital Engagement
Approach
– After our
initial sale, we want
to utilize technology
to engage more
efficiently and
effectively
with our
customers, so
we train
and steer
them to
use our
digital apps
to manage
and grow
their financial
services over time.
We have developed a variety
of digital apps
for our customers
to use when
engaging with our
different
solutions including a digital banking app for
our consumers and a payments management account app
for our merchants.
4.
Proprietary Access to Data
– We leverage our
solutions to gain access to data that provides us with unique insights
into our customers, which we use to serve them more effectively.
For example, we can often see the timing, amount
and frequency of a consumer’s income deposits and how
they spend their money and pay their bills. We
believe this is
rare in Africa, particularly among the underserviced,
and provides a competitive advantage in the market.
5.
Leading Brand Value
– Based on our market
penetration and length of time
in the market, we have established
several
strong brands and brand equity in the market across our three business segments and different product lines. We
believe
these brands are valuable touch points, with which
to evolve a unified leading brand, that
helps us attract new customers,
build trust, and facilitate the roll-out and adoption of new solutions over
time.
Our Business Segments
We
go-to- market
and operate
through three
business segments
including our
Merchant Segment
(“Merchant”), our
Consumer
Segment (“Consumer”) and our Enterprise Segment (“Enterprise”).
1.
Our Merchant Segment
Our Merchant Market
We
serve
merchants
of all
sizes, ranging
from micro
-merchants
to
small-to-medium
merchants.
Currently,
we
serve over
125,000 merchants across Southern Africa, of which more than 100,000 merchants are in South Africa. Approximately 95,000 of
the merchants
are micro
merchants who
range from
local kiosks
and spaza
shops (corner
stores) to
sole proprietors,
including
taverns, marketplaces and
the businesses and suppliers
that serve them.
These merchants typically
have lower payment
volume,
and a lower proportion of merchants accepting digital payments given
a larger dominance of cash in rural areas. However,
as the
secular
shift
from
cash
to
digital payments
continues
to
progress, we
believe
these
merchants
will increase
adopt
new digital
payment
solutions and
complementary services.
Approximately 30,000
of the
merchants are
small-to-medium merchants,
who
are larger and
more formal businesses.
They can range
from small local retailers
to merchants with
multi-lane stores, franchises
and online storefronts.
These merchants are
more professional
businesses with sophisticated
business needs with
a greater need
for more advanced business solutions that can help them run and grow their
businesses more efficiently.
Our Merchant Solutions
Our merchant solutions serve merchants of all sizes offering a wide breadth of capabilities across their financial lifecycles to
help them
Accept Payments
,
Manage Money
,
Grow Revenue,
and
Access Capital
, as illustrated below.
5
Our Merchant solutions and products comprise:
●
Merchant acquiring:
Merchant acquiring solutions for micro-merchants and small-to-medium
sized merchants.
●
Software:
Integrated POS software and hardware to the hospitality industry.
●
Cash:
Cash management
and digitalization
solutions helps
merchants manage
their money
and effectively
“puts the
bank” in
micro-merchants’
and small-to-medium
sized businesses’
stores. We
provide
them with
digital accounts
so
merchants can track their deposits and supplier payment services to order
and pay for more inventory.
●
Lending:
Access to capital to
small-to-medium merchants by providing small
cash advances or business
credit utilizing
our proprietary visibility into their business activity.
●
ADP
:
This
solution
comprises
4
categories
including
prepaid
solutions
(airtime,
data,
electricity
and
gaming),
bill
payments,
International
Money
Transfers
(“IMT”)
and
supplier
enabled
payments.
Our
supplier
enabled
payments
product suite has specifically been developed for the micro-merchants.
Merchant Competitive Landscape and Market Share
We estimate an addressable revenue
pool of approximately of $2.8 billion of which we believe we have approximately 7.0%
market
share
of
the
revenue
in
the
market
(according
to
Global
Data
Analytics
2024,
Genesis Analytics
2024,
South African
Reserve Bank
Interchange
Rate 2021,
IFC MSME
Opportunity in
South Africa
2019, Electrum
Value
Added Services
in South
Africa 2020, peer company public quarterly results from
2024 and management’s
best estimates).
A key
component
of
our
strategy
is to
differentiate
ourselves
by
being
a
customer-led
provider
rather
than
a
product-led
company by
evolving our
product offerings
to meet
the various
needs of
our customers,
being merchants.
While the
rest of
the
industry is highly fragmented with companies providing 1-2 products on their platforms, we have positioned ourselves to provide
an integrated suite of solutions for merchants. No single competitor offers the range of solutions we provide in the market. In this
respect
we
face
a
different
competitive
environment
dependent
on
the
specific
product.
For
example,
while
traditional
South
African banks
may dominate
the core
merchant acquiring
market, they
do not
offer software
or alternative
digital products
for
which we face a different universe of competitors.
2.
Our Consumer Segment
Our Consumer Market
Through
our
Consumer
Division
we
focus
on
individuals
who
have
historically
been
excluded
from
traditional
financial
services.
Our
products
are
designed
for
consumers
at
the
lower
socioeconomic
end
of
the
market
within
Living
Standards
Measures
(“LSMs”)
1
to
6,
which
comprises
approximately
26
million
people
as
of
2023
(according
to
a
report
by
Genesis
Analytics). LSM is a
research tool used
in South Africa
to segment the population
based on living
standards rather than
income
alone. It considers factors like access
to services and durable goods (for
example electricity, running water, appliances) to classify
consumers into different groups, typically from LSM 1 (lowest)
to LSM 10 (highest).
6
There are approximately 12.1
million permanent grant beneficiaries
in South Africa, in
addition approximately 9.0 million
people
receive a Social Relief of Distress
(“SRD”) grant each month (according
to the South African Social Security
Agency (“SASSA”) as
of June
30, 2025).
As of
the date of
this Annual
Report, we have
approximately 2.1
million active
consumer customers
comprising
1.9 million
grant beneficiaries
(approximately 90%
permanent grant
beneficiaries and
the balance
SRD grant
beneficiaries) and
0.2
million
EasyPay
Payouts
cardholders.
We
believe
that
for
those
consumers
receiving
welfare
grants
from
the
South
African
government, there are no other providers able to provide a transactional account, lending and insurance product under one ecosystem.
Our proposition has a unique ‘last mile’ service and
distribution model whereby we go to the rural
and peri urban geographies across
the country
to bring our
services to the
customer.
Through digitally enabled
onboarding, we can
open accounts
and issue a
physical
card at the point of application.
Our Consumer Solutions
Our consumer
solutions serve
to provide
a wide breadth
of banking,
credit and
insurance capabilities
across their
financial
lifecycles to help them
Receive Money
,
Manage Money
,
Borrow Money
, and
Protect Assets
, as illustrated below.
Our Consumer product offering is targeted at underserviced
South African consumers, and includes:
●
Transactional accounts:
Low-cost EasyPay Everywhere (“EPE”) transactional bank
account with access to
banking via
card, mobile application,
web integration and
unstructured supplementary
service data (“USSD”).
To
contextualize the
value of USSD
for our consumers
- consumers often
have no data
nor access to
WiFi, so USSD is
a very effective channel
for them. USSD
is a communication
protocol used by
mobile phones to
interact with a
mobile network operator’s system,
including real-time
interaction (no
need for
internet) and
works on
any mobile
phone, including
basic feature
phones.
Consumers can manage and
use the funds
they receive with a
complementary debit card and
a mobile app, through
which
they can withdraw cash at ATMs,
make purchases at points of sale, and pay bills. This helps us build a relationship with
our consumers and cross-sell additional financial services over time.
7
●
Lending:
We
utilize
our
access to
data on
money
flowing
in and
out of
our consumers’
deposit
accounts
to provide
access to
short-term, unsecured
personal loans
to qualifying
EPE consumers.
For many
of our
consumers, we
provide
their first-time access to regulated credit.
●
Insurance:
We
help
our
EPE
consumers
protect
their
assets
with
our
funeral
insurance
offering,
leveraging
our
relationship with our consumers, and access to data.
●
Payouts:
Secure payout solutions
for consumers, being
corporate employees who
receive work-related payments
from
their employers (South African businesses) through us.
Consumer Competitive Landscape and Market Share
The consumer
market we
address today
is focused
on South
African grant
beneficiaries and
other payout
cardholders. We
estimate an
addressable revenue
pool of
approximately $1.4
billion of
which
we believe
we have
approximately
6.5% market
share of the
revenue in the market
(according to SASSA grant data
and management’s best estimates in 2024).
We have a different
subset of competitors depending on the product
offering. While banks are the principal competitors for
transactional accounts, the
lending market is dominated by micro-finance companies and the insurance
market by insurance companies.
3.
Enterprise Segment
Our Enterprise Market
Our Enterprise
Division serves more
than 750 Enterprise
clients with large
ecosystems of billpayers,
tenants, employees or
constituents. The
Enterprise Division
is focused
on providing
strategic and
targeted
solutions that
facilitate payments
between
consumers and businesses. Our target
market primarily focuses on our network
of more than 620 billers across
South Africa and
over 100
corporate clients.
We
have deep
integrations across
municipal councils,
utility providers,
banks and
mobile operators
who leverage our technology to create readily scalable solutions.
8
Our Enterprise Solutions
Instead of a
financial lifecycle, our
enterprise solutions organized
by platforms which
provide hardware, software
and services
to different constituents,
as illustrated below.
Our Enterprise product offering is focused across three core verticals
and includes:
●
ADP:
By providing
the integration
technology to
enable any
customer in
South Africa
to purchase
a prepaid
solution
(e.g. airtime, electricity
or gaming) and/or
pay a bill
through channels such
as retailer distribution
networks and online
banking apps.
●
Utilities:
Provides a convenient
platform for tenants
to purchase and
top-up their prepaid
electricity meters which
enables
landlords
to
manage
the
electricity
usage
of
each
of
their
tenants
without
the
postpaid
risk.
This
was
incorporated
following our acquisition of Recharger in March 2025 and is a low
churn annuity-based revenue model.
●
Payments:
Houses the
proprietary payment
technology of
the Group,
particularly the
payment switch
enabling us
to
insource components
of the
payments value
chain to
create greater
efficiencies
and reduce
third party
dependencies.
Ancillary
security
and
tokenization
services
are
also
offered
to
enterprise
clients.
This
solution
remains
a
modest
contributor to the Enterprise Division’s
revenue.
Enterprise Competitive Landscape and Market Share
We
estimate an
addressable revenue
pool of
approximately of
$200 million
of which
we believe
we have
approximately
10.0% market share of the revenue in the market
(according to South African Local Government Association 2024, Statista 2024,
South African Treasury
2024, Grand View Research
2024 and management’s
best estimates. Bill payments is a representation of
the non-bank bill collection market in South Africa).
Like
our
Merchant
Division and
Consumer
Division,
we
have
competitors
within
each of
our
core products,
however
no
specific competitor participating across the integrated suite of products,
offered in our Enterprise Division.
9
Human Capital Resources
Over
the
last
few
years
we
have
built
a
diverse
team
of
high-caliber
individuals,
from
different
organizations,
to
form
our
leadership group. This
leadership group is
deeply committed to
building a high-performance
culture that is
based on our core
values
and a commitment to the care and development of our people.
Lesaka’s Core Values:
•
Entrepreneurial spirit;
•
Integrity;
•
Collective wisdom;
•
Ownership; and
•
A bias to action.
These are
our values
that underpin
our mission
to enable
Merchants
to compete
and grow,
and for
our Consumer
customers,
which comprise
mainly grant
beneficiaries,
to improve
their lives,
by providing
innovative financial
technology and
value-creating
solutions.
Employee training and skills development
We strongly believe that learning
is an ongoing process and that the majority of learning is in the doing. As such, while we offer
a range of formal
programs (as listed further
below), more importantly,
we continue to encourage
a culture of learning
in everything
that we do.
Sustainable
employee
training
and
development
programs
impact
employee
retention,
and
we
believe
that
our
investment
in
employee development contributes
to high performance and
high employee engagement
as well as a strong pipeline
of talent for key
and
critical roles
This
increases loyalty,
which
will in
turn contribute
to employee
retention.
We
offer
the following
development
programs to enhance employee performance and skills:
•
training programs;
•
leadership development programs;
•
unemployed and employed learnerships;
•
internships;
•
financial assistance to pursue further studies and obtain formal qualifications;
•
other in-house and cross-functional training to aid with career advancement;
and
•
succession planning – training interventions to address scarce and critical skills.
Equal opportunity
Having an inclusive
and diverse workforce
which reflects our
economically active population
and society in
general, is crucial
for helping the organization attract and retain talent and is important
for long-term organizational success. Our human capital team
in
partnership with
our leaders
drive recruiting
and retaining
a talented
and diverse
workforce with
special focus
on hiring
previously
disadvantaged
groups whenever
possible. We
are
committed
to
hiring
qualified
candidates without
regard
to
their
personal
status,
while
taking
into
account
the
unique
circumstances
affecting
our
operations
in
South
Africa
and
the
need
to
uplift
previously
disadvantaged groups. This commitment extends to all levels of
our organization, including within senior management
and our board
of directors.
10
As of June 30, 2025, the composition of our workforce was:
•
53% female and 47% male;
•
42% between 18 and 34 years old, 53% between 35 and 54 years old, and 5% over
55 years old; and
•
66% Black, 9% two or more races, 10% Indian and 15% White.
We have no
female named executive officer.
We
continue
to strive
to build
a more
inclusive workforce
and to
enhance our
pay structures
by taking
measures to
eliminate
potential remuneration discrimination
and to help close gender pay gaps
to progress towards gender equality
at work. We
have taken
positive strides towards a rewards philosophy that rewards high performance
and focuses on equal pay for work of equal value.
Employee compensation programs
We
are committed
to
ensuring
that
all
our
employees
are
paid
fair
and
competitive
remuneration. To
that
end,
we
offer the
following to our employees:
•
Access to a comprehensive medical, dental, and vision plan that our employees
have the option to join;
•
Access to a defined contribution retirement plan that our employees have
the option to join;
•
Paid sick, study, annual
and family responsibility leave;
•
Maternity benefits;
•
Life and disability insurance coverage;
•
Financial aid to fund tertiary education for children of employees;
•
Employee assistance programs; and
•
Product discounts.
Annual
increases
and
incentive
compensation
are
based
on
merit,
which
is
communicated
to
employees
at
onboarding
and
documented as part of our annual remuneration review process.
Our number
of employees
allocated
on a
segmental
and
group
basis as
of the
years ended
June 30,
2025,
2024 and
2023,
is
presented in the table below:
Number of employees
2025
2024
2023
Consumer
(1)
1,542
1,333
1,306
Merchant
(1)
1,957
1,059
872
Enterprise
(1)
213
130
118
Total segments
3,712
2,522
2,296
Group
(1)
16
9
7
Total
3,728
2,531
2,303
(1) Consumer includes one executive officer for
each of fiscal 2024 and 2023. Merchant includes one executive officer
for each
of fiscal 2024 and 2023. Group includes five executive officers for fiscal 2025, and two executive
officers for each of fiscal 2024 and
2023.
On a
functional basis,
as of June
30, 2025, five
of our
employees were
our named
executive officers,
1,567 were
employed in
sales and marketing, 703 were employed in finance and
administration, 432 were employed in information technology and 1,021 were
employed in operations.
Health and safety laws and regulations
We
are
subject
to various
South
African
laws and
regulations
that regulate
the health
and
safety of
our
South African-based
workforce, including
those laws monitored
by the
South African
Department of
Employment and
Labour which
stipulates the
legal
framework within
which we
need to
function. This
framework comprises
the Occupational
Health and
Safety Act,
Act 85
of 1993
(“OHSA”),
the
Compensation
for
Occupational
Injuries
and
Diseases
Act,
Act
130
of
1993
(“COIDA”),
the
Basic
Conditions
of
Employment Act,
Act 75
of 1997
(“BCEA”) and
the Labour
Relations Act,
Act 66
of 1995
(“LRA”). Compliance
with COVID-19
regulations remains
regulated by the
National Institute of
Occupational Health (“NIOH”),
and the Occupational
Health Surveillance
System
(“OHSS”),
the
Centre
for
Scientific
Industrial
Research
(“CSIR”)
and
the
National
Institute
for
Communicable
Diseases
(“NICD”).
We
have
implemented
and regularly
update human
capital-related
policies that
are designed
to ensure compliance
with
applicable South African laws and regulations.
11
Our Executive Officers
The table below presents our executive officers, their
ages and their titles:
Name
Age
Title
Ali Mazanderani
43
Executive Chairman and Director
Dan L. Smith
53
Group Chief Financial Officer and Director
Naeem E. Kola
52
Group Chief Operating Officer and Director
Lincoln C. Mali
57
Chief Executive Officer: Southern Africa and Director
Steven J. Heilbron
60
Head of Corporate Development and Director
Ali Mazanderani
has been our Executive
Chairman since February 1,
2024. He is a fintech
investor and entrepreneur.
He is the
co-founder
and
chairman
of Teya,
a pan-European
fintech. He
is also
a non-executive
director
on the
board of
several companies
including Thunes (Singapore based
private fintech), Kushki (Latin
American payments company) and
is the president
of The European
Digital Payments Industry Alliance
(EDPIA). He was previously
on the board of
several other leading payments
companies globally
including
StoneCo
(Nasdaq:
STNE)
in
Brazil
and
Network
International
Holdings
Plc
(LSE:NETW)
in
the
Middle
East.
He
was
formerly a Partner at Actis, a London-based emerging market private equity firm, where
he led multiple landmark fintech investments
globally. Prior to his career at Actis, Mr.
Mazanderani advised private equity and corporate clients for OC&C Strategy Consultants in
London
and
served
as
lead
strategy
consultant
for
First
National
Bank
based
in
Johannesburg.
He
holds
postgraduate
degrees
in
Economics from
the University of
Pretoria, Oxford University
and the London
School of Economics,
an MBA from
INSEAD and a
Masters in Business Law from the University of St Gallen.
Dan
L.
Smith
has
been
our
Group
Chief
Financial
Officer
since
October
1,
2024.
He
has
held
various
roles
in
the
financial
services sectors
in South
Africa and
the United
Kingdom. Mr.
Smith is
a director
of ADvTECH
Limited (JSE:
ADH). He
founded
DLS Advisors in
2020 and
was its CEO
until joining
VCP in
2021, where
he was employed
until September
2024. Prior
to that, he
was
employed
by
Standard
Bank
South
Africa
for
a
number
of
years
where
he
accumulated
vast
corporate
finance
experience,
including heading the Mergers &
Acquisitions investment banking team.
He holds a
Bachelor of Commerce, a
Bachelor of Accounting
and a Higher Diploma
in Taxation
Law from the University
of Witwatersrand
and is a Chartered
Accountant (SA). He is
a Graduate
of
the
Oxford
Fintech
Programme
from
the
Saïd
Business
School,
University
of
Oxford.
He
also
has
an
Advanced
Valuation
Techniques certificat
ion from the Gordon Institute of Business Science and a Diploma in Strategic Client Management from the UCT
Graduate School of Business.
Naeem E. Kol
a has been
our Group Chief
Operating Officer since October
1, 2024, and
was previously our
Group Chief Financial
Officer from March 1, 2022 until September 30, 2024. Mr. Kola has progressively held senior finance roles in Dubai, most notably
as
Chief Financial Officer of the Emerging
Markets Payments Group (“EMP”), a high-growth
fintech business that grew materially and
successfully concluded and integrated
five acquisitions during
Mr. Kola’s six-year tenure as Chief
Financial Officer. Prior to becoming
Chief Financial Officer, Mr. Kola
was Senior Vice President
for Investments, Strategy
and Business Planning
at Network International.
Since the acquisition
of EMP by
Network International in
2017, Mr.
Kola had been an
Operations Director and
Strategic Advisor to
the emerging market private equity firm
Actis, where he again focused on fintech businesses.
He is a qualified Chartered Accountant
(SA) and a member of the South African Institute of Chartered Accountants.
Lincoln
C.
Mali
has
been
our
Chief
Executive
Officer:
Southern
Africa
since
May
1,
2021.
Mr.
Mali
is
a
financial
services
executive with over 25 years in the
industry. Until April 2021, he was the Head of Group
Card and Payments at Standard Bank
Group,
having
served
in many
different
roles within
that organization
since 2001.
Mr.
Mali chaired
the board
of directors
of Diners
Club
South Africa
until April
2021, and
was a
member of
the Central
and Eastern
Europe, Middle
East and
Africa Business
Council for
Visa.
Mr.
Mali holds
Bachelor of
Arts (BA)
and Bachelor
of Laws
(LLB) degrees
from Rhodes
University,
an MBA
from Henley
Management College, various diplomas and attended an Advanced
Management Program at Harvard Business School.
Steven J.
Heilbron
joined us following
the acquisition
of Connect
in 2022. Mr.
Heilbron has two
decades of
financial services
experience,
having
spent
19
years
working
for
Investec
in
South
Africa
and
the
UK,
where
he
served
as
Global
Head
of
Private
Banking and Joint Chief Executive
Officer of Investec Bank plc.
He led a private
consortium that acquired Cash
Connect Management
Solutions (Pty) Ltd
(“CCMS”) in 2013.
Mr. Heilbron
has presided over
significant organic
growth in the
rebranded Connect Group,
as well as
spearheading the successful
acquisition and integration of
Kazang and EFTpos
acquired from the
Paycorp Group in
February
2020. He is a member of the South African Institute of Chartered Accountants
.
12
Financial Information about Geographical Areas and Operating
Segments
Refer
to
Note
21
to
our
audited
consolidated
financial
statements
included
in
this
Annual
Report
contains
detailed
financial
information about our operating segments for fiscal 2025, 2024 and 2023. Revenues based on the geographic location from which the
sale originated and geographic location where long-lived assets are held for the years ended June 30, are presented in the table below:
Revenue
(1)
Long lived assets
2025
2024
2023
2025
2024
2023
$'000
$'000
$'000
$'000
$'000
$'000
South Africa
624,846
537,594
505,558
392,098
286,700
300,104
India (MobiKwik)
-
-
-
-
76,297
76,297
Rest of the world
34,855
26,628
22,413
3,055
2,548
2,197
Total
659,701
564,222
527,971
395,153
365,545
378,598
(1)
Refer to
Note 16
to our
audited consolidated
financial statements
included
in this
Annual Report
which contains
detailed
financial information about our revenue for fiscal 2025, 2024
and 2023.
Corporate history
Lesaka was incorporated
in Florida in
May 1997 as
Net 1
UEPS Technologies, Inc. and
changed its name
to Lesaka Technologies,
Inc. on May 12, 2022. In 2004, Lesaka acquired Net1 Applied Technology
Holdings Limited (“Aplitec”), a public company listed on
the Johannesburg
Stock Exchange
(“JSE”). In
2005, Lesaka
completed an
initial public
offering
and listed
on the
NASDAQ Stock
Market. In
2008, Lesaka
listed on
the JSE
in a
secondary listing,
which enabled
the former
Aplitec shareholders
(as well
as South
African residents generally) to hold Lesaka common stock directly.
Available information
We maintain a website at www.
lesakatech.com. Our Annual Report, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, and amendments to those reports, as well as our proxy statements, are available free of charge through the “SEC filings” portion
of our website,
as soon as
reasonably practicable after
they are filed
with the SEC.
The information contained
on, or accessible
through,
our website is not incorporated into this Annual Report.
The SEC
maintains a
website at
www.sec.gov
that contains
reports, proxy
and information
statements, and
other information
regarding issuers that file electronically with the SEC.
13
ITEM 1A. RISK FACTORS
OUR OPERATIONS
AND FINANCIAL
RESULTS
ARE SUBJECT
TO VARIOUS
RISKS AND
UNCERTAINTIES,
INCLUDING
THOSE
DESCRIBED
BELOW,
THAT
COULD
ADVERSELY
AFFECT
OUR
BUSINESS,
FINANCIAL
CONDITION, RESULTS
OF OPERATIONS,
CASH FLOWS, AND THE TRADING PRICE OF OUR COMMON STOC
K
Risks Relating to Our Business
To achieve our mission, our
strategy is to
build and operate
the leading South
African full service
fintech
platform offering cash
management, payment and
financial services. Our
future success, and
our ability to
return
to
profitability
and
positive
cash
flow
is
substantially
dependent
on
our
ability
to
complete
the
implementation of this strategy successfully.
Our board conducted an extensive
review of our business strategy
and operations in July 2020,
and decided to focus on
our South
African
operations
and
other
business
opportunities
in
South
Africa
and,
to
a
lesser
extent,
the
rest
of
the
African
continent.
The
restructuring
of
the
consumer
business
and
acquisition
of
Connect
were
integral
parts
of
the
strategy
to
return
the
business
to
profitability
and
positive
cash
flow.
We
have
made
significant
progress
on
both
of
these
initiatives,
including
the
acquisitions
of
Adumo
and
Recharger,
and
the
proposed
acquisition
of
Bank
Zero
(which
remains
subject
to
the
fulfilment
or
waiver
of
various
conditions
precedent),
however
we
cannot
assure
you
that
we
will
be
able
to
complete
our
strategy
successfully
and
return
to
profitability and positive cash flow.
Even if we do return to profitability, achieving net income does not necessarily
ensure positive cash flows. Future periods of net
losses
from
operations
could
result
in
negative
cash
flow
and
may
hamper
ongoing
operations
or
prevent
us
from
sustaining
or
expanding our business. We cannot assure you that we will achieve, sustain or increase profitability in the future and if we do not, our
business will be materially and adversely affected.
We
have a
significant amount
of indebtedness that
requires us
to comply with
restrictive and financial
covenants. If we are unable to comply with these
covenants, we could default on this debt, which would have
a material adverse effect on our business and financial condition.
As of June 30,
2025, we had
aggregate borrowings outstanding
of ZAR 3.6 billion
($200.8 million translated
at exchange rates
as of June 30, 2025). We partially funded certain of
our recent acquisitions through South
African bank borrowings. We, together with
Lesaka SA
and the majority
of Lesaka SA’s directly and indirectly wholly-owned
subsidiaries, have agreed
to guarantee the
obligations
of
Lesaka
SA
and
of
the
other
borrowers
under
the
certain
of
the
borrowings
to
the
lenders.
Certain
of
these
borrowings
contain
customary covenants which include a
requirement for Lesaka SA
to maintain specified Net
Debt to EBITDA and
Interest Cover Ratios
(as defined in
the lending agreements) and
restricts the ability
of Lesaka SA,
and certain of
its subsidiaries to
make certain distributions
with respect
to their
capital stock,
prepay other
debt, encumber
their assets,
incur additional
indebtedness, make
investment above
specified levels, engage in certain business combinations and engage in
other corporate activities.
The borrowings through our merchant lending operations, through Cash
Connect Capital (Pty) Ltd (“CCC”) and K2020 Connect
(Pty) Ltd (“K2020”),
include a ZAR 400
million revolving credit
facility agreement. This
facility contains customary
covenants that
require
the borrowing
parties to
collectively
maintain
a specified
capital adequacy
ratio, restrict
the ability
of the
entities
to make
certain distributions with respect to
their capital stock, encumber their assets,
incur additional indebtedness, make investments, engage
in certain business combinations and engage in other corporate activities.
These security arrangements and covenants may
reduce our operating flexibility or
our ability to engage in
other transactions that
may
be
beneficial
to
us.
If
we
are
unable
to
comply
with
the
covenants,
we
could
be
in
default
and
the
indebtedness
could
be
accelerated. If this were to occur, we might not be able to obtain waivers of default or to refinance the debt with another lender and as
a result, our business, financial condition and stock price would suffer.
Failure to complete, or delays in completing, the
Bank Zero acquisition, could materially and adversely
affect our results of operations and stock price.
The
completion
of the
Bank
Zero
acquisition
is subject
to
a
number
of
conditions
precedent,
including
receipt
of
regulatory
approvals and certain third-party consents. Some of these conditions are
outside our control.
To
complete
the
acquisition,
we
must
make
certain
filings
with,
and
obtain
certain
consents
and
approvals
from,
various
governmental and regulatory authorities.
The regulatory approval processes may
take a lengthy period of time to complete,
and there
can be no assurance
as to the outcome
of the approval processes,
including the undertakings
and conditions that
may be required
for
approval, or whether the regulatory approvals will be obtained at all.
14
In addition,
the completion
of the
acquisition is
conditional
on, among
other things,
no action
or circumstance
occurring that
would result in a material adverse effect on the Bank Zero’s
business operations or financial results.
We cannot
provide any assurance regarding if or
when all conditions precedent to the acquisition
will be satisfied or waived. If,
for any reason, the acquisition is
not completed, or its completion is
materially delayed and/or the transaction agreement is terminated,
the market price of our common stock may be materially and adversely
affected.
In addition, if the acquisition is not completed for any reason, there are risks that (i) the announcement of the acquisition and (ii)
the dedication
of management’s
attention and other
of our resources
to the completion
thereof, could have
a negative impact
on our
relationships with our stakeholders
and could have a material
adverse effect on
our current and future operations,
financial condition
and prospects.
We may not realize some or all of the anticipated benefits
from the Bank Zero acquisition or
we may fail
to realize
some or
all of
the expected
benefits of
certain recently
integrated acquisitions,
including Adumo
and Recharger
Even
if
we
complete
the
Bank
Zero
acquisition,
we
may
experience
unforeseen
events,
changes
or
circumstances
that
may
adversely affect us. For
example, we may
incur unexpected costs,
charges or expenses resulting
from the transaction,
including charges
to
future
earnings
if
Bank
Zero’s
business
does
not
perform
as
expected.
Our
expectations
regarding
Bank
Zero’s
business
and
prospects
may not
be realized,
including
as a
result of
changes in
the financial
condition of
the markets
that Bank
Zero serves.
In
addition, there are risks associated with Bank Zero’s product and service offerings or
results of operations, including the risk of failing
to comply with certain regulatory rules required to operate its business.
Further,
there
are numerous
challenges, risks
and
costs involved
with integrating
the operations
of Bank
Zero with
ours. For
example, integrating
Bank Zero
into our
company will
require significant
attention from
our senior
management which
may divert
their attention from our day-to-day business. The difficulties of
integration may also be increased by cultural differences between our
two organizations and the necessity of retaining and integrating
personnel, including Bank Zero’s
key employees.
During fiscal
2025 we
closed the
acquisitions of
Adumo and
Recharger and
have integrated
their businesses
into our
ours. As
these businesses have only been
recently integrated in our business
there is a risk
that we may fail to
realize some or all
of the expected
benefits from these acquisitions.
Our Sarbanes-Oxley
Act of
2002 (“Sarbanes”)
management certification
and auditor
attestation regarding
the effectiveness
of
our internal control over
financial reporting as of
June 30, 2025, excludes
the operations of
Adumo and Recharger as these
transactions
were only closed during fiscal 2025. The requirement to evaluate and report on our internal
controls also applies to companies that we
acquire,
including
Bank
Zero.
As
a
group
of
South
African
private
companies
prior
to
acquisition,
Adumo,
and
more
recently
Recharger,
were not required to comply with Sarbanes prior
to the time we acquired them. The integration
of Adumo, Recharger and
Bank
Zero
into our
internal
control
over
financial
reporting would
be
expected
to require
significant
time
and
resources
from
our
management and other
personnel and is
expected to increase our
compliance costs. If
we fail to successfully
integrate the operations
of Adumo,
Recharger and
Bank Zero
into our
internal control
over financial
reporting, our
internal control
over financial
reporting
may not be effective.
As such, if some or
all of the aforementioned
risks materialize, our ability to
successfully integrate Bank Zero’s
operations into
our business
and realize
the associated
benefits of
that acquisition
could be
adversely impacted.
This could
lead to
the recording
of
material impairments, and as a result, our financial condition, results of
operations, cash flows and stock price could suffer.
We may undertake acquisitions
that could
increase our
costs or
liabilities or
be disruptive
to our
business.
Acquisitions are
an integral part
of our new
growth strategy
as we seek
to expand our
business and deploy
our technologies
in
new markets
in Southern
Africa. However,
we may
not be
able to
locate suitable
acquisition
candidates at
prices that
we consider
appropriate.
If
we
do
identify an
appropriate
acquisition
candidate,
we
may
not be
able to
successfully
negotiate
the
terms
of
the
transaction, finance it
or, if the
transaction occurs, integrate the
new business into
our existing business.
These transactions may
require
debt financing or additional equity financing, resulting in additional leverage
or dilution of ownership.
Acquisitions of businesses
or other material
operations and the
integration of these
acquisitions or their
businesses will require
significant attention
from members
of our senior
management team,
which may
divert their
attention from
our day-to-day
business.
The difficulties
of integration
may be
increased by
the necessity
of integrating
personnel with
disparate business
backgrounds
and
combining
different
corporate cultures.
We
also may
not be
able to
retain key
employees or
customers
of an
acquired business
or
realize
cost
efficiencies
or
synergies
or
other
benefits
that
we
anticipated
when
selecting
our
acquisition
candidates.
Acquisition
candidates may have liabilities or adverse operating issues that we fail to
discover through due diligence prior to the acquisition.
We
may
need
to record
write-downs
from future
impairments of
goodwill or
other intangible
assets, which
could reduce
our
future reported earnings.
15
Geopolitical conflicts,
including the
conflict between
Russia and
Ukraine and
in the
Middle East,
may
adversely affect our business and results of operations.
The current conflicts between Russia and Ukraine, and in the Middle East are creating substantial uncertainty about the future of
the global economy.
Countries across the globe have instituted sanctions and other penalties
against Russia. The retaliatory measures
that have been taken, and
could be taken in the future,
by the U.S., NATO,
and other countries have created
global security concerns
that could
result in broader
European military
and political conflicts
and otherwise
have a substantial
impact on
regional and
global
economies, any or all of which could adversely affect our business.
While the broader consequences are uncertain at this time, the continuation
and/or escalation of the conflicts, along with any
expansion of the conflict to surrounding areas, create a number of risks that could
adversely impact our business, including:
•
Increased inflation and significant volatility in the macroeconomic environment;
•
Disruptions to our technology infrastructure, including through
cyberattacks, ransom attacks or cyber-intrusion;
•
Adverse changes in international trade policies and relations;
•
Disruptions in global supply chains; and
•
Constraints, volatility or disruption in the credit and capital markets.
All of these risks could materially
and adversely affect our business
and results of operations. We
are continuing to monitor the
situation in Ukraine, the Middle East and globally and assessing the potential
impact on our business.
A prolonged economic
slowdown or lengthy
or severe recession
in South Africa
or elsewhere could
harm
our operations.
A prolonged economic
downturn or recession
in South Africa
could materially
impact our results
from operations, particularly
in light
of electricity
disruptions, a
significantly weak
USD/ ZAR
exchange rate
compared with
previous periods,
and our
strategic
decision to focus on
our South African operations. Economic
confidence in South Africa, our
main operating environment, is
currently
low and, as
a result, the
risk of a
prolonged economic downturn
is increased, which
could have a
negative impact on
merchants and
retailers; mobile
phone operators;
our account
holders; the level
of transactions
we process; the
take-up of
the financial
services we
offer
and
the ability
of our
customers
to
repay our
loans or
to
pay
their insurance
premiums.
If financial
institutions
and
retailers
experience decreased demand for their products
and services, our hardware, software, related
technology sales and processing revenue
could decrease.
Any economic slowdown may be further exacerbated by the
recently imposed trade tariffs on South Africa by the
U.S. While the
South African government
intends to negotiate the
reduction of the
30% tariff hike,
it is uncertain
as to whether the
planned attempt
to negotiate will result
in the desired outcome.
It is therefore necessary to
consider the macroeconomic
effect of the tariff
hike in the
context of
the South
African economy
which may
ultimately have
a ripple effect
on our operations
as our client
consists of,
but are
not limited
to, merchants,
retailers, mobile
phone operators
and account
holders. We
are unable
to quantify
the impact
of the
tariff
hike on our business and results of operations.
Our
ability
to fund
our ATM
network
requires that
we
continue
to have
access to
an
agreement
with
African Bank to provide liquidity to operate our ATM network.
The operational
maintenance
of our
ATM
network,
along with
an increase
in our
consumer
banking
client base,
necessitates
access to large amounts
of cash to stock the
ATMs
and maintain uninterrupted service
levels. In September 2024,
we entered into an
arrangement with African Bank Limited (“African Bank”) and certain cash-in-transit service
providers to fund our ATMs.
Under this
arrangement, African Bank will use its cash resources to fund our ATMs
and it is specifically recorded that the cash in our ATMs
are
African Bank’s
property.
Therefore, as
we have
not utilized
a facility
to obtain
the cash,
and do
not own
or control
the cash
for an
extended period of time, we do not record
cash or cash equivalents and borrowings in our
consolidated statement of financial position.
Cash withdrawn from our ATMs by our EPE customers and other consumers are settled through the interbank settlement system from
the ATM
users bank account to African Bank’s
bank accounts. We pay
African Bank a monthly fee for the service provided which is
calculated based on the cumulative
daily outstanding balance of cash
utilized multiplied by the South
African prime interest rate less
1%. We
are exposed to
the risk of
cash lost while
it is in
our ATMs
(i.e. from theft)
and are required
to repay African
Bank for any
shortages.
We
may not
be able
to extend
the terms
of the
arrangement with
African Bank
and certain
cash-in-transit service
providers to
fund our ATMs
on commercially reasonable
terms or at all. Our
ability to continue the
uninterrupted operation of our
ATM
network
will be adversely
impacted by our
failure to
renew these arrangements,
any adverse change
to the terms
of these arrangements,
or a
significant reduction in the amounts provided under these arrangements. We
may also suffer reputational damage if our service levels
are negatively impacted due to the unavailability of cash.
16
Our
consumer
microlending
loan
book
and
merchant
lending
book
expose
us
to
credit
risk
and
our
allowance for doubtful finance loans receivable may not be sufficient to absorb future write-offs.
All of our microfinance loans made are for a period of nine months or less and all of our merchant
lending is for a period of less
than
12
months.
We
have
created
an
allowance
for
doubtful
finance
loans
receivable
related
to
these
books.
When
creating
the
allowance, management considered factors including the period
of the finance loan outstanding,
creditworthiness of the customers and
the past payment
history of the borrower.
We
consider this policy
to be appropriate
as it takes into
account factors such
as historical
bad debts, current
economic trends and
changes in our customer
payment patterns. However,
additional allowances may
be required
should the ability of our customers to make
payments when due deteriorate in the future. A
significant amount of judgment is required
to assess the ultimate recoverability of these microfinance loan receivables.
We may face competition from other
companies that offer innovative
payment technologies and payment
processing,
which
could
result
in
the
loss
of
our
existing
business
and
adversely
impact
our
ability
to
successfully market additional products and services.
Our primary competitors in
the payment processing
market include other independent
processors, as well
as financial institutions,
independent
sales
organizations,
new
digital
and
fintech
entrants
and,
potentially
card
networks.
Many
of
our
competitors
are
companies who
are larger
than we
are and
have greater
financial and
operational resources
than we
have. These
factors may
allow
them to offer better pricing
terms or incentives to customers, which
could result in a loss of our potential
or current customers and/or
force us to lower our prices. Either of these actions could have a significant effect
on our revenues and earnings.
Our
future
success
will
depend
in
part
on
our
ability
to
attract,
integrate,
retain
and
incentivize
key
personnel
and
a
sufficient
number
of
skilled
employees,
particularly
in
the
technical,
sales
and
senior
management areas.
We believe our management team has the right experience
and skills to execute on our strategy. However,
in order to succeed in
our product
development and
marketing efforts,
we may
need to identify
and attract new
qualified technical
and sales personne
l, as
well as motivate and retain our
existing employees. As a result, an
inability to hire and retain such
employees would adversely affect
our ability to
achieve our strategic
goals and maintain
our technological relevance.
We may face difficulty in
assimilating, transitioning
and integrating
newly-hired
personnel or
management of
any future
acquisitions into
our existing
management team,
and this
may
adversely affect
our business. Competitors
may attempt
to recruit
our top
management and
employees. In
order to
attract and retain
personnel in
a competitive
marketplace, we
must provide
competitive pay
packages, including
cash and equity
-based compensation
and
the
volatility
in
our
stock
price
may
from
time
to
time
adversely
affect
our
ability
to
recruit
or retain
employees.
We
do
not
maintain
any
“key
person”
life
insurance
policies.
If
we
fail
to
attract,
integrate,
retain
and
incentivize
key
personnel
and
skilled
employees, our ability to manage and grow our
business could be harmed and our product
development and marketing activities could
be negatively affected.
Cybersecurity breaches and other system disruptions pose a significant threat to business operations.
As a fintech organization reliant on digital infrastructure, we
are highly susceptible to cybersecurity incidents involving sensitive
data
such
as personally
identifiable
information
(“PII”),
payment
card
information
(“PCI”),
and
proprietary
business records.
Our
exposure
includes
the
risk
of data
breaches,
ransomware,
denial-of-service
attacks,
and
unauthorised
system
access.
Although
we
follow the National Institute
of Standards and
Technology (“NIST”) Cybersecurity Framework in our
security controls, evolving cyber
threats
mean
no
system
is
invulnerable.
A
successful
cybersecurity
breach
could
result
in
financial
losses,
regulatory
penalties,
reputational
damage,
operational interruptions,
and legal
consequences. Prolonged
or frequent
breaches or
system disruptions
may
diminish
customer
trust, potentially
leading
customers
to
consider
our
systems
unreliable,
which
could
impact
adoption
and
harm
brand reputation.
Addressing breaches
or system disruptions
can significantly
strain staff
resources and delay
new service launches.
Furthermore, if customers rely on
our products for critical transactions,
a breach could disrupt their
businesses and lead to claims
for
compensation. Even if unsuccessful, this type of claim could be time-consuming
and costly for us to address.
Although certain of our systems
have been designed to reduce
downtime in the event of
outages or catastrophic occurrences, they
remain vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunication
failures, terrorist attacks,
computer viruses, computer denial-of-service attacks and similar events. Some of
our systems are not fully
redundant, and our disaster
recovery planning may not be sufficient for all eventualities.
Protection against fraud is of key
importance to the purchasers and end
users of our solutions. We
incorporate security features,
including encryption
software, biometric
identification and
secure hardware,
into our solutions
to protect
against fraud in
electronic
transactions and to provide for the privacy and integrity of
cardholder data. Our solutions and systems may be vulnerable to
breaches
in security due to
defects in the security mechanisms,
the operating system, applications
or the hardware platform
as well as through
risk introduced
into our
environment through
third party
suppliers, which
the group
relies heavily
on. Security
vulnerabilities could
jeopardize the security of
information transmitted using our solutions.
If the security of our
solutions is compromised, our
reputation
and marketplace acceptance of
our solutions may be
adversely affected, which would cause
our business to
suffer, and we may become
subject to damages claims. We
have not yet experienced any significant security breaches affecting
our business.
17
Despite
robust
measures,
unforeseen
cyber
incidents
or natural
disasters
could
trigger
lengthy
service
interruptions.
Existing
business interruption insurance may not adequately compensate for losses stemming
from cybersecurity failures.
Defending
our
intellectual
property
rights
or
defending
ourselves
in
infringement
suits
that
may
be
brought against us is expensive and time-consuming and may not be successful.
Litigation to enforce our trademarks or other intellectual property rights or
to protect our trade secrets could result in substantial
costs
and
may
not
be
successful.
Any
loss
of,
or
inability
to
protect,
intellectual
property
in
our
technology
could
diminish
our
competitive
advantage and
also seriously
harm our
business. In
addition,
the laws
of certain
foreign
countries may
not protect
our
intellectual property rights to the same extent as do the laws in countries where we currently have protection. Our means of protecting
our intellectual property rights in countries where we currently have protection, or any other country in which we operate, may not be
adequate to
fully protect
our intellectual
property rights.
Similarly,
if third
parties claim
that we
infringe their
intellectual property
rights, we
may be
required to
incur significant
costs and
devote substantial
resources to
the defense
of such
claims, to
discontinue
using and
selling any
infringing technology
and services,
to expend
resources to
develop non-infringing
technology or
to purchase
licenses or pay royalties
for other technology.
In addition, if we
are unsuccessful in
defending any such third-party
claims, we could
suffer costly judgments and injunctions that
could materially adversely affect our business,
results of operations or financial
condition.
We
may incur
material losses
in connection
with our
movement of
cash through
our infrastructure
in
South Africa.
In our merchant
business we collect
and process large
volumes of cash
from our customers,
assuming the
risk of loss
from the
moment that cash is
deposited into our vaults.
We are then responsible for its
collection and transportation to
processing centers, which
we outsource to various cash-in-transit service providers. These services extend
across all areas of South Africa.
South Africa suffers
from high levels
of crime and
in particular cash-in-transit
heists. We
cannot insure against
certain risks of
loss or theft
of cash from
our delivery and
collection vehicles, and
we will therefore
bear the full
cost of certain
uninsured losses
or
theft in connection with
the cash handling process
Such losses could materially
and adversely affect our financial
condition, cash flows
and results
of operations.
We
have not
incurred any
material losses
resulting from
cash distribution
in recent
years, but
there is
no
assurance that we will not incur any such material losses in the future.
We depend upon third-party suppliers, making us vulnerable to supply shortages and price fluctuations,
which could harm our business.
We
obtain our
smart cards,
ATMs,
electronic payment
and POS
devices, components
for our
vaults, components
to repair
the
ISV (independent
software vendor)
division’s
POS hardware, and
the other hardware
we use in
our business from
a limited number
of suppliers, and
do not manufacture
this equipment ourselves.
We generally do not have
long-term agreements with
our manufacturers
or component suppliers.
If our suppliers
become unwilling or
unable to provide
us with adequate
supplies of parts
or products when
we need them,
or if they
increase their prices,
we may not
be able to
find alternative
sources in a
timely manner
and could be
faced
with a critical shortage. This
could harm our ability to meet customer
demand and cause our revenues
to decline. Even if we are
able
to secure alternative sources in a timely manner,
our costs could increase as a result of supply or geopolitical shocks, which
may lead
to an
increase in
the prices
of goods
and services
from third
parties. A
supply interruption,
such as
the previous
global shortage
of
semiconductors, or
an increase
in demand
beyond current
suppliers’ capabilities
could harm
our ability
to distribute
our equipment
and thus to
acquire new customers
who use our
technology. Any
interruption in the
supply of the
hardware necessary to
operate our
technology, or our inability to obtain substitute equipment at acceptable prices in a
timely manner, could impair our ability to meet the
demand of our customers, which would have an adverse effect on
our business.
Our EasyPay Insurance business exposes us to risks typically experienced by life assurance companies.
EasyPay Insurance Limited (“EasyPay Insurance”)
is a life insurance company and exposes us to risks typically
experienced by
life assurance companies.
Some of these
risks include the
extent to which
we are able
to continue to
reinsure our risks
at acceptable
costs, reinsurer
counterparty risk,
maintaining regulatory
capital adequacy,
solvency and
liquidity requirements,
our ability
to price
our insurance
products appropriately,
the risk
that actual
claims experience
may exceed
our estimates,
the ability
to recover
policy
premiums from our customers and the
competitiveness of the South African insurance
market. If we are
unable to maintain our desired
level of reinsurance
at prices that
we consider acceptable,
we would have
to either accept an
increase in our
risk exposure or
reduce
our insurance writings. If our reinsurers are unable to meet their commitments to us in a timely manner, or at all, we may be unable to
discharge our
obligations under our
insurance contracts. As
such, we are
exposed to counterparty
risk, including credit
risk, of these
reinsurers.
Our
product
pricing
includes
long-term
assumptions
regarding
investment
returns,
mortality,
morbidity,
persistency
and
operating
costs
and
expenses
of
the
business.
Using
the
wrong
assumptions
to
price
our
insurance
products
could
materially
and
adversely affect our financial
position, results of
operations and cash flows.
If our actual
claims experience is
higher than our
estimates,
our financial position, results of
operations and cash flows could be
adversely affected. Finally,
the South African insurance industry
is
highly
competitive.
Many
of
our
competitors
are
well-established,
represented
nationally
and
market
similar
products
and
we
therefore may not be able to effectively penetrate the South
African insurance market.
18
Risks Relating to Operating in South Africa and Other Foreign Markets
Operating in
Southern and East
Africa, both
emerging markets, subjects
us to
greater risks than
those
we would face if we operated in more developed markets.
Emerging markets such as
Southern Africa are subject
to greater risks
than more developed markets.
While we focus
our business
primarily
on
emerging
markets
because
that
is
where
we
perceive
the
greatest
opportunities
to
market
our
products
and
services
successfully, the
political, economic and market conditions
in these markets present risks that
could make it more difficult
to operate
our business successfully.
Some of these risks include:
•
Political, legal and economic instability,
including higher rates of inflation and currency fluctuations;
•
High levels of corruption, including bribery of public officials;
•
Loss due to civil strife, acts of war or terrorism, guerrilla activities and insurrection;
•
A
lack
of
well-developed
legal
systems
which
could
make
it
difficult
for
us
to
enforce
our
intellectual
property
and
contractual rights;
•
Logistical, utilities (including electricity and water supply) and communications
challenges;
•
Potential
adverse
changes
in
laws
and
regulatory
practices,
including
import
and
export
license
requirements
and
restrictions, tariffs, legal structures and tax laws;
•
Difficulties in staffing and managing operations
and ensuring the safety of our employees;
•
Restrictions on the right to convert or repatriate currency or export assets;
•
Greater risk of uncollectible accounts and longer collection cycles;
•
Indigenization and empowerment programs;
•
Exposure to liability under the UK Bribery Act; and
•
Exposure to
liability under
U.S. securities
and foreign
trade laws,
including the
Foreign Corrupt
Practices Act,
or FCPA,
and regulations established by the U.S. Department of Treasury’s
Office of Foreign Assets Control, or OFAC.
If
we
do
not
achieve
applicable
Broad-Based
Black
Economic
Empowerment
objectives in
our
South
African businesses, we
may be subject
to fines and
we risk losing
our government and/or
private contracts.
In addition,
it is
possible that
we may
be required
to increase
the Black
shareholding of
our company
in a
manner that
could dilute
your ownership
and/or change
the companies
from which
we purchase
goods or
procure services (to companies with a better BEE Status Level).
The legislative framework for the promotion of Broad-Based Black Economic Empowerment (“BEE”) in South Africa has been
established through
the Broad-Based
Black Economic
Empowerment
Act, No.
53 of
2003, as
amended from
time to
time, and
the
Amended
BEE
Codes
of
Good
Practice,
2013,
or
BEE
Codes,
and
any
sector-specific
codes
of
good
practice,
or
Sector
Codes,
published pursuant
thereto. Sector
Codes are
fully binding
between and
among businesses
operating in
a sector
for which
a Sector
Code has been
published. Achievement
of BEE objectives
is measured by
a scorecard which
establishes a weighting
for the various
elements. Scorecards
are independently
reviewed by
accredited BEE
verification agencies
which issue
a verification
certificate that
presents an
entity’s
BEE Status
Level. This
BEE verification
process must
be conducted
on an
annual basis,
and the
resultant BEE
verification certificate is only valid for a
period of 12 months from
the date of issue. Under
our consolidated scorecard, which includes
all South African businesses, we currently hold a BEE Status Level 2.
Two
of our
South African
businesses, being
EasyPay Financial
Services (Pty)
Ltd (“EP
FS”) and
EasyPay Insurance
Limited,
are
subject
to
the
Amended
Financial
Sector
Code,
or
the
FS
Sector
Code,
and
all
other
businesses
are
consolidated
under
the
Department
of Trade
and Industry
(DTI)
Generic
Codes. The
FS Sector
Code have
been amended
and aligned
with the
new BEE
Codes and
were promulgated
in December
2017. Licensing
and/or regulatory
authorities overseeing
these South African
businesses
may set minimum adherence
requirements to BEE
standards as a
condition for an
operating license to
trade. The minimum
requirement
under the Financial Sector
Code is Level 8. We
currently have a BEE
Status Level 5 for
EP FS and BEE Status
Level 4 for EasyPay
Insurance.
The BEE scorecard includes
a component relating to management
control, which serves to determine
the participation of Black
people in the board, as
well as at various
levels of management within a
measured entity (including, inter alia,
Executive Management,
Senior Management,
Middle Management
and Junior
Management). The
BEE Codes
and/or Sector
Codes define
the terms
"Senior
Management", "Middle
Management" and
"Junior Management"
as those occupational
categories as determined
in accordance
with
the
Employment
Equity
Regulations,
with
specific
emphasis
on
improving
participation
in
proportion
to
the
demographics
of
the
Economically
Active
Population
of
South
Africa,
as published
by
Statistics South
Africa,
from
time
to
time.
Employment
Equity
legislation seeks to
drive the alignment
of the workforce
with the racial
composition of the
economically active population
of South
Africa
and
accelerate
the
achievement
of
employment
equity
targets,
introducing
monetary
fines
for
non-compliance
with
the
Employment Equity legislation and misrepresented submissions. Annexure EEA9 to the Employment
Equity Regulations sets out the
various occupational levels which are determined in accordance with the relevant grading systems applied by the measured entity and
referred to in said Annexure.
19
During fiscal 2025, we made cash contributions to 36 community-based organizations and enterprises to enable them to
promote
growth
and strengthen
their capacity
to develop
innovative platforms
or provide
services to
the markets
they
serve. We
were also
involved in disaster relief efforts for 275 families who were affected by disasters such as
floods, cyclones and fires. We also advanced
digital transformation in over 80 high schools by donating over 3,800 mobile devices. On November 14,
2024, our shareholders voted
on and approved the funding and issuance of 2,490,000 shares
of our common stock to the Lesaka ESOP
Trust. The Lesaka Employee
Share Ownership
Plan (“ESOP”)
is designed
to create
alignment with
our long-term
growth objectives.
The Lesaka
ESOP Trust
is
also expected to advance our transformation initiatives and plays an important
role in improving our BEE Status Level.
However, it
is possible that these
and other actions
may not be sufficient
to enable us to
achieve the applicable
BEE objectives
set out for specific financial years. In that event, in order to maintain competitiveness in the South African marketplace, we may have
to seek to
increase compliance through other means,
including by selling or
placing additional shares
of Lesaka or
of our South African
subsidiaries to Black
South Africans (either directly
or indirectly), over
and above what has already
been approved, and/or
changing
to suppliers that
have higher BEE Status
Levels. Such sales
or placements of
shares could have a
dilutive impact on
your ownership
interest, which could cause the market price of our stock to decline.
We expect
that our BEE Status Level
will be important in order
for us to remain
competitive in the South
African marketplace.
We continually seek
ways to improve our BEE Status Level, especially the ownership (so-called “equity”) and procurement elements
thereof.
We
may not be
able to effectively
and efficiently
manage the disruption
to our operations
as a result
of
erratic electricity supply in
South Africa, which could
adversely affect our, financial position, cash flows
and
future growth.
Our businesses in
South Africa are
dependent on electricity
generated and supplied
by the state-owned
utility,
Eskom, in order
to operate, and,
in recent years, Eskom
has been unable to
consistently generate and
supply the amount of
electricity required by
the
South
African
economy
which
has
resulted
in
significant
and
often
unpredictable
electricity
supply
disruptions.
Eskom
has
implemented
a number
of short-
and
long-term
mitigation
plans
to
correct
these
issues, but
supply
disruptions
continued
to occur
regularly and with no predictability, although consistency of electricity supply has improved significantly since April 2024. As part of
our
business continuity
programs, we
have
installed back-up
diesel generators
in order
for
us to
continue
to operate
our
core data
processing
facilities
in
the
event
of
intermittent
disruptions
to
our
electricity
supply.
We
have
to
perform
regular
monitoring
and
maintenance of these
generators and also
source and manage
diesel fuel levels.
We
may also be
required to replace
these generators
on a more frequent basis due to the additional burden placed on them.
Our results of operations, financial position, cash flows
and future growth could be adversely affected if Eskom is
unable to raise
sufficient funding to operate
and/or commission new electricity-generating
power stations in accordance with its
plans, or at all, or if
we are unable to effectively and efficiently test, maintain,
source fuel for, and replace, our generators.
Fluctuations in
the value
of the
South African
rand have
had, and
will continue
to have,
a significant
impact
on
our
reported
results
of
operations,
which
may
make
it
difficult
to
evaluate
our
business
performance between reporting periods and may also adversely affect our stock price.
The South
African rand,
or ZAR,
is the
primary operating
currency for
our business
operations while
our financial
results are
reported in U.S. dollars. Therefore, any depreciation in
the ZAR against the U.S. dollar, would negatively impact
our reported revenue
and net
income. The
U.S. dollar/ZAR
exchange rate
has historically
been volatile
and we
expect this
volatility to
continue (refer
to
Item
7—“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations—Currency
Exchange
Rate
Information.”).
Due
to
the
significant
fluctuation
in
the
value
of
the
ZAR
and
its
impact
on
our
reported
results,
you
may
find
it
difficult to
compare our results
of operations between
financial reporting periods
even though we
provide supplemental information
about our
results of
operations determined
on a
ZAR basis.
Similarly,
depreciation in
the ZAR
may negatively
impact the
prices at
which our stock trades.
We generally do not engage in any currency hedging
transactions intended to reduce the
effect of fluctuations in foreign currency
exchange rates on our results of
operations, other than economic hedging
using forward contracts relating to
our inventory purchases
which are settled in U.S.
dollars or euros. We
cannot guarantee that we will
enter into hedging transactions
in the future or,
if we do,
that these transactions will successfully protect us against currency fluctuations.
South Africa’s
high levels of
poverty, unemployment
and crime may
increase our costs
and impair our
ability to maintain a qualified workforce.
While South Africa has a highly developed financial and legal infrastructure, it also has high levels of crime and unemployment,
relative to peer
countries in Africa
and other emerging
economies, and there
are significant differences
in the level
of economic and
social development among its people,
with large parts of the population,
particularly in rural areas, having limited
access to adequate
education, healthcare, housing and other
basic services, including water
and electricity. In addition, South Africa has
a high prevalence
of
HIV/AIDS
and
tuberculosis,
the
impact
of
which
may
be
exacerbated
in
the
short-term
by
the
discontinuation
of
the
U.S.
government’s funding of certain HIV/AIDS
research and outreach programs.
20
Government policies
aimed at
alleviating and
redressing the
disadvantages suffered
by the majority
of citizens
under previous
governments may
increase our
costs and
reduce our
profitability,
all of
which could
negatively affect
our business.
These problems
may prompt
emigration of
skilled workers,
hinder investment
into South
Africa and
impede economic
growth. As
a result,
we may
have difficulties attracting and retaining qualified employees
.
The
economy
of
South
Africa
is
exposed
to
high
rates
of
inflation,
interest
and
corporate
tax,
which
could
increase
our
operating
costs
and
thereby
reduce
our
profitability.
Furthermore,
the
South
African
government requires additional
income to fund
future government
expenditures and may
be required,
among
other things, to
increase existing income
tax rates, including
the corporate income tax
rate, amend existing
tax legislation or introduce additional taxes.
The economy of
South Africa in the
past has been, and
in the future may
continue to be, characterized
by rates of inflation
and
interest that
are substantially
higher than
those prevailing
in the United
States and
other highly-developed
economies. High
rates of
inflation could increase our South African-based costs and decrease our operating margins. High interest rates increase the cost of our
debt financing, though conversely, they also
increase the amount
of income we
earn on any
cash balances. The
South African corporate
income tax rate, of 27%, is higher than the
U.S. federal income tax rate, of 21%. Any increase
in the effective South African corporate
income tax rate would adversely impact our profitability and cash flow generation.
Risks Relating to Government Regulation
We
are required to
comply with
certain laws
and regulations, including
economic and trade
sanctions,
which could adversely impact our future growth.
We
are
subject
to U.S.
and
other
trade
controls,
economic sanctions
and
similar
laws and
regulations,
including
those in
the
jurisdictions
where
we
operate.
Our
failure
to
comply
with
these
laws
and
regulations
could
subject
us
to
civil,
criminal
and
administrative
penalties
and
harm
our
reputation.
These
laws and
regulations
place
restrictions
on
our
operations,
trade
practices,
partners
and
investment
decisions.
In particular,
our operations
are subject
to U.S.
and
foreign
trade
control laws
and
regulations,
including various export controls and economic sanctions programs, such as those administered by OFAC. We monitor compliance in
accordance with
the 10
principles as
set out
in the
United Nations
Global Compact
Principles, the
Organisation
for Economic
Co-
operation and
Development recommendations
relating to
corruption, and
the International
Labor Organization
Protocol in
terms of
certain of the items to be
monitored. As a result of doing business
in foreign countries and with foreign
partners, we are exposed to a
heightened risk of violating trade control laws as well as sanctions regulations.
Violations
of
trade
control
laws and
sanctions
regulations
are
punishable
by civil
penalties,
including
fines,
denial
of export
privileges,
injunctions,
asset seizures,
debarment
from
government
contracts
and revocations
or restrictions
of licenses,
as
well
as
criminal fines and imprisonment.
We have
developed policies and procedures as
part of a company-wide compliance
program that is
designed to
assist our compliance
with applicable
U.S. and international
trade control laws
and regulations,
including trade controls
and sanctions programs administered
by OFAC,
and provide regular training
to our employees to create awareness
about the risks of
violations of trade
control laws and
sanctions regulations and
to ensure compliance
with these laws
and regulations.
However, there
can be no assurance that all of our employees, consultants,
partners, agents or other associated persons will not act in violation
of our
policies and these laws and regulations, or that our policies and
procedures will effectively prevent us from violating these regulations
in every transaction
in which we
may engage, or
provide a defense
to any alleged
violation. In particular,
we may be
held liable for
the actions that our
local, strategic or joint venture
partners take inside or outside
of the United States, even
though our partners may
not be
subject to
these laws.
Such a
violation, even
if our
policies prohibit
it, could
materially and
adversely affect
our reputation,
business,
results
of
operations
and
financial
condition.
Any
expansion
into
developing
countries,
and
our
development
of
new
partnerships and joint venture relationships, could increase the risk
of OFAC violations in the
future.
In addition,
our payment
processing and
financial services
activities are
subject to
extensive regulation.
Compliance with
the
requirements under the various
regulatory regimes may cause
us to incur significant
additional costs and failure
to comply with such
requirements could result in the shutdown of
the non-complying facility, the imposition of liens, fines and/or civil or
criminal liability.
We
are
required
to
comply
with
anti-corruption
laws
and
regulations,
including
the
FCPA
and
UK
Bribery Act, in the
jurisdictions in which we
operate our business, which could
adversely impact our future
growth.
The FCPA prohibits
us from providing anything of value to foreign
officials for the purposes of obtaining or retaining business,
or
securing
any
improper
business
advantage,
and
requires
us
to
keep
books
and
records
that
accurately
and
fairly
reflect
our
transactions.
As part
of
our
business,
we
may
deal
with
state-owned
business
enterprises,
the
employees
of
which
are
considered
foreign
officials
for
purposes of
the FCPA.
The UK
Bribery
Act includes
provisions
that extend
beyond bribery
of foreign
public
officials and also apply to
transactions with individuals not employed
by a government and
the act is also
more onerous than the FCPA
in a number of other respects, including
jurisdiction, non-exemption of facilitation
payments and penalties. Some of the international
locations in which we operate or have investments lack a developed
legal system and have higher than normal levels of corruption.
21
Any
failure
by
us
to
adopt
appropriate
compliance
procedures
and
ensure
that
our
employees,
agents
and
business
partners
comply with
the anti-corruption
laws and
regulations could
subject us
to substantial
penalties, and
the requirement
that we
comply
with these laws could
put us at a
competitive disadvantage against
companies that are not
required to comply.
For example, in many
emerging
markets,
there
may be
significant
levels
of official
corruption,
and
thus, bribery
of public
officials
may
be
a comm
only
accepted cost
of doing
business. Our
refusal to
engage in
illegal behavior,
such as
paying bribes,
may result
in us not
being able
to
obtain business that we
might otherwise have been able
to secure or possibly
even result in unlawful,
selective or arbitrary action being
taken against us.
Violations of anti-corruption laws and regulations are punishable by civil penalties, including fines, as well as criminal fines and
imprisonment. We
have developed policies
and procedures as part
of a company-wide
compliance program that
is designed to assist
our compliance with applicable U.S.,
South African and other international
anti-corruption laws and regulations,
and provide regular
training to our
employees to comply
with these laws
and regulations. However,
there can be
no assurance that
all of our
employees,
consultants, partners, agents or other associated persons will not take actions in violation of our policies or
these laws and regulations,
or that our
policies and procedures
will effectively prevent
us from violating
these regulations in every
transaction in which
we may
engage, or
provide a defense
to any alleged
violation. In
particular,
we may be
held liable for
the actions
that our
local, strategic
or
joint venture
partners take inside
or outside
of the United
States, even though
our partners may
not be subject
to these
laws. Such a
violation,
even
if
our
policies
prohibit
it,
could
materially
and
adversely
affect
our
reputation,
business,
results
of
operations
and
financial condition.
We
do not
have a South
African banking license
and, therefore, we
provide our EPE
solution through
an arrangement with
a third-party bank,
which limits our
control over this
business and the
economic benefit
we derive from it.
If this arrangement were
to terminate, we would
not be able to operate
our EPE business
without alternate means
of access to
a banking license.
We are also required to comply
with the requirements
of payment schemes,
including VISA and
Mastercard. Furthermore, we
provide certain of
our services under
partnerships
with
South
African
banks.
We
will
be
unable
to
provide
our
payments
and
card-acquiring
businesses if we fail
to comply with payment
scheme rules, and/or fail
to maintain certain regulatory
licenses
and registrations, and/ or if
we were unable to
continue to partner with
South African banks to
provide our
payments and card acquiring services.
The
South
African
retail
banking
market
is
highly
regulated.
Under
current
law
and
regulations,
our
EasyPay
Everywhere
(“EPE”) business activities require
us to be registered as
a bank in South Africa
or to have access to an
existing banking license.
We
are not currently so registered, but we have an
agreement with African Bank Limited, that enables us
to implement our EPE program
in compliance with the
relevant laws and regulations.
If this agreement were
to be terminated, we
would not be able
to operate these
services unless we were able to obtain access to a banking license
through alternate means. Furthermore, we have to comply
with the
South
African
Financial
Intelligence
Centre Act,
2001
and money
laundering and
terrorist financing
control
regulations,
when
we
open new
bank accounts
for our
customers and
when they
transact.
Failure to
effectively
implement
and monitor
responses
to the
legislation and regulations may result in significant fines or prosecution of
African Bank and ourselves.
The South African Financial Advisory and Intermediary Services Act, 2002, requires persons who act as intermediaries between
financial product suppliers and consumers in South Africa to register as financial service providers. EasyPay Insurance was granted
a
Financial Service Provider (“FSP”) license
on June 9, 2015, and
EP FS was
granted a FSP license
on July 11, 2017. If
our FSP licenses
are withdrawn or suspended, we may be stopped from continuing our financial services businesses in South Africa unless we are able
to enter into a representative arrangement with a third party
FSP.
Furthermore, the
proposed Conduct
of Financial
Institutions (“COFI”)
Bill will
overhaul the
current regulatory
and legislative
framework by replacing
the rules-based approach
with an
outcomes-driven and principles-based
model, and the
adoption of
an activity-
based licensing regime. It will establish a uniform legislative framework to regulate the conduct of all financial institutions across the
financial services
sector.
While the
framework will
make significant
changes, including
the conversion
of existing
licences through
transitional
arrangements
and
new
activities
requiring
licensing,
it
is
likely
to
increase
operational
costs
to
meet
regulatory
expectations. The final draft
of the COFI
Bill is expected to
be tabled before Parliament
late 2025 or
early 2026 for approval.
However,
contingencies are in place to
ensure smooth transition should the
COFI Bill face further
delays which will include formal
consultations
and the phased introduction of the new legislative framework.
We
are required
to comply
with the
requirements of
payment schemes,
including VISA
and Mastercard.
We
have deployed
a
significant number of devices, and any
mandatory compliance upgrades to our deployed POS
devices would require significant capital
expenditures and/or be
disruptive to our
customer base. Failure
to comply with
the payment schemes’
rules may result
in significant
fines and/or a loss of license to participate in the scheme(s).
We provide card acquiring services
to our customers
by partnering with
Nedbank Limited and
ABSA Bank Limited,
and payment
processing services
in partnership
with the
largest banks
in South
Africa. If
these agreements
were to
be terminated,
Adumo would
not be able to operate
its payment services unless it
were able to obtain
alternative card acquiring or
payment processing agreements
with other partners
or obtain a
direct designation license
with the schemes
and regulatory bodies.
In addition, if
we were to
lose our
Payment Association of South Africa (“PASA
”) registrations or fail to have them renewed, it would be
unable to operate its payment
services.
22
Compliance with the requirements under these various regulatory regimes may
cause us to incur significant additional costs and
failure to
comply with
such requirements
could result
in the
shutdown of
the non-complying
facility,
the imposition
of liens,
fines
and/or civil or criminal liability.
Proposed regulatory changes to the national payments system are
expected to have a substantial impact
on the South African payments industry. It may change the manner
in which we conduct business and likely
lead to increased operating
costs for our business
as we work
to ensure compliance with
the new legislative
and regulatory framework, which may have a material adverse effect on our business.
On March
3, 2025,
the South
African Reserve
Bank (“SARB”)
published
certain draft
regulatory documents
for commentary
that
are
expected
to have
a substantial
impact
on how
we conduct
our
business namely:
(i)
a draft
directive
entitled
“Directive
in
respect
of specific
payment
activities within
the
national
payment
system”
(the “Directive”);
(ii) a
draft
exemption
notice
entitled
“Designation by the
Prudential Authority of
specific activities conducted
in the national
payment system which
shall be deemed
not
to constitute
‘the business
of a
bank’ under
paragraph (cc)
in section
1(1) of
the Banks
Act, 1990”
(the “Exemption
Notice”); and
(iii) the National
Payment System
Bill (“NPS
Bill”), which
seeks to
replace the
existing National
Payment System
Act, 1998.
The
proposed regulations
were made
available for
comment, and
we submitted
detailed comments
to our
industry body,
Association of
South African Payment Providers, on the proposed regulations.
The key objectives of the proposed regulations are to
clarify the mandate and objectives of the
SARB with respect to the national
payment
system
(“NPS”);
and
establish
a
robust
regulatory,
oversight,
and
supervisory
framework
for
the
NPS.
The
proposed
regulations also aim
to promote financial
inclusion, competition, the
prevention of financial
crime, and the
fair treatment and
protection
of
customers,
while introducing
an activity-based
licensing and
authorization
regime. In
this regard,
the Directive
defines
thirteen
“payment
activities”
and
provides
that
a
person,
which
can
be
a
bank
or
a
non-bank,
providing
a
“payment
activity"
must
obtain
authorisation from the
SARB to undertake
such activity.
Under the Exemption
Notice, certain payment
activities are exempted
from
the definition of ‘the business of a bank’. Prior to the
Exemption Notice, these activities could only be undertaken by a bank. Pursuant
to the
Exemption Notice,
these activities
can be
undertaken by
non-banks, subject
to certain
conditions. Certain
of our
businesses,
including EasyPay Everywhere,
Adumo and Kazang Pay,
currently undertake activities which
would qualify as “payment
activities”
under the
Directive and
the NPS Bill.
Under the
current regulatory
framework, these
activities are
undertaken in
partnership with
a
sponsoring bank and the sponsoring bank is
subject to regulation by the SARB.
In other words, the business undertaking the “payment
activity” is not subject to direct regulation with respect to such payment activities.
It is
uncertain if
and when
the proposed
regulations will
enter into
effect and
whether a
non-bank such
as the
relevant Lesaka
subsidiary
may
elect
whether
to
conduct
an exempted
payment
activity
by
partnering
with
a
bank
to
do so,
or on
its own,
if
it
is
authorised by the
SARB -
i.e. whether both
options will
be available
to a
non-bank. Should
our businesses
be subject to
direct regulation
under this new regime (i.e., if our current sponsorship model
is no longer available), we expect that we
will incur significant operating
costs to comply
with the new
requirements, and
to obtain
authorization with
respect thereto. Furthermore,
while some requirements
may already exist under
other current regulatory frameworks
for certain of our
businesses, we will likely
need to invest in additional
resources, systems and processes to
satisfy the regulatory requirements contemplated in the
proposed regulations, which may also lead
to increased operational costs, which may have a material adverse effect
on our business.
We
may
be
subject
to
regulations
regarding
privacy,
data
use
and/or
security,
which
could
adversely
affect our business.
We are
subject to regulations in
a number of the countries
in which we operate
relating to the processing
(which includes,
inter
alia
, the collection, use, retention, security and transfer) of
personal information about the people (whether natural or juristic)
who use
our products
and services.
The interpretation
and application
of user
data protection
laws are
in a
state of
flux. These
laws may
be
interpreted
and
applied
inconsistently
from
country
to
country
and
our
current
data
protection
policies
and
practices
may
not
be
consistent with those interpretations and applications. Complying
with these varying requirements could cause us to incur
substantial
costs or
require us
to change
our business
practices in
a manner
adverse to
our business.
Any failure,
or perceived
failure, by
us to
comply with any regulatory requirements or international
privacy or consumer protection-related laws and regulations could
result in
proceedings
or
actions
against
us
by
governmental
entities
or
others,
subject
us
to
significant
penalties
and
negative
publicity.
In
addition, as
noted above,
we are
subject to
the possibility
of security
breaches, which
themselves may
result in
a violation
of these
laws.
Amendments to
the NCA
were signed into
law in
South Africa
in August 2019.
Compliance with
these
amendments may adversely impact our micro-lending operations in South Africa.
In August 2019, the National Credit Amendment Bill, or debt-relief bill, was signed into law in South Africa.
The effective date
of the debt-relief
bill has not
yet been announced
and has been
significantly delayed.
We
believe that the
debt-relief bill will
restrict
the ability of financial services providers to provide lending
products to certain low-income earners and will increase the
cost of credit
to
these
consumers.
As a
result,
compliance
with
the debt
-relief
bill
may
adversely
impact
our
micro-lending
operations
in
South
Africa. Furthermore, we expect that it will take us, and other credit providers, some time to fully understand, interpret and
implement
this new legislation
in our lending processes
and practices. Non-compliance
with the provisions of
this new legislation may
result in
financial loss and penalties, reputational loss or other administrative punishment.
23
Risks Relating to our Common Stock
Our stock price has been and may continue to be volatile.
Our stock price has periodically experienced significant volatility. During the 2025 fiscal
year, our stock price ranged from a low
of $3.39 to a high of $5.60. We
expect that the trading price of our common stock may
continue to be volatile as a result of a number
of factors, including, but not limited to the following:
•
Any adverse developments in litigation or regulatory actions in which we are
involved;
•
Fluctuations in currency exchange rates, particularly the U.S. dollar/ZAR exchange
rate;
•
Announcement
of
additional
BEE
transactions,
especially
one
involving
the
issuance
or
potential
issuance
of
equity
securities or dilution or sale of our existing business in South Africa;
•
Quarterly variations in our operating results;
•
Significant fair value adjustments or impairment in respect of investments
or intangible assets;
•
Announcements of acquisitions or disposals;
•
The timing of, or delays in the commencement, implementation or completion
of major projects;
•
Large purchases or sales of our common stock; and
•
General conditions in the markets in which we operate.
Additionally,
shares of
our common
stock can
be expected
to be
subject to
volatility resulting
from purely
market forces
over
which we have no control.
The put
right we granted
to the IFC
Investors on the
occurrence of certain
triggering events may
have
adverse impacts on us.
In May 2016, we issued an aggregate of 9,984,311 shares of our common stock to the IFC Investors. Certain IFC Investors were
also investors in Adumo and on October 1, 2024, we issued an aggregate of 1,989,162 additional shares of our common stock to these
IFC Investors pursuant to the
Adumo transaction agreement. As of
June 30, 2025, the
IFC Investors held 9,356,028
shares. We granted
the IFC Investors certain rights, including the
right to require us to
repurchase any share held by the
IFC Investors pursuant to the May
2016 and
October 2024
transactions upon
the occurrence
of specified
triggering events,
which we
refer to
as a
“put right.”
The put
price per
share will
be the
higher of
the price
per share
paid to
us by
the IFC
Investors and
the volume-weighted
average price
per
share prevailing for the 60 trading days preceding the triggering event, except
that with respect to a put right triggered by rejection of
a bona
fide offer,
the put
price per
share will
be the
highest price
offered
by the
offeror.
If a
put triggering
event occurs,
it could
adversely impact
our liquidity
and capital
resources. In
addition, the
existence of
the put
right could
also affect
whether or
on what
terms a
third
party
might
in the
future
offer
to purchase
our
company.
Our response
to any
such offer
could also
be complicated,
delayed or otherwise influenced
by the existence of the put right.
Approximately
31%
of
our
outstanding
common
stock
is
owned by
two shareholders.
The
interests of
these shareholders may conflict with those of our other shareholders.
There is a concentration
of ownership of our
outstanding common stock because
approximately 31% of our
outstanding common stock
is owned by two shareholders. Based
on their most recent SEC filings
disclosing ownership of our shares, Value Capital Partners (Pty)
Ltd, or VCP, and IFC Investors, beneficially own approximately 19% and 12% of our outstanding common stock as of June 30, 2025,
respectively.
The interests of
VCP and the
IFC Investors may
be different
from or conflict
with the interests
of our other
shareholders. As a
result of
the significant
combined ownership
by VCP
and the
IFC Investors,
they may
be able,
if they
act together,
to significantly
influence the
voting outcome
of all
matters requiring
shareholder approval.
This concentration
of ownership
may have
the effect
of
delaying or preventing
a change of control of
our company,
thus depriving shareholders
of a premium for
their shares, or facilitating
a change of control that other shareholders may oppose.
We may seek to raise
additional financing by
issuing new securities
with terms or
rights superior to
those
of shares of our common stock, which could adversely affect the market price of such shares.
We
may require
additional financing
to fund future
operations, including
expansion in
current and new
markets, programming
development and acquisition,
capital costs and
the costs of any
necessary implementation of
technological innovations or
alternative
technologies, or to fund acquisitions. We may also wish to raise additional equity funding to
reduce the amount of debt funding on our
balance sheet. Because of the exposure to market risks associated
with economies in emerging markets, we may not
be able to obtain
financing on favorable terms or at all.
If we raise additional funds by
issuing equity securities, the percentage ownership of our
current
shareholders will be reduced, and the holders of the new equity securities may have rights superior to those of the holders of shares of
common stock,
which could
adversely affect
the market
price and
voting power
of shares
of common
stock. If
we raise
additional
funds by issuing debt securities, the holders of these debt securities would similarly have some rights senior
to those of the holders of
shares of common stock, and the terms of these debt securities could impose restrictions on operations and
create a significant interest
expense for us.
24
Issuances
of significant
amounts of
stock in
the future
could potentially
dilute
your equity
ownership
and adversely affect the price of our common stock.
We
believe that
it is necessary
to maintain
a sufficient
number of
available authorized
shares of our
common stock
in order
to
provide
us
with
the flexibility
to
issue shares
for
business
purposes
that
may
arise
from time
to
time.
For example,
we
could
sell
additional shares to raise
capital to fund our
operations, to reduce debt
or to acquire other
businesses, issue shares in
a BEE transaction,
issue additional shares under our stock incentive plan or declare a stock dividend. Our board may authorize
the issuance of additional
shares of common stock without notice to, or further
action by, our shareholders, unless shareholder approval is required by law or the
rules of the NASDAQ Stock
Market. The issuance of additional
shares could dilute the equity
ownership of our current shareholders
and any such additional shares would likely be freely tradable, which could
adversely affect the trading price of our common
stock.
We
have
identified
material
weaknesses
in
our
internal
control
over financial
reporting
which, if
not
timely
remediated,
may
adversely
affect
the
accuracy
and
reliability
of
our
financial
statements,
and
our
reputation, business and stock price, as well as lead to a loss of investor confidence in us.
As described
under Item
9A—“Controls and
Procedures.”, we
concluded that
our disclosure
controls and
procedures were
not
effective
as of
June 30,
2025 and
that we
had, as
of such
date, material
weaknesses in
our internal
control over
financial reporting
related to:
●
Our
Consumer
lending
process,
specifically
insufficient
risk
assessment
and
monitoring
activities
relating
to
changes
in
systems
and
processes,
insufficient
controls
over
internal
information
and
information
from
service
organizations,
and
insufficient
design
and
implementation
of
information
technology
general
controls
(“ITGCs”),
controls
over
service
organizations and process level controls,
resulting in ineffective process level
controls, including a lack of validation
of the
completeness and accuracy of information used within the process;
●
Our payroll process, specifically
insufficient risk assessment
and monitoring activities relating
to changes over the
transfer
of
ownership
to
the
centralized
payroll
processes,
insufficient
controls
over
information
from
service
organizations,
and
insufficient design and implementation of ITGCs, controls over service organizations and process level controls resulting in
ineffective process level controls including a lack of validation of
the completeness and accuracy of information used within
this process;
●
Our
annual
goodwill
impairment
process,
specifically
related
to
insufficient
risk
assessment
and
ineffective
design
and
implementation of controls resulting in ineffective process level
controls;
●
Our business
combination process,
specifically insufficient
risk assessment
and ineffective
design and
implementation of
controls
over the
purchase price
allocation of
the Adumo
and Recharger
acquisitions including
insufficient
controls over
information resulting in ineffective process level controls including a lack of validation of the completeness and accuracy
of
information used;
●
Our
revenue
recognition
process
relating
to
prepaid
airtime
sold
and
processing
fees
relating
to
certain
agreements,
specifically insufficient risk assessment and ineffective design and implementation of
controls related to our judgement over
revenue recognized either as principal versus as agent resulting in ineffective
process level controls.;
●
Our journal entry process, specifically relating to insufficient risk assessment, and ineffective design and implementation of
controls including
insufficient controls
over information
resulting in
ineffective process
level controls
including a
lack of
validation of the completeness
of the journal entry
population and a lack of
validation of the completeness
and accuracy of
information used within the process; and
●
An insufficient number of experienced and trained resources to execute
on their internal control responsibilities resulting in
ineffective
design, implementation
and operating
effectiveness of
process level
controls for
processes in
the scope
of our
internal control over financial reporting evaluation.
A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting such that there
is
a
reasonable
possibility
that
a
material
misstatement
of
our
annual
or
interim
consolidated
financial
statements
would
not
be
prevented or detected on a timely basis. The material weaknesses identified in Item 9A—“Controls and Procedures.”, did not result in
any
adjustments or
restatements of
our audited
and unaudited
consolidated
financial statements
or disclosures
for any
prior period
previously reported by us.
We
intend to remediate
these material weaknesses.
While we believe
the steps we
take to remediate
these material weaknesses
will improve
the effectiveness
of our
internal
control over
financial
reporting
and will
remediate the
identified deficiencies,
if our
remediation
efforts
are
insufficient
to
address the
material
weakness
or
we identify
additional
material
weaknesses in
our
internal
control over financial reporting in the future, our ability
to analyze, record and report financial information
accurately, to prepare
our
financial statements within
the time periods
specified by the rules
and forms of the
SEC and to otherwise
comply with our
reporting
obligations
under
the federal
securities
laws may
be
adversely
affected.
The occurrence
of,
or failure
to
remediate,
these material
weaknesses and any future material weaknesses in our internal control over financial reporting may adversely affect
the accuracy and
reliability of our financial
statements and have other
consequences that could
materially and adversely affect
our business, including
an
adverse
impact
on
the
market
price
of
our
common
stock,
potential
actions
or
investigations
by
the
SEC
or
other
regulatory
authorities, shareholder lawsuits, a loss of investor confidence and
damage to our reputation.
25
Failure to maintain effective internal control over financial
reporting in accordance with Section 404
of
the Sarbanes-Oxley Act, especially
over companies that we may
acquire, could have a material
adverse effect
on our business and stock price.
Under
Section
404
of
Sarbanes,
we
are
required
to
furnish
a
management
certification
and
auditor
attestation
regarding
the
effectiveness of our
internal control over
financial reporting. We
are required to
report, among other things,
control deficiencies that
constitute
a
“material
weakness”
or
changes
in internal
control
that materially
affect,
or are
reasonably
likely to
materially
affect,
internal control over financial reporting.
A “material
weakness” is
a deficiency,
or a
combination of
deficiencies, in
internal control
over financial
reporting such
that
there is a reasonable possibility that
a material misstatement of annual or
interim financial statements will not be
prevented
or detected
on a timely basis.
The
requirement
to
evaluate
and
report
on
our
internal
controls
also
applies
to
companies
that
we
acquire.
Some
of
these
companies,
such as
Adumo
and
Recharger,
may
not be
required
to comply
with
Sarbanes prior
to the
time we
acquire
them.
The
integration of these acquired companies
into our internal control over financial reporting
could require significant time and resources
from our management
and other personnel and
may increase our compliance
costs. If we fail
to successfully integrate
the operations
of these acquired companies into our internal control over financial reporting, our internal control over financial reporting may not be
effective.
While
we
continue
to
dedicate
resources
and
management
time
to
ensuring
that
we
have
effective
controls
over
financial
reporting, failure to
achieve and maintain
an effective internal
control environment could
have a material
adverse effect on
the market’s
perception of our business and our stock price.
The
restatement
of
our
prior
quarterly
financial
statements
may
affect
shareholder
and
investor
confidence in us or harm our reputation, and may subject us to
additional risks and uncertainties, including
increased
costs
and
the
increased
possibility
of
legal
proceedings
and
regulatory
inquiries,
sanctions
or
investigations.
We
identified
material
misstatements
in
the
original
filings
of
our
Quarterly
Report
on
Form
10-Q
for
the
quarters
ended
September 30, 2024, December 31, 2024 and March 31, 2025 (“Original Filings”) and withdrew reliance on these Original
Filings on
September 10,
2025.
We
filed amended
quarterly reports
on September
29, 2025
which include
restatement(s),
refer to
the section
titled “Restatement” in
Note 1 to
the unaudited condensed
consolidated financial statements
in each of
the amended filings
on Form
10-Q/A for the quarters ended September 30, 2024, December 31, 2024 and March 31, 2025, for additional information regarding the
restatement(s).
Management
also
identified
material
weaknesses
in
our
internal
control
over
financial
reporting
specific
to
the
evaluation of information that was known or knowable at the time of the transaction or event included
in the Original Filings, refer to
Item 9A—“Controls and Procedures.”
As a result of the restatement
described above, we have
incurred, and may continue to
incur, unanticipated costs
for accounting
and
legal
fees
in
connection
with,
or
related
to,
such
restatement.
In
addition,
such
restatement
could
subject
us
to
a
number
of
additional risks and uncertainties, including the increased possibility of legal proceedings and inquiries, sanctions or investigations by
the SEC
or other
regulatory authorities.
Any of
the foregoing
may adversely
affect
our reputation,
the accuracy
and timing
of our
financial
reporting,
or
our
business,
results
of
operations,
liquidity
and
financial
condition,
or
cause
shareholders,
investors
and
customers to lose confidence in the accuracy and completeness
of our financial reports or cause the market price of
our common stock
to decline.
You
may experience some difficulties in effecting
service of legal process, enforcing U.S and/or foreign
judgments
or
bringing
original
actions
based
upon
U.S.
laws,
including
federal
securities
laws
or
other
foreign laws, against us or certain of our directors and officers and experts.
While Lesaka is incorporated
in the state of
Florida, United States, substantially
all of the company’s
assets are located outside
the United
States. For
this reason,
the majority
of Lesaka’s
directors and
all its
officers reside
outside of
the United
States and
the
majority of our experts, including our independent registered public accountants,
are based in South Africa.
As a
result, even
though you
could effect
service of
legal process
upon Lesaka,
as a
Florida corporation,
in the
United States,
you may not be able
to collect any judgment obtained
against Lesaka in the United
States, including any judgment based
on the civil
liability provisions of U.S. federal securities laws, because substantially all of
our assets are located outside the United States.
26
Any legal processes initiating action in the United States against Lesaka's
directors, officers, and experts who are located outside
of the United States, will need to be served on them in that country, in accordance with the procedures prescribed by the relevant U.S.
court. South
Africa is
not a
party to
any treaties
regarding the
enforcement of
foreign commercial
judgments. In
order to
be able
to
enforce a foreign judgment,
it is required for the
South African courts to first
"recognize" the U.S. judgment
– in the absence of
this,
the
foreign
judgment
has no
automatic
extra
territorial
effect.
The foreign
judgment
constitutes a
"cause
of
action" which
may
be
recognized and enforced by South African courts. In order to
achieve this, legal proceedings must be commenced in the
South African
courts.
South Africa
is a party
to the New
York
Convention on
the Recognition
and Enforcement
of Foreign
Arbitral Awards,
and its
International
Arbitration
Act
15
of
2017
provides
that
foreign
arbitral
awards
must
be
recognised
and
enforced
in
South
Africa.
However, application
must still be made
to the South African
High Court in order
for the award to
be recognised and
enforceable in
South Africa.
Additional,
practical,
considerations
relating
to
the enforcement
of foreign
judgments
and arbitration
awards in
South
Africa
include the following:
●
If a foreign judgment is enforced by a South African court,
the approval of the SARB (or an Authorised Dealer of
SARB) is
required
(i) before
a
defendant
resident
in
South
Africa
may
pay
money
to
a
non-resident
plaintiff;
and
(ii) to
settle
the
judgement in a currency other than South African Rand; and
●
A plaintiff who is not resident
in South Africa may be required
to provide security for costs
when initiating court proceedings
in South Africa (including for the enforcement of foreign judgments and
awards).
27
ITEM 1B.
UNRESOLVED
STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
We operate
in the Southern African
Fintech industry,
which is subject to various
cybersecurity risks that could
adversely affect
our business, financial condition,
and results of
operations including, but not
limited to, the
following: intellectual property theft,
fraud,
extortion, harm to employees or customers, violation of privacy laws and other litigation and legal risk and reputational risk.
We have
implemented
a
risk-based
approach
to
identify
and
assess the
cybersecurity
threats that
could
affect
our
business and
information
systems. Our cybersecurity program is aligned with
industry standards and best practices, specifically the
Payment Card Industry Data
Security Standard
(“PCI DSS”),
the National
Institute of
Standards and
Technology
(“NIST”) Cybersecurity
Framework and
more
recently
the SARB
Directive
No. 01
of 2024,
focusing
on cybersecurity
and cyber-resilience
within the
National
Payment System
(“NPS”).
We periodically
conduct a
third
-party Security Risk Assessment
(“SRA”) to
identify
the potential impact and
likelihood of
various
cyber
scenarios
and
to
determine
the
appropriate
mitigation
strategies
and
controls.
We
also
use
this
SRA
to
inform
our
cybersecurity roadmap and strategies to ensure a robust
IT security environment is implemented at
our company. We use various tools
and
methodologies
to
manage
cybersecurity
risk—including,
but
not
limited
to,
the
following:
the
use
of
a
Managed
Endpoint
Detection and Response
(“EDR”) software and
Managed Network
Detection and Response
(“MNDR”) for
our Local Area
Network
(“LAN”)
monitoring
with
internal
and
external
Security
Operations
Center
(“SOC”)
real-time
monitoring,
Data
Loss
Prevention
(“DLP”) enabled
across email and
web channels as
well as mandatory
Multi-factor Authentication
(“MFA”)
in our IT
environment.
In addition, we do periodic backups and regularly test the process to recover any lost or corrupted data. We
also monitor and evaluate
our
cybersecurity
posture
and
performance
on
an
ongoing
basis
through
regular
vulnerability
scans,
penetration
tests,
and
threat
intelligence
feeds
provided
by
our
respective
security
vendors.
We
require
third-party
service
providers
with
access
to
personal,
confidential or proprietary
information to implement
and maintain comprehensive
cybersecurity practices consistent
with applicable
legal standards and industry best practices.
We
recognize
the importance
of cyber
security
awareness and
skills development
which is
regularly
provided
to the
general
workforce, security
teams, developers
and senior
management which
includes regular
crisis simulations to
prepare respective
teams
for crisis scenarios. This also includes regular phishing simulations and campaigns.
Our business
depends on
the availability,
reliability,
and security
of our
information systems,
networks, data,
and intellectual
property. Any disruption, compromise, or breach of our systems
or data due to a
cybersecurity threat or incident could adversely
affect
our operations, customer service, product development, and competitive position. This could also result in a breach of our contractual
obligations or
legal duties
to protect
the privacy
and confidentiality
of our
stakeholders. Such
a breach
could expose
us to business
interruption, lost revenue, ransom
payments, remediation costs, liabilities
to affected parties, cybersecurity protection
costs, lost assets,
litigation,
regulatory
scrutiny and
actions,
reputational harm,
customer dissatisfaction,
harm
to our
vendor
relationships,
or loss
of
market share.
Our Board of Directors exercises its oversight role through the Audit Committee
,
which provides the Board with regular reports
and findings
from our
Group
Chief Information Security Officer
(“
CISO
”)
, a
qualified cybersecurity professional
with over 25 years
of experience and a Master’s in Information Security from
Royal Holloway, University of London
.
As of
the date
of this
Annual Report,
we
do
not
believe
any risks
from
cybersecurity
threats have
materially
affected
or are
reasonably
likely to
materially affect
us, including
our results
of operations
or financial
condition.
This Item
1C should
be read
in
conjunction with the other sections of this Annual Report, particularly Item 1A “Risk Factors,” for a comprehensive understanding of
the risks and uncertainties related to our business and operations.
28
ITEM 2.
PROPERTIES
We lease our corporate
headquarters facility which consists of approximately 81,000 square feet in Johannesburg,
South Africa.
We
also lease
properties throughout
South Africa,
including 207
financial services
branches, 14
financial service
express stores,
17
satellite branches
and 14
sites to
support our
integrated POS
software and
hardware to
the hospitality
industry operations.
We
also
lease additional office
space in Johannesburg, Cape
Town and
Durban, South Africa; Gaborone,
Botswana; Windhoek Namibia;
and
Nairobi, Kenya.
These leases
expire at
various dates
through 2030,
assuming the
exercise of
options to
extend. We
believe that
we
have adequate facilities for our current business operations.
ITEM 3.
LEGAL PROCEEDINGS
Litigation related to CPS
Lesaka SA is
a party to
proceedings in the Constitutional
Court of South Africa
involving its subsidiary, Cash Paymaster
Services
Proprietary Limited
(“CPS”), which is
currently in
liquidation. The objective
of these proceedings
is to procure
an order for
CPS to
pay to SASSA the
profit generated by CPS
pursuant to an agreement
concluded between SASSA and
CPS, following the award
of a
tender to CPS. This arose as a consequence of prior court proceedings which concluded that the tender should not have been awarded
to CPS (for
technical reasons not related
to any conduct
by CPS). Lesaka
SA has been
included in these proceedings
in order to
provide
information relevant to determining the profit so made by CPS.
A hearing was
held in the Constitutional
Court on May
27, 2025 and
we await the ruling
of the Constitutional
Court. While no
formal steps have been taken by CPS or any other party to these proceedings to claim that Lesaka SA should be liable to
SASSA or to
CPS as a
consequence of
the proceedings currently
before the Constitutional
Court, it is
difficult to
anticipate what the
ruling of the
Constitutional Court will be.
General
From time to time, we
are involved in
legal proceedings and litigation
arising in the ordinary
course of business. As of
the date
of this Annual Report on Form 10-K, we are not
a party to any litigation or legal proceeding
or subject to any claim that, in the
current
opinion
of
management,
could
reasonably
be
expected
to
have
a
material
adverse
effect
on
our
financial
position
or
results
of
operations. However, due to the risks and uncertainties inherent in legal proceedings, actual results could differ from current expected
results.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
29
PART
II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Market information
Our common stock is listed on The NASDAQ Global Select Market, or Nasdaq, in the United States under
the symbol “LSAK”
and on the JSE in South Africa under the symbol “LSK.” The Nasdaq is
our principal market for the trading of our common stock and
we have a secondary listing on the JSE.
Our transfer
agent in
the United
States is
Computershare Shareowner
Services LLC,
480 Washington
Blvd, Jersey
City,
New
Jersey,
07310. According
to the
records of
our transfer
agent, as
of September
25, 2025, there
were 6
shareholders of
record of
our
common stock.
We
believe that
a substantially
greater number
of beneficial
owners of
our common
stock hold
their shares
though
banks, brokers,
and other financial
institutions (i.e. “street
name”). Our transfer
agent in South
Africa is JSE
Investor Services (Pty)
Ltd, One Exchange Square, 2 Gwen Lane, Sandown, Sandton, 2196, South
Africa.
Dividends
We
have not
paid any
dividends on
shares of our
common stock
during our
last two
fiscal years
and presently
intend to
retain
future earnings to finance the expansion of
the business. We do not anticipate paying any cash dividends in
the foreseeable future. The
future dividend policy will depend on our earnings, capital requirements, debt commitments, expansion plans, financial condition and
other relevant factors.
Issuer purchases of equity securities
On September 2, 2025, our board of directors approved a share repurchase authorization to repurchase up to an aggregate of $15
million of our
common stock. The
authorization has no
expiration date. This
share purchase authorization
replaces our $100
million
share repurchase authorization.
The table
below presents
information relating
to purchases
of shares
of our
common stock
during the
fourth quarter
of fiscal
2025:
Period
(a)
Total
number of
shares purchased
(b)
Average price
paid per share ($)
(c)
Total
number of shares
purchased as part of
publicly announced
plans or programs
(d)
Maximum dollar value
of shares that may yet
be purchased under the
plans or programs ($)
April 2025
0
-
-
100,000,000
May 2025
(1)
230,442
4.49
-
100,000,000
June 2025
(1)
2,853
4.19
-
100,000,000
Total
233,295
-
(1) Relates to the delivery of shares of our common
stock to us by certain of our employees to settle their income
tax liabilities.
These shares do not reduce the repurchase authority under our previous $100
million share repurchase program.
30
Share performance graph
The chart
below compares
the five-year
cumulative return,
assuming the
reinvestment of
dividends, where
applicable, on
our
common stock with that of the S&P 500 Index and the NASDAQ Industrial Index. This graph assumes
$100 was invested on June 30,
2020, in each of our common stock, the companies in the S&P 500 Index, and the companies
in the NASDAQ Industrial Index.
ITEM 6.
[RESERVED]
31
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS
The following
discussion and
analysis should
be read
in conjunction
with Item
8—“Financial Statements
and Supplementary
Data.” In
addition
to historical
consolidated
financial
information,
the following
discussion
and
analysis contains
forward-looking
statements that involve risks, uncertainties and assumptions. See Item 1A—
“Risk Factors” and “Forward Looking Statements.”
U.S. securities laws
require that when
we publish any
non-GAAP measures, we
disclose the reason
for using these
non-GAAP
measures
and
provide
reconciliations
to
the
most
directly
comparable
GAAP
measures.
We
discuss
why
we
consider
it
useful
to
present these non-GAAP
measures and the
material risks and
limitations of these
measures, as well
as a reconciliation
of these non-
GAAP measures
to the
most directly
comparable GAAP
financial measure
below at
“—Results of Operations
—Use of Non-GAAP
Measures” below.
Overview
We
offer
an
integrated
and
holistic
multiproduct
platform
that
provides
transactional
accounts,
lending,
insurance,
merchant
acquiring,
cash
management,
software
and
ADP.
Targeted
solutions
and
integrations
facilitate
payments
between
consumers
and
businesses. By providing a full-service fintech platform in our connected ecosystem, we facilitate the digitization of commerce
in our
markets.
Sources of Revenue
We generate revenue
through a diversified portfolio of financial, payment, software, and technology solutions, structured across
three reportable segments: Merchant, Consumer,
and Enterprise.
Merchant
Revenues in Merchant are derived from a combination of transaction-based
fees and an ad valorem pricing model.
●
Merchant acquiring:
We earn
revenue from merchant acquiring
on an ad valorem basis,
based on a percentage
of the total
transaction value processed through our network. We
also earn revenue from transaction fees charged to merchants.
●
Software
(technology
products):
Revenue
is
generated
through
selling
hardware
(such
as
POS
devices)
and
providing
licensing software and technology services to merchants.
●
Cash:
We
generally
earn
revenue
on
an
ad
valorem
basis,
based
on
a
percentage
of
the total
cash
settlements
processed
through our cash vaulting network. We
also earn transaction fees when customers utilize our ATM
network.
●
Lending:
We generate interest revenue from qualifying
merchant customers who
are able to
access short-term business loans.
This revenue stream includes interest charged on outstanding
loan balances.
●
ADP:
We also offer merchant customers access to platforms through which we (a) generate revenue from the sale of prepaid
airtime and
generate fees
from distribution
of ADP,
including prepaid
solutions (airtime,
data, electricity
and gaming),
bill
payments, International
Money Transfers
(“IMT”) and
supplier enabled payments.
These fees are
largely charged
on an ad
valorem basis.
Consumer
Revenues in Consumer are generated from transactional banking fees, interest income, insurance premiums and card transaction
processing fees.
●
Transactional
Fees:
We
earn
revenue
by
charging
a monthly
fee
and
charge
fees
on an
ad valorem
basis for
goods
and
services purchased.
Transactional
fees associated
with our
consumer accounts
include monthly
account service
fees, ATM
withdrawal fees, and other fees based on usage.
●
Lending:
Revenue
from
our
lending
products
is
derived
from
a
combination
of
origination
fees,
monthly
interest
on
outstanding loan balances and monthly service fees.
●
Insurance:
Revenue from our insurance offerings is earned monthly premiums
paid by the policyholders.
Enterprise
Like Merchant, Enterprise generates revenue from a combination of transaction-based
fees and an ad valorem pricing model.
●
ADP:
Revenue from our
ADP offering
for Enterprise clients
is primarily based
on a fixed
fee per transaction.
A secondary
pricing model is on an ad valorem basis, depending on the specific digital product
being sold.
●
Utilities:
Our utilities vertical generates revenue predominantly through an annuity-based model, with fees charged on an ad
valorem basis
based on
the total
value of
electricity vended
through our
platform. Ad-hoc
hardware sales
of utility
meters
also an additional contribution to revenue.
●
Payments:
Our payment
solutions enable
payment acceptance
for us
and external
enterprises, on
which we
earn a
fee per
transaction processed.
32
Developments during Fiscal 2025
This item
generally discusses
our 2025
results compared
to our 2024
results. Discussions
of our
2024 results
compared to
our
2023 results can be found within our Annual Report on Form 10-K
for the year ended June 30, 2024.
Merchant Division
Performance in Merchant has been driven by:
Merchant acquiring
Merchant acquiring includes 84,541 devices deployed under the Adumo,
Card Connect and Kazang brands.
2025
2024
2023
2025 vs
2024
Number of devices in deployment
84,541
51,880
44,935
63%
Total Throughput
for the year (ZAR billions)
35.5
15.6
12.0
127%
●
2025 is inclusive of approximately 29,000 devices deployed by Adumo with the Adumo transaction closing on October
1, 2024, the impact of which is not included in the prior period comparatives.
●
Throughput increased
to ZAR
35.5 billion
for the
year,
driven mainly
by the
inclusion of
Adumo for
nine months
of
fiscal 2025 and 15% year-on-year growth attributable
to Kazang Pay.
Software
Our software solutions are offered through GAAP.
2025
Number of GAAP sites
9,649
Approximate ARPU per site (ZAR)
(1)
3,144
(1) ARPU
is calculated
on a revenue
per site basis,
as monthly
figure based
on a three
-month rolling
average for the
quarter
ending June 30, 2025.
●
GAAP was acquired on October 1, 2024.
●
Monthly
ARPU
per
site
combines
hardware
on
a
rental
basis
and
software
subscription
revenue,
but
excludes
the
merchant acquiring revenue when our software customers utilize our merchant
acquiring payment solutions.
Cash
2025
2024
2023
2025 vs
2024
Number of devices in deployment
4,572
4,448
4,393
3%
Cash settlements (throughput) for the year (ZAR billions)
114.8
112.6
110.1
2%
Our cash business continues to reflect a tale of two distinct markets:
●
Small-to-Medium
merchant
sector: Ongoing
decline in
cash usage
with flat
net growth
in vault
activity in
a more
mature
digital economy where cash is increasingly displaced by digital alternatives.
●
Micro-merchant market: High cash prevalence and increasing digital adoption is supporting strong growth in the numbers of
devices and cash settlements. Throughput in
our vaults placed in the
micro-merchant sector increased more than 90% to
ZAR
13.8 billion
in fiscal
2025, representing
more than
10% of
total vault
throughput for
the year
compared to
over 5%
a year
ago. This is fast becoming a meaningful contributor to our cash offering.
33
Lending
Our lending
solutions are
offered to
merchants through
Capital Connect and
Adumo Capital.
Adumo Capital
is a joint
venture
with Retail Capital, a division of Tyme
Bank, with a 50:50 profit share.
2025
2024
2023
2025 vs
2024
Total lending origination
volume (ZAR millions)
(1)
917
716
769
28%
Total net loan book
outstanding at period end (ZAR millions)
(1)
479
284
294
69%
(1) Amounts reflected above includes 100% of
Adumo Capital’s
credit disbursed and net loan book.
●
2025 is inclusive
of lending origination volume
(for nine months)
and the net loan
book under the
Adumo brand, with
the Adumo transaction closing on October
1, 2024, the impact of
which is not included in
the prior period comparatives.
●
Capital Connect comprises more than 70%
of our merchant lending activity. After a
challenging two-year period shaped
by
macroeconomic
headwinds,
Capital
Connect
lending
origination
volume
rebounded
during
fiscal
2025.
Capital
Connect disbursed ZAR 783 million
in 2025, compared with ZAR 716
million last year and ZAR 769 million
in 2023.
This recovery has been driven
by targeted strategic interventions, including dedicated sales
teams, improved proprietary
visibility
into
merchants’
business
activity,
increased
emphasis
on
new
client
acquisition
and
renewals
for
repeat
borrowers.
ADP
ADP in our Merchant Division includes prepaid solutions (airtime, data,
electricity and gaming), bill payments, IMT and
supplier enabled payments. IMT and bill payments are included in the supplier
enabled throughput shown below,
with supplier
payments representing the most significant contributor to ADP throughput
in the Merchant Division.
2025
2024
2023
2025 vs
2024
Number of devices in deployment
94,345
87,562
74,955
8%
Total throughput
for the year (ZAR billions)
42.5
33.0
27.6
29%
Prepaid solutions throughput for the year (ZAR billions)
19.1
18.1
14.8
6%
Supplier enabled payments throughput for the year (ZAR
billions)
23.4
14.9
12.8
57%
●
We
had
94,345
devices
deployed
as
of
June
30,
2025,
representing
a
8%
year-on-year
growth.
Core
to
our
device
placement strategy
is the decision
to focus on
quality business
and optimizing
our existing
fleet, which
is reflected
in
healthy throughput growth.
●
Total
throughput
increased
29%
to
ZAR
42.5
billion
year-on-year,
driven
by
a
57%
increase
in
supplier
enabled
payments.
Unification of Merchant under Lesaka brands
Over the
past three
years, we
have
brought together
Kazang and
Connect and
subsequently added
Adumo and
GAAP to
our
Merchant Division. In 2025, we accelerated the integration of our micro-merchant and merchant businesses as we build an integrated,
multi-product platform
serving merchants of
all sizes. The
unification of our
Merchant Division’s
operations and the
realignment of
these
brands
under
a
single
Lesaka
identity
has
commenced.
We
expect
streamlining
efforts
to
reduce
complexity,
eliminate
duplication,
and
unify
our
go-to-market
strategy.
As
a
result
of
these
actions,
we
have
incurred
reorganization
costs,
as
well
as
additional intangible asset amortization charges due
to the shortening of the deemed useful lives of some of our brands.
Consumer Division
Our consumer base includes South African grant beneficiaries and other EasyPay
Payouts cardholders.
●
Our grant beneficiary base
includes both permanent and
non-permanent grant beneficiaries. As
the division has evolved,
both sub-categories of consumers are revenue generating and hence the combined consumer base metrics shown below
are most appropriate to measure the performance of the division financially and operationally. Although historically we
have
shown
these
metrics
separately,
it
is
maintained
that
90%
of
the
active
consumer
base
are
permanent
grant
beneficiaries.
●
Our definition
of an active
consumer is any
EPE consumer that
has made a
voluntary transaction (debit
and/or credit)
within the last
90 days.
Consumers who may
be charged a
monthly banking fee
but have
not made a
voluntary transaction
in the last 90 days would not be considered an active consumer.
●
The definition of an active consumer reflects the revenue generating engagement of our entire consumer base and more
accurately tracks our current and future monetization strategy for
the division.
34
●
We will continue
to show the EasyPay Payouts separately given this follows a different
monetization model.
2025
2024
2023
2025 vs
2024
Transactional accounts
(banking) - EPE
Total active EPE transactional
account base at year end
(millions)
1.9
1.5
1.3
24%
Approximate Net EPE account activations for the year – active
EPE transactional account base (number '000)
348
235
143
48%
Lending - EasyPay Loans
Approximate number of loans originated during the year
(number '000)
1,299
1,061
856
22%
Gross advances in the year (ZAR millions)
2,500
1,686
1,306
48%
Loan book size, before allowances, at year end (ZAR millions)
(1)
996
548
415
82%
Insurance - EasyPay Insurance
Approximate number of insurance policies written in the year
(number '000)
210
170
125
23%
Total active insurance
policies on book as of year end (number
'000)
564
439
335
28%
Gross written premium (ZAR millions)
404
294
229
38%
Average
revenue
per
consumer
per
month,
in
the
quarter,
(active customers) (ZAR)
(2)
85
76
71
11%
EasyPay Payouts
Approximate number of active cardholders (number '000)
212,724
n.a.
n.a.
nm
Approximate load value for the year (ZAR millions)
(3)
457
n.a.
n.a.
nm
(1) Gross loan book, before
provisions.
(2) ARPU is calculated on a revenue
per active consumer basis whereby an
active consumer can be both a permanent and
non-
permanent grant beneficiary with prior
periods adjusted for comparison
purposes. Previously ARPU represented only accounted
for permanent grant beneficiaries. ARPU is a monthly figure based on a 3-month rolling average for the quarter ended June 30,
2025.
(3) Represents
the 9-month
period for
fiscal 2025
given Adumo
integration into
results from
the second
quarter of
fiscal 2025
onwards.
●
Driving customer acquisition, supported by increased focus on
customer service.
o
Net active account growth
(
permanent grant beneficiaries
per SASSA’s
monthly Social Assistance report
for June
30, 2025, on
the SASSA statistical
reports portal)
for the year
was approximately
348,000 accounts,
compared to
approximately 235,000 a year ago (fiscal 2024).
o
Our focus
is on
all revenue
generating consumers
who have
initiated a
transaction within
the last
90-day period.
This
will
include
both
permanent
and
temporary
grant
beneficiaries.
Our
total
active
consumer
base
stood
at
approximately 1.9 million at the end of June 2025, compared to 1.5 million
a year ago.
●
Progress on cross selling.
EasyPay Loans
o
We
originated approximately
1.3 million
loans during
the year,
with our
consumer loan
book, before
allowances
(“gross book”), increasing 82% to ZAR
996 million as of June 30, 2025, compared
to ZAR 548 million as of June
30, 2024.
o
We
have not
amended our
credit scoring
or other
lending criteria,
and the
growth is
reflective of
the demand
for
our tailored
loan product
for this
market, growth
in EPE
bank account
customer base
and improved
cross-selling
capabilities.
o
The loan conversion rate continues to improve following the implementation of several targeted Consumer lending
campaigns and encouraging results from our digital channels.
o
The portfolio loss ratio, calculated as the loans written off over the last 12 months as a percentage of the total gross
loan book at the end
of the quarter,
has remained stable at approximately
6% on an annualized basis,
compared to
a year ago (fourth quarter of fiscal 2024). With
the roll-out of the new lending product, targeting
larger loans for a
longer tenor, we expect a modest and non
-material increase in the portfolio loss ratio.
35
EasyPay Insurance
o
Our insurance product sales
continue to grow
and is a
material contributor to the
improvement in our overall
ARPU.
We
have been able to
improve customer penetration
to approximately 34%
of our active permanent
grant account
base as of June 30, 2025, compared to 33% as of June 30, 2024. Approximately 210,000 new policies were written
in the year, increasing 23% compared to approximately 170,000 a year ago. The total number of active policies has
grown 28% to approximately 564,000 policies at year end, compared to
439,000 policies a year ago (fiscal 2024).
ARPU
o
ARPU for
our active
consumer base
has increased
to approximately
ZAR 85
per month
for the
fourth quarter
of
fiscal 2025
from approximately
ZAR 76
a year
ago (during
the fourth
quarter of
fiscal 2024).
ARPU reflects
the
definition of an active customer and includes permanent and non-permanent grant
beneficiaries.
EasyPay Payouts
o
The number of active
card holders was approximately 213,000
at year end, with
a load value of
approximately ZAR
457 million for 9 months with the Adumo transaction closing on October
1, 2024.
Enterprise Division
ADP includes
prepaid solutions
and bill
payments through
channels such
as retailer
distribution networks
and online
banking
apps.
2025
2024
2025 vs
2024
ADP
Total Throughput
for the year (ZAR billions)
40.7
38.5
6%
Utilities
Total Throughput
for the year (ZAR millions)
(1)
1,329
1,051
26%
Number of Registered Meters (Thousands)
524,711
444,397
18%
(1) The Recharger
transaction closed on
March 3, 2025.
Utility payments throughput
for fiscal 2025
is a 4-month
contribution
(comprising a
1-month contribution
to the
third
quarter and
a full
quarter contribution
to the
fourth quarter).
Utilities throughput
shown combines historical performance pre
-acquisition.
Acquisition of Bank Zero
On June
26, 2025,
we announced
the acquisition
of Bank
Zero, subject
to regulatory
approval. The
transaction marks
another
key
milestone
in
our
journey
to
build
a
vertically
integrated
fintech
platform.
The
combination
of
Bank
Zero's
digital
banking
infrastructure and its operational banking license, together with our fintech and distribution platform, is intended to transform the way
Lesaka is able to conduct business in the future, offering key financial,
strategic and regulatory benefits, including:
(i)
Better end-to-end servicing of Lesaka's customer base through a full
suite of banking services,
(ii)
Unlocking meaningful synergies and new opportunities for
the group,
(iii)
Accelerating product innovation and streamlining operations across Consumer,
Merchant and Enterprise,
(iv)
Enabling a transformative shift in our financial profile, and
(v)
Empowering the combined group to deliver greater value to consumers
and businesses across South Africa.
Upon completion of the proposed transaction, the
selling shareholders of Bank Zero –
which include Michael Jordaan (Chairman
of Bank Zero), Yatin Narsai (CEO of Bank Zero), and other
key members of the Bank Zero
will collectively hold an approximate 12%
stake in Lesaka. Bank Zero sellers will be
subject to regulatory and contractual lockups ranging from between 18 and
36-months post-
completion, depending on the seller.
Subject
to
completion
of
the
transaction,
Michael
Jordaan
is
expected
to
join
our
Board
of
Directors,
while
Yatin
Narsai
is
expected
to
continue
as
CEO
of
Bank
Zero.
The
broader
Bank
Zero
leadership
team
will
remain
in
their
current
roles,
ensuring
continuity and integration.
36
Balance Sheet Optimization
Debt refinance and new banking partner
At the end of February 2025, we completed the ZAR 4.5 billion refinance of our debt facilities, including Investec Bank Limited
(acting
through
its
Investment
Banking
division:
Corporate
Solutions)
(“Investec
Bank”)
as
a
new
banking
partner
alongside
our
incumbent
bank,
FirstRand
Bank
Limited
(acting
through
its
Rand
Merchant
Bank
division)
(“RMB”).
The
benefits
of
the
debt
refinance include:
(i) consolidating most
of our legacy
senior debt facilities
at the center,
(ii) reducing our
overall weighted
average
borrowing
rate by
approximately
1.3%
per year,
(iii) reshaping
the repayment
profile
of our
senior
debt, and
(iv)
diversifying our
funding sources and increasing debt facility headroom, thereby creating
flexibility and capacity for organic and inorganic growth.
Refinancing the Merchant lending facility
At the end of September 2025, we refinanced and increased our merchant lending facility to $22.5 million (ZAR 400 million) to
create capacity
to fund growth
of our merchant
lending book.
We
achieved a 75
basis point
reduction in
the overall
funding cost
of
this facility.
Mobikwik
We completed the disposal of our major non
-core asset, Mobikwik, for $16.4 million (ZAR 290 million) with proceeds received
at the end
of June. These
funds have been
included in our
cash balances and
used to partially
offset our
debt, in line
with our stated
intention.
Lesaka Employee Share Trust
We
successfully
launched
Lesaka’s
Employee
Share
Ownership
Plan
(“Lesaka
ESOP”)
in
March
2025
reflecting
our
commitment to our people and adherence to change of control obligations placed on us by the Competition Commission South Africa
at the time of
the Connect acquisition in
2022. Our ESOP is
designed to create alignment
with our long-term
growth objectives. The
Lesaka ESOP
Trust
held an
effective
3% of
our issued
shares at
the date
of implementation,
representing approximately
ZAR 220
million at the
current market
price. This allocation
of shares ensures
that employees
have a meaningful
stake in our
future financial
success and gives them the opportunity to share in the value created by us.
The Lesaka
ESOP Trust
advances our
transformation initiatives
and plays
an important
role in
improving our
BBBEE rating.
Our employee base is comprised of 87% designated groups for BBBEE purposes. Through the creation of a broader base
of employee
ownership, we are helping to promote economic inclusion and contribute
to transformation in the broader South African economy.
Association of South African Payment Providers (“ASAPP”)
ASAPP,
publicly launched (www.asapp.co.za) in January 2025, is now fully established as the main representatives of non-bank
participants
in
the
payments
space.
The
eight
original
members
(Altron
Fintech,
Hello
Group
Inc.,
iKhokha
(Pty)
Ltd,
Lesaka
Technologies
(Pty)
Ltd,
Network
International
Holdings
Plc,
Peach
Payment
Services
(Pty)
Ltd,
Shop2Shop
(Pty)
Ltd,
Yoco
Technologies
(Pty)
Ltd)
have
been
joined
by
Flash
Group,
PayU
GPO,
Cross
Switch
Technology
Ltd,
and
Paycorp
Group.
Key
workstreams include:
●
Greater inclusion of Non-Bank participation in the payment’s
ecosystem including services such as settlement of funds
as part of the Bank's Act.
●
Calling to action a review of interchange pricing in South Africa, directly with
the SARB.
●
Working alongside the SARB and other regulatory stakeholders
on the strategic direction
of the Faster Payment
System,
National Treasury Financial Inclusion
Forum and the Payments Industry Body Formation.
37
Critical Accounting Policies
Our audited consolidated
financial statements have
been prepared in accordance
with U.S. GAAP,
which requires management
to
make
estimates
and
assumptions
about
future
events
that
affect
the
reported
amount
of
assets
and
liabilities
and
disclosure
of
contingent assets and liabilities.
As future events and
their effects cannot be
determined with absolute certainty,
the determination of
estimates requires
management’s
judgment based
on a
variety of
assumptions and
other determinants
such as
historical experience,
current
and
expected
market
conditions
and
certain
scientific
evaluation
techniques.
Management
believes
that
the
following
accounting policies
are critical due
to the degree
of estimation required
and the impact
of these policies
on the understandi
ng of the
results of our operations and financial condition.
Recoverability of Goodwill
A significant component
of our growth
strategy is to acquire
and integrate businesses
that complement
our existing operations.
The purchase
price of
an acquired
business is
allocated to
the tangible
and intangible
assets acquired
and liabilities
assumed
based
upon their estimated
fair value at the
date of purchase.
The difference between
the purchase price and
the fair value of
the net assets
acquired is
recorded as goodwill.
In determining
the fair value
of assets acquired
and liabilities assumed
in a business
combination,
we use various
recognized valuation methods, including
present value modeling.
Further, we make assumptions
using certain valuation
techniques, including discount rates and timing of future cash flows.
We
review the
carrying value
of goodwill
annually (June
30) or
more frequently
if circumstances
indicating impairment
have
occurred.
W
e did not
perform interim impairment
testing in fiscal
2025 as no
triggering events were
identified outside of
the annual
impairment test date. In performing this review, we are required to estimate the fair value of goodwill that is implied from a valuation
of the reporting unit to which the goodwill has been allocated after deducting the fair values
of all the identifiable assets and liabilities
that form part
of the reporting unit.
The determination of
the fair value
of a reporting
unit requires us
to make significant
judgments
and estimates.
Changes in
these judgements
and estimates may
impact on
the outcome
of the
impairment test.
For instance,
the fair
value of the ISV reporting
unit included in our acquisition
of Adumo exceeded the carrying value
of the reporting unit as of
June 30,
2025, by only 2.4%.
If we had used
a weighted average cost of
capital (“WACC”)
rate that was 1%
higher, we would
have recorded
an impairment of $3.8 million, and if the WACC
rate was 1% lower, the headroom would
have increased from 2.4% to 12.4%.
In determining
the fair
value of
reporting units
for fiscal
2024 and
2023, our
key judgements
related to
reporting unit
revenue
growth rates and
the weighted-average cost
of capital applicable
to peer and
industry comparables of
the reporting units.
In determining
the
fair value
of reporting
units for
fiscal
2025,
we
considered
key
judgements
related
to reporting
unit
revenue
growth
rates,
the
weighted-average cost of capital applicable to peer and industry comparables of the reporting units and the forecast period to be used.
We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. In addition, we
make judgments
and assumptions
in allocating
assets and
liabilities to
each of
our reporting
units. Refer
to Note
10 to
our audited
consolidated financial statements for a summary of the key judgements used in
our impairment testing.
The results of our impairment tests during fiscal 2025 and 2023 indicated that the fair value of our reporting units exceeded their
carrying
values,
with
the exception
of the
$17.0
million
(related
to
the
Cash Connect,
Adumo
Technologies,
Adumo Payouts
and
EasyPay reporting units) and $7.0 million
(related to the PPT/
NUETS reporting unit), respectively, of goodwill impaired during fiscal
2025 and
2023, as discussed
in Note 10
to our audited
consolidated financial
statements. The
results of our
impairment tests during
fiscal 2024
indicated that the fair value of our reporting units exceeded their carrying values and so
did not require impairment.
Intangible Assets Acquired Through Acquisitions
The
fair values
of the
identifiable
intangible
assets acquired
through
acquisitions
were determined
by management
using
the
purchase method
of accounting. We
completed the acquisition
of Adumo and
Recharger during
fiscal 2025 where
we identified and
recognized intangible assets. We
did not identify any significant intangible assets related to the Touchsides
acquisition in fiscal 2024.
We
used the
relief from
royalty method
to value
identified brands
identified in
the Adumo
acquisition, and
the multi-period
excess
earnings method to value identified customer relationships and
the replacement cost approach to value
the identified technology assets
related to Adumo and Recharger
.
We have used
the relief from royalty method, the
multi-period excess earnings method, the
income
approach
and
the
cost
approach
to
value
other
historic
acquisition-related
intangible
assets.
In
so
doing,
we
made
assumptions
regarding expected future revenues and
expenses to develop the
underlying forecasts, applied contributory asset
charges, WACC rates,
and useful lives.
The valuations were based on information available at the
time of the acquisition and the expectations and
assumptions that were
deemed reasonable by us. No assurance can be given, however,
that the underlying assumptions or events associated with such assets
will occur as
projected. For these
reasons, among others,
the actual cash
flows may vary
from forecasts of
future cash flows.
To
the
extent actual cash flows
vary, revisions
to the useful life
or impairment of intangible
assets may be necessary.
Management assesses
the useful life of
the acquired intangible assets
upon initial recognition and revisions
to the useful
life or impairment of
these intangible
assets may be necessary in the future.
38
For instance, during early
calendar 2025, our executive
considered the unification of
our merchant segments operations
and the
realignment of
our brands
under the
master brand
“Lesaka”.
We
have identified
the steps
and timing
to realign
the affected
brands
under
the
master
brand
and
expect
to
have
complete
alignment
by
February
2027,
with
certain
brands
expected
to
be
aligned
by
December 2025. The change in
brands has resulted in a
change in the useful
life of certain of
our brand and trademark intangible
assets
which
has
resulted
in
an
increase
in
amortization
expense
of
$2.6
million
during
the
year
ended
June
30,
2025.
Furthermore,
we
recorded an
impairment loss
of $1.8
million related
to Adumo
Technologies
intangible assets which
were fully
impaired during
the
year ended June 30, 2025. Refer to Note 10 of our audited consolidated
financial statements for additional information.
Revenue recognition – principal versus agent considerations
We generate
revenue from the provision of transaction-processing
services through our various platforms
and service offerings.
We use these platforms to (a) sell prepaid airtime
vouchers that are held as
inventory and (b) distribute ADP, including prepaid airtime
vouchers (which we do not hold as inventory), prepaid electricity, gaming vouchers, and other services, to end consumers through our
platforms. The determination of whether we act as a principal
or as an agent when providing these services using
guidance contained
in
Accounting
Standards
Codification
(“ASC”)
606
Revenue
from
Contracts
with
Customers
requires
a
significant
amount
of
judgement. When
we are the
principal in
a transaction,
revenue is reported
on a gross
basis. When
we are an
agent in
a transaction,
revenue
is recognized
based on
the amount
that
we are
contractually
entitled to
receive
for
performing
the distribution
service on
behalf of our customers.
Finance Loans Receivable and Allowance for Credit Losses
Merchant lending
The allowance for credit losses related to Merchant finance loans receivables is calculated by multiplying the expected write-off
rate for
doubtful or
legal debt
with the
total actual
receivables in
default plus
multiplying the
lifetime loss
rate with
the month-end
outstanding lending book. Our risk management procedures include adhering to our proprietary lending criteria which uses an online-
system loan application
process, obtaining
necessary customer
transaction-history data
and credit bureau
checks. We
consider these
procedures to
be appropriate
because it
takes into
account a
variety of
factors such
as the
customer’s credit
capacity and
customer-
specific risk factors when originating a loan.
We recently
(in the past three years)
commenced lending to merchant
customers and uses historical
default experience over
the
lifetime of loans generated thus far in order to calculate a lifetime loss rate for the
lending book. In addition, management determines
the expected write-off
rate for doubtful or
legal debt based on historical
recovery trends for defaulted
receivables. The allowance for
credit losses related
to these merchant
finance loans receivables
is calculated by
multiplying the expected
write-off rate for
doubtful
or legal debt with the total actual receivables in default plus multiplying the lifetime loss rate with the month-end outstanding lending
book.
The lifetime loss
rate as of June
30, 2025 and
June 30, 2024, was
1.14% and 1.18%,
respectively.
The performing component
(that is, outstanding loan payments
not in arrears), under-performing component (that is,
outstanding loan payments that are
in arrears)
and
non-performing
component
(that
is,
outstanding
loans
for
which
payments
appeared
to
have
ceased)
of
the
book
represents
approximately 95%, 4% and 1%, respectively,
of the outstanding lending book as of June 30, 2025.
Prior to
July 1, 2023,
we maintained
an allowance
for credit
losses -
finance loans
receivable related
to our Merchant
services
segment
with
respect
to
short-term
loans
to
qualifying
merchant
customers.
Our
policy
was
to
regularly
review
the
ageing
of
outstanding
amounts due
from these
merchants and
an allowance
is created
for the
full amount
outstanding if
the customer
was in
arrears for more than 15 days. We wrote off loans and related interest and fees when it is evident that reasonable recovery procedures,
including where deemed necessary,
formal legal action, had failed.
Consumer microlending
The allowance for credit
losses related to Consumer finance
loans receivables is calculated
by multiplying the lifetime
loss rate
with the month-end outstanding lending book
, excluding upfront initiation fees.
Loans to customers have
a tenor of up
to nine months,
with the majority of loans originated having a tenor of six months. Credit bureau
checks as well as an affordability test are conducted
as part of
the origination process,
both of which
are in line with
local regulations. We
consider this policy
to be appropriate
because
the affordability test it performs takes into account a variety of factors such as other debts and total expenditures on
normal household
and
lifestyle
expenses.
Additional
allowances
may
be
required
should
the
ability
of
its
customers
to
make
payments
when
due
deteriorate in the future. While
the allowance for credit
losses is primarily determined utilizing
a provisioning model, there is still
an
element of judgment
required to assess the
ultimate recoverability of
these finance loan receivables,
including ongoing evaluation
of
the creditworthiness of each customer.
We
have operated this
lending book for
more than five
years and use
historical default experience
over the lifetime
of loans in
order to calculate a lifetime loss rate for the lending book. We analyze this lending book as a single portfolio because the loans within
the portfolio
have similar characteristics
and management
uses similar processes
to monitor
and assess the
credit risk of
the lending
book. The allowance for credit losses related to these microlending finance loans receivables is calculated
by multiplying the lifetime
loss rate with the month
end outstanding lending book,
excluding upfront initiation fees. The
lifetime loss rate as of each
of June 30,
2024
and June 30,
2024, was 6.50%. The
performing component (that is,
outstanding loan payments not
in arrears) of the
book exceeds
more than 98% of outstanding lending book as of June 30, 2025.
39
Prior to July
1, 2023, we
maintained an allowance
for credit losses
- finance loans
receivable related to
our Consumer services
segment with respect
to short-term loans
to qualifying customers.
Our policy was
to regularly review
the ageing
of outstanding amounts
due from
borrowers and
adjust the
provision based
on management’s
estimate of
the recoverability
of finance
loans receivable.
We
wrote off microlending loans and related service fees if a borrower is
in arrears with repayments for more than three months or , in
the
event of the borrower’s death, or if the borrower was under
debt review.
Valuation
of investment in Cell C
We have elected to measure
our investment in
Cell C, an
unlisted equity security, at fair
value using the
fair value option.
Changes
in
the
fair
value
of
this
equity
security
are
recognized
in
the
caption
“change
in
fair
value
of
equity
securities”
in
our
audited
consolidated statements of operations. The tax impact related to the change in
fair value of equity securities is included in income tax
expense in our audited
consolidated statements of operation.
The determination of
the fair value of this
equity security requires us
to
make significant judgments
and estimates.
We base our estimates
on assumptions we
believe to be
reasonable but that
are unpredictable
and inherently uncertain. Refer
to Note 6
of our audited consolidated
financial statements regarding the
valuation inputs and
sensitivity
related to our investment in Cell C.
We used a discounted cash flow model to determine the fair value of our investment in Cell C as of June 30, 2024 and 2023, and
valued Cell C at
$0.0 (zero) as of each
of June 30, 2025 and
2024. We utilized the latest business plan provided by Cell
C management
for the
period ended
May 31,
2030, for
the June
30, 2025,
valuation and
the business
plan approved
by Cell
C management
for the
period ended December 31, 2027, for the June 30, 2024, valuation, and the
following key valuation inputs were used:
Weighted Average
Cost of Capital:
24% as of June 30, 2025 and between 21% and 23% as of June 30, 2024
Long-term growth rate:
4.5% (4.5% as of June 30, 2024)
Marketability discount:
15% (20% as of June 30, 2024)
Minority discount:
17% (24% as of June 30, 2024)
Net adjusted external debt - June 30, 2025:
(1)
ZAR 8.3 billion ($0.5 billion), no lease liabilities included
Net adjusted external debt - June 30, 2024:
(2)
ZAR 8 billion ($0.4 billion), no lease liabilities included
(1) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30,
2025.
(2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30,
2024.
We
believe the
Cell C
business plan
is reasonable
based on
the current
performance and
the expected
changes in
the business
model. Refer to the sensitivity analysis included in
Note 6 to our audited consolidated financial statements
related to our valuation of
Cell C as of June 30, 2025.
On September 1, 2025,
Cell C’s largest
shareholder, Blue
Label Telecoms
Limited (“BLT”),
announced that BLT,
The Prepaid
Company Proprietary Limited (a wholly-owned subsidiary of BLT), Cell C Limited, Comm Equipment Company Proprietary Limited
(a
wholly-owned
indirect
subsidiary
of
BLT),
K2021889191
(South
Africa)
(RF)
Proprietary
Limited,
and
K2022559963
(South
Africa)
(RF)
Proprietary
Limited,
had
entered
into
an
agreement
setting
out
the
terms
of
the
proposed
restructure
of
BLT
and
its
subsidiaries (the
“Pre-Listing Restructuring”).
The Pre-Listing
Restructuring encompasses
various transactions
aimed at
optimizing
Cell C’s
capital structure
and balance sheet
in preparation for
a separation and
listing of the
Cell C business
on the JSE.
The Cell C
listing remains subject to, amongst other things, market conditions, shareholder, regulatory and other relevant approvals and therefore
the exact date of listing is
unknown at the date of this Annual
Report on Form 10-K. The listing
of Cell C’s
business on the JSE may
result in
a change
in the
methodology used
to value
our interest
in Cell
C because
we may
use its
quoted listed
price instead
of the
discounted cash flow model currently used.
Recent Accounting Pronouncements
Recent accounting pronouncements adopted
Refer
to
Note
2 of
our
audited consolidated
financial
statements for
a full
description
of recent
accounting
pronouncements,
including the dates of adoption and effects on financial
condition, results of operations and cash flows.
Recent accounting pronouncements not yet adopted as of June 30, 2025
Refer to Note 2
of our audited consolidated
financial statements for a
full description of recent
accounting pronouncements not
yet adopted as of June 30, 2025, including the expected dates of adoption
and effects on financial condition, results of operations and
cash flows.
40
Currency Exchange Rate Information
Actual exchange rates
The actual exchange rates for and at the end of the periods presented were
as follows:
Table 1
June 30,
2025
2024
2023
ZAR : $ average exchange rate
18.1644
18.7070
17.7641
Highest ZAR : $ rate during period
19.6350
19.4568
19.7558
Lowest ZAR : $ rate during period
17.1144
17.6278
16.2034
Rate at end of period
17.7554
18.1808
18.8376
Translation Exchange Rates
We are required
to translate our results of operations from ZAR to U.S. dollars on a monthly
basis. Thus, the average rates used
to translate this data for the years ended June 30, 2025, 2024 and 2023, vary slightly from the averages shown in the table above. The
translation rates we use in presenting our results of operations are the rates shown
in the following table:
Table 2
June 30,
2025
2024
2023
Income and expense items: $1 = ZAR
17.9031
18.6844
17.9400
Balance sheet items: $1 = ZAR
17.7554
18.1808
18.8376
We
have
translated
the
results
of
operations
and
operating
segment
information
for
the
year
ended
June
30,
2025
and
2024,
provided in
the tables
below using
the actual
average exchange
rates per
month between
the USD
and ZAR
in order
to reduce
the
reconciliation
of information
presented to
our chief
operating decision
maker.
The impact
of using
this method
compared with
the
average rate for the
quarter and year to
date is not significant,
however, it does result in
minor differences. We believe that presentation
using
the
average
exchange
rates
per
month
compared
with
the
average
exchange
rate
per
quarter
and
for
the
year
improves
the
accuracy of the information presented in our external financial
reporting and leads to fewer differences between our external reporting
measures which are supplementally presented in ZAR, and our internal management
information, which is also presented in ZAR.
41
Results of operations
The discussion
of our
consolidated overall
results of
operations is
based on
amounts
as reflected
in our
audited consolidated
financial statements which are prepared in accordance
with U.S. GAAP.
We analyze our
results of operations both in U.S. dollars, as
presented in the audited consolidated financial statements, and supplementally in ZAR, because ZAR is the functional currency of the
entities which contribute the majority of our results and is the currency in which
the majority of our transactions are initially incurred
and
measured.
Presentation
of
our
reported
results
in
ZAR
is
a
non-GAAP
measure.
Due
to
the
significant
impact
of
currency
fluctuations between
the U.S. dollar
and ZAR on
our reported
results and
because we
use the
U.S. dollar as
our reporting
currency,
we believe that
the supplemental presentation
of our results
of operations in
ZAR is useful
to investors to
understand the changes
in
the underlying trends of our business.
Our
operating
segment
revenue
presented
in
“—Results
of
operations
by
operating
segment”
represents
total
revenue
per
operating segment before intercompany
eliminations. A reconciliation between
total operating segment revenue and
revenue, as well
as the reconciliation between our segment performance measure and net loss before tax (benefits) expense, is presented in our audited
consolidated financial statements
in Note 21 to
those statements. Our
chief operating decision maker
is our Executive Chairman
and
he
evaluates
segment
performance
based
on
segment
earnings
before
interest,
tax,
depreciation
and
amortization
(“EBITDA”),
adjusted for
items mentioned
in the
next sentence
(“Segment Adjusted
EBITDA”) for
each operating
segment. We
do not
allocate
once-off items (as defined below), stock-based compensation charges, depreciation and amortization, impairment of goodwill or other
intangible assets,
other items
(including gains
or losses
on disposal
of investments,
fair value
adjustments to
equity securities,
fair
value
adjustments
to
currency
options),
interest
income,
interest
expense,
income
tax
expense
or
loss
from
equity-accounted
investments
to
our
reportable
segments.
We
have
included
an
intercompany
interest
expense
in
our
Consumer
Segment
Adjusted
EBITDA for fiscal
2025. Once-off items represent
non-recurring expense items,
including costs related
to acquisitions and
transactions
consummated or
ultimately not
pursued. The
Stock-based compensation
adjustments reflect
stock-based compensation
expense and
are both excluded from the calculation of Segment Adjusted EBITDA and
are therefore reported as reconciling items to reconcile the
reportable segments’ Segment Adjusted EBITDA to our loss before income
tax expense. Effective from fiscal 2025, all lease charges
are allocated
to our operating
segments, whereas
in previous
filings we
presented certain
lease charges
on a separate
line outside
of
our operating segments. Prior
period information has been
recasted to include the lease
charges which were
previously reported on a
separate line in our Consumer and Merchant (and now Merchant, Consumer
and Enterprise) operating segments.
Group
Adjusted
EBITDA
represents
Segment
Adjusted
EBITDA
after
deducting
group
costs.
Refer
also
“Results
of
Operations—Use of Non-GAAP Measures” below.
In fiscal 2025 we closed the acquisitions of Adumo
and Recharger and have integrated their businesses into our
ours. Our fiscal
2025 financial results
include Adumo from
October 1, 2024
and Recharger
from March 3,
2025. Refer also
to Note 3
to the audited
consolidated financial
statements for
additional information
regarding these
transactions. Adumo
and Recharger
are not included
in
our financial results for fiscal 2024 and 2023.
We
analyze our
business and
operations
in terms
of three
inter-related
but independent
operating segments:
(1) Merchant
(2)
Consumer and (3) Enterprise.
In addition, corporate activities
that are impracticable to
allocate directly to the
operating segments, as
well as any inter-segment eliminations, are included in Group costs. Inter-segment revenue eliminations are included
in Eliminations.
Fiscal 2025 Compared to Fiscal 2024
The following factors had
a significant influence on
our results of
operations during fiscal 2025
as compared with
the same period
in the prior year:
●
Revenue increased:
Our revenues
increased by
16.9% in
U.S. dollar
and 13.5%
in ZAR,
primarily due
to the
inclusion of
Adumo
and
Recharger,
an
increase
in
value-added
services activity
in
Merchant,
higher Pinned
Airtime
sales,
as well
as
higher transaction, insurance and lending revenues in Consumer,
which was partially offset by a lower contribution from our
legacy Enterprise businesses;
●
Operating
income
increase,
before
transaction
costs:
Operating
income,
before
transaction
and
related
costs,
increased
significantly primarily
due to contribution
s
from Adumo
from October
1, 2024
and Recharger
from March
3, 2025,
which
were partially offset
by increased costs and an
increase in amortization
of acquisition-related intangible assets
related to the
acquisition of Adumo and Recharger;
●
Non-cash fair value adjustment related to equity securities:
We recorded a non
-cash fair value loss of $59.8 million during
fiscal 2025 related to the disposal of our investment in MobiKwik;
●
Higher net
interest charge:
Net interest
charge
increased to
$18.9 million
(ZAR 342.8
million) from
$16.6 million
(ZAR
311.1 million) primarily
due to higher overall borrowings, which
was partially offset by an increase
in interest received as a
result of the inclusion of Adumo; and
●
Foreign exchange movements:
The U.S. dollar was 4.2% weaker against the ZAR during fiscal
2025 compared to the prior
period, which positively impacted our U.S. dollar reported results.
42
Consolidated overall results of operations
This discussion is based on the amounts prepared in accordance with U.S. GAAP.
The following tables show the changes in the items comprising our statements of operations,
both in U.S. dollars and in ZAR:
Table 3
In U.S. Dollars
Year
ended June 30,
2025
2024
$ %
$ ’000
$ ’000
change
Revenue
659,701
564,222
17%
Cost of goods sold, IT processing, servicing and support
486,546
442,673
10%
Selling, general and administration
131,512
91,969
43%
Depreciation and amortization
33,721
23,665
42%
Impairment loss
18,863
-
nm
Transaction costs related to Adumo, Recharger
and Bank Zero acquisitions and
certain compensation costs
16,159
2,325
595%
Operating (loss) income
(27,100)
3,590
nm
Change in fair value of equity securities
(59,828)
-
nm
Loss on disposal of equity-accounted investment
161
-
nm
Reversal of allowance for EMI doubtful debt receivable
-
250
nm
Interest income
2,596
2,294
13%
Interest expense
21,453
18,932
13%
Loss before income tax (benefit) expense
(105,946)
(12,798)
728%
Income tax (benefit) expense
(18,198)
3,363
nm
Net loss before earnings (loss) from equity-accounted investments
(87,748)
(16,161)
443%
Earnings (Loss) from equity-accounted investments
114
(1,279)
nm
Net loss
(87,634)
(17,440)
402%
Add net loss attributable to non-controlling interest
130
-
nm
Net loss attributable to us
(87,504)
(17,440)
402%
Table 4
In South African Rand
Year
ended June 30,
2025
2024
ZAR %
ZAR ’000
ZAR ’000
change
Revenue
11,980,399
10,553,233
14%
Cost of goods sold, IT processing, servicing and support
8,833,924
8,280,262
7%
Selling, general and administration
2,388,795
1,719,992
39%
Depreciation and amortization
612,298
442,570
38%
Impairment loss
334,929
-
nm
Transaction costs related to Adumo, Recharger
and Bank Zero acquisitions and
certain compensation costs
291,358
43,154
575%
Operating (loss) income
(480,905)
67,255
nm
Change in fair value of equity securities
(1,089,871)
-
nm
Loss on disposal of equity-accounted investment
2,886
-
nm
Reversal of allowance for EMI doubtful debt receivable
-
4,741
nm
Interest income
47,108
42,896
10%
Interest expense
389,882
354,048
10%
Loss before income tax (benefit) expense
(1,916,436)
(239,156)
701%
Income tax (benefit) expense
(328,347)
62,616
nm
Net loss before earnings (loss) from equity-accounted investments
(1,588,089)
(301,772)
426%
Earnings (Loss) from equity-accounted investments
2,035
(24,298)
nm
Net loss
(1,586,054)
(326,070)
386%
Add net loss attributable to non-controlling interest
2,307
-
nm
Net loss attributable to us
(1,583,747)
(326,070)
386%
43
Revenue increased
by $95.5
million (ZAR
1.4 billion)
or 16.9%
(in ZAR,
13.5%).
The increase
in ZAR
was primarily
due to,
the inclusion
of Adumo,
an increase
in the
volume of
value-added
services provided
(Pinless Airtime
and
gaming), an
increase
in
Pinned Airtime sales, an increase
in certain issuing fee base prices
and transaction activity in our issuing
business, and an increase in
insurance
premiums
collected
and
lending
revenues
following
higher
loan
originations.
Refer
to
discussion
above
at
“—Recent
Developments” for a description of key trends impacting our revenue this
fiscal year.
Cost of goods sold, IT processing, servicing and support increased by $43.9 million (ZAR 0.6 million ) or 9.9% (in ZAR, 6.7%),
primarily due
to the
inclusion of
Adumo, higher
commissions paid
related to
ADP revenue
generated, and
higher insurance-related
claims and third-party transaction fees, which was partially offset
by the decrease in Pinned Airtime sales.
Selling, general
and administration expenses
increased by $39.5
million (ZAR 668.8
million), or 43.0%
(in ZAR, 38.9%).
The
increase was primarily
due to the inclusion
of Adumo; higher
employee-related expenses
(including annual salary
increases); higher
stock-based compensation
charges, consulting
fees and audit
fees; and the
year-over-year
impact of inflationary
increases on certain
expenses.
Depreciation
and
amortization
expense
increased
by
$10.06
million
(ZAR
169.7
million),
or
42.5%
(in
ZAR,
38.4%).
The
increase was due to the inclusion of acquisition-related intangible asset amortization related
to intangible assets identified pursuant to
the Adumo and Recharger acquisitions and an increase
in depreciation expense related to additional POS devices deployed.
During fiscal
2025, we
recorded an
impairment loss
which includes
an impairment
of goodwill
of $17.0
million related
to the
impairment of goodwill allocated
to each of Merchant,
Consumer and Enterprise as
well as an impairment of
intangible assets of 1.8
million. Refer to
Note 10 of
our audited consolidated
financial statements
for additional information
regarding these impairment
losses.
Transaction costs related to Adumo, Recharger
and Bank Zero acquisitions and certain compensation costs includes
fees paid to
external service
providers associated
with legal
and advisory
services procured
to close
the Adumo
transaction on
October 1,
2024,
and the Recharger transaction in March 2025,
as well as post-combination compensation charges recognized
related to the Recharger
acquisition of $13.6 million
(ZAR 245.7 million) and
increased primarily due to
these post-combination compensation charges.
This
caption also includes
transaction costs related
to the proposed
acquisition of Bank
Zero. Refer to
Note 3 to
our audited consolidat
ed
financial statements for additional information.
Our operating (loss)
income margin in
fiscal 2025
and 2024 was (4.1%)
and 0.6%, respectively.
We
discuss the components of
operating loss margin under “—Results of operations
by operating segment.”
The change in fair value of equity securities of $59.8 million during fiscal 2025 represents a non-cash
fair value adjustment loss
related to MobiKwik. We
did not record any changes
in the fair value of
equity interests in MobiKwik during
the fiscal 2024, or
any
fair value adjustments for Cell C during fiscal 2025 or 2024, respectively.
We continue to carry our investment
in Cell C at $0 (zero).
Interest on surplus cash increased to $2.6 million (ZAR 47.1 million) from $2.3 million (ZAR 42.9 million), primarily due to the
inclusion of Adumo and higher overall average cash balances on deposit during
fiscal 2025 compared with 2024.
Interest expense increased to $21.5
million (ZAR 389.9 million)
from $18.9 million (ZAR 354.0
million). In ZAR, the increase
was primarily
as a result
of higher
overall borrowings
during fiscal 2025
compared with
the comparable
period in the
prior quarter,
which was partially offset by lower overall interest rates.
Fiscal 2025 income tax benefit was $18.2
million (ZAR 328.3 million) compared to an
income tax expense of $3.4 million
(ZAR
62.6
million)
in
fiscal
2024.
Our
effective
tax
rate
for
fiscal
2025
was
impacted
by
deferred
tax
impact
related
to
the
fair
value
adjustment to our equity
securities, the reversal of
$12.8 million related to
certain valuation allowances created
in prior years
following
(i) an improvement
in profitability of
certain of our
subsidiaries and (ii)
a change in
judgment on the
need for a valuation
allowance
of $11.4 million related to an entity
which we believe has achieved
sustainable profitability, the tax expense recorded by our profitable
South African operations,
a deferred tax
benefit related to
acquisition-related intangible
asset amortization, non-deductible
expenses
(in transaction-related expenses), the on-going losses incurred by certain of our South African businesses and the associated valuation
allowances created related to the deferred tax assets recognized regarding
net operating losses incurred by these entities.
Our effective
tax rate
for fiscal
2024 was
impacted by
the tax
expense recorded
by our
profitable South
African operations,
a
deferred tax benefit related to acquisition-related intangible asset amortization, non-deductible expenses, the on-going losses incurred
by certain of our
South African businesses and
the associated valuation allowances
created related to the
deferred tax assets recognized
regarding net operating losses incurred by these entities.
44
Results of operations by operating segment and group costs
The composition of revenue and the contributions of our business activities to
Group Adjusted EBITDA are illustrated below:
Table 5
In U.S. Dollars
Year
ended June 30,
2025
% of
2024
% of
%
Operating Segment
$ ’000
total
$ ’000
total
change
Consolidated revenue:
Merchant
526,598
80%
459,790
81%
15%
Consumer
96,008
15%
69,211
12%
39%
Enterprise
42,556
6%
46,897
8%
(9%)
Subtotal: Operating segments
665,162
101%
575,898
101%
15%
Eliminations
(5,461)
(1%)
(11,676)
(1%)
(53%)
Total
consolidated revenue
659,701
100%
564,222
100%
17%
Group Adjusted EBITDA:
Merchant
(1)(2)
36,195
71%
29,170
79%
24%
Consumer
(1)(2)
23,949
47%
12,679
34%
89%
Enterprise
(1)(2)
1,287
3%
2,931
8%
(56%)
Group costs
(10,743)
(21%)
(7,844)
(21%)
37%
Group Adjusted EBITDA (non-GAAP)
(3)
50,688
100%
36,936
100%
37%
(1) Segment
Adjusted EBITDA
for fiscal
2025, includes
reorganization
and retrenchment
costs for
Merchant of
$0.8 million,
Enterprise of $0.8 million, and Consumer of $0.1
million. Segment Adjusted EBITDA for fiscal 2024, includes retrenchment costs
for
Merchant $0.3 million and Consumer of $0.2 million.
(2) Lease expenses which
were previously presented on
a separate line in fiscal
2024 are now included
in Merchant, Consumer
and Enterprise Segment Adjusted EBITDA. The prior period has been re-presented
to conform with current period presentation.
(3) Group Adjusted EBITDA
is a non-GAAP measure, refer
to reconciliation below at
“—Results of Operations—Use of
Non-
GAAP Measures”.
Table 6
In South African Rand
Year
ended June 30,
2025
% of
2024
% of
%
Operating Segment
ZAR ’000
total
ZAR ’000
total
change
Consolidated revenue:
Merchant
9,562,360
80%
8,599,450
81%
11%
Consumer
1,744,429
15%
1,294,632
12%
35%
Enterprise
773,057
6%
877,317
8%
(12%)
Subtotal: Operating segments
12,079,846
101%
10,771,399
101%
12%
Eliminations
(99,447)
(1%)
(218,166)
(1%)
(54%)
Total
consolidated revenue
11,980,399
100%
10,553,233
100%
14%
Group Adjusted EBITDA:
Merchant
(1)(2)
657,177
71%
545,472
79%
20%
Consumer
(1)(2)
435,193
47%
237,362
34%
83%
Enterprise
(1)(2)
23,724
3%
54,924
8%
(57%)
Group costs
(193,853)
(21%)
(146,815)
(21%)
32%
Group Adjusted EBITDA (non-GAAP)
(3)
922,241
100%
690,943
100%
33%
(1)
Segment
Adjusted
EBITDA
for
fiscal
2025,
includes
reorganization
and
retrenchment
costs
for
Merchant
of
ZAR
15.7
million, Enterprise
of ZAR
13.6 million,
and Consumer
of ZAR
1.5 million.
Segment Adjusted
EBITDA for
fiscal 2024,
includes
retrenchment costs for Merchant of ZAR 4.9 million and Consumer of ZAR 3.5 million.
(2) Lease expenses
which were previously
presented on a
separate line in
fiscal 2024 are
now included in
Merchant and Consumer
Segment Adjusted EBITDA. The prior period has been re-presented to conform
with current period presentation.
(3) Group Adjusted EBITDA
is a non-GAAP measure, refer
to reconciliation below at
“—Results of Operations—Use of
Non-
GAAP Measures”.
45
Merchant
Segment revenue primarily increased due to the inclusion
of Adumo, and a higher volume
of ADP provided (Pinless Airtime and
gaming) and
an increase
in fewer Pinned
Airtime sales.
In ZAR,
the increase
in Segment
Adjusted EBITDA
is primarily
due to
the
inclusion of Adumo, which was partially offset by higher operating expenses incurred, including employment-related expenditures, to
expand
our
offering,
an
increase
in
the
allowance
for
credit
losses
following
higher
loan
originations
and
reorganization
and
retrenchment costs incurred during fiscal 2025.
Our Segment Adjusted EBITDA margin (calculated as
Segment Adjusted EBITDA divided by revenue) for
fiscal 2025 and 2024
was 6.9% and 6.3%, respectively.
Consumer
Segment
revenue
increased
primarily
due
to higher
transaction
fees
generated
from
the higher
EPE
account holders
base,
an
increase
in
certain
issuing
fee
base
prices
and
transaction
activity
in
our
issuing
business,
insurance
premiums
collected,
lending
revenues following an increase in loan originations and the inclusion of
Adumo. This increase in revenue has translated into improved
profitability, which was partially offset
by a higher allowance for credit losses following an increase in loan originations during fiscal
2025,
higher insurance-related
claims, interest
expense (of
ZAR 61.4
million)
incurred to
fund our
lending book,
higher computer
software license costs, and the
year-over-year impact of inflationary increases on certain expenses.
We have included an intercompany
interest expense in our Consumer Segment Adjusted EBITDA for fiscal 2025
compared with fiscal 2024.
Our Segment Adjusted EBITDA margin for fiscal 2025
and 2024 was 24.9% and 18.3%, respectively.
Enterprise
Segment revenue
decreased primarily
due to
fewer ad
hoc hardware
sales as well
as lower
revenue generated
from the
sale of
prepaid
airtime
vouchers,
which
was
partially
offset
by
the
inclusion
of
Recharger.
In
ZAR,
the
significant
decrease
in
Segment
Adjusted EBITDA is primarily due to the impact of few sales,
which was partially offset by the inclusion of Recharger
.
Our Segment Adjusted EBITDA margin for fiscal 2025
and 2024 was 3.0% and 6.2%, respectively.
Group costs
Our group
costs primarily
include employee
related costs
in relation
to employees
specifically hired
for group
roles and
costs
related
directly
to
managing
the
US-listed
entity;
expenditures
related
to
compliance
with
the
Sarbanes-Oxley
Act
of
2002;
non-
employee directors’ fees; legal fees; group and US-listed related audit
fees; and directors’ and officers’ insurance premiums.
Our group costs for fiscal
2025 increased compared with the prior
period due to higher employee costs
resulting from an increase
in the number of individuals allocated to group costs and base salary
adjustments, higher bonus expense, travel, audit,
consulting and
legal fees.
Fiscal 2024 Compared to Fiscal 2023
The following factors had
a significant influence on
our results of
operations during fiscal
2024 as compared with
the same period
in the prior year:
●
Higher revenue:
Our revenues
increased
by
6.9%
in U.S.
dollar
and
11.4%
in ZAR,
primarily
due
to an
increase
in low
margin prepaid
airtime sales and
other value-added
services, as well
as higher transaction,
insurance and
lending revenues,
which was partially offset by
lower hardware sales revenue in
our POS hardware distribution
business given the lumpy
nature
of bulk sales;
●
Operating
income
generated:
Operating
profitability
was
achieved
following
years
of
operating
losses
as
a
result
of the
various cost reduction initiatives in Consumer implemented in prior periods as well as the contribution
from Connect;
●
Higher net interest charge:
The net interest charge increased to
$16.6 million (ZAR 311.1 million) from $16.7 million
(ZAR
299.9 million) primarily due to higher interest rates;
●
Significant transaction costs:
We expensed $2.3 million of transaction costs related to the Adumo transaction in fiscal
2024;
and
●
Foreign exchange movements:
The U.S. dollar was 4.1% stronger against the ZAR during fiscal
2024 compared to the prior
period, which adversely impacted our U.S. dollar reported results.
46
The following tables show the changes in the items comprising our statements of
operations, both in U.S. dollars and in ZAR:
Table 7
In U.S. Dollars
Year
ended June 30,
2024
2023
$ %
$ ’000
$ ’000
change
Revenue
564,222
527,971
7%
Cost of goods sold, IT processing, servicing and support
442,673
417,544
6%
Selling, general and administration
91,969
95,050
(3%)
Depreciation and amortization
23,665
23,685
(0%)
Impairment loss
-
7,039
nm
Transaction costs related to Adumo and Recharger
acquisitions
2,325
-
nm
Operating income (loss)
3,590
(15,347)
nm
Reversal of allowance for EMI doubtful debt receivable
250
-
nm
Loss on disposal of equity-accounted investment
-
205
nm
Interest income
2,294
1,853
24%
Interest expense
18,932
18,567
2%
Loss before income tax expense (benefit)
(12,798)
(32,266)
(60%)
Income tax expense (benefit)
3,363
(2,309)
nm
Net loss before loss from equity-accounted investments
(16,161)
(29,957)
(46%)
Loss from equity-accounted investments
(1,279)
(5,117)
(75%)
Net loss attributable to us
(17,440)
(35,074)
(50%)
Table 8
In South African Rand
(US GAAP)
Year
ended June 30,
2024
2023
ZAR %
ZAR ’000
ZAR ’000
change
Revenue
10,553,233
9,471,800
11%
Cost of goods sold, IT processing, servicing and support
8,280,262
7,490,739
11%
Selling, general and administration
1,719,992
1,705,196
1%
Depreciation and amortization
442,570
424,909
4%
Impairment loss
-
126,280
nm
Transaction costs related to Adumo and Recharger
acquisitions
43,154
-
nm
Operating income (loss)
67,255
(275,324)
nm
Reversal of allowance for EMI doubtful debt receivable
4,741
-
nm
Loss on disposal of equity-accounted investment
-
3,678
nm
Interest income
42,896
33,243
29%
Interest expense
354,048
333,092
6%
Loss before income tax expense (benefit)
(239,156)
(578,851)
(59%)
Income tax expense (benefit)
62,616
(41,423)
nm
Net loss before loss from equity-accounted investments
(301,772)
(537,428)
(44%)
Loss from equity-accounted investments
(24,298)
(91,799)
(74%)
Net loss attributable to us
(326,070)
(629,227)
(48%)
Revenue increased by $36.3 million (ZAR 1.1 billion), or 6.9% (in ZAR, 11.4%)
,
primarily due to the increase in the number of
low-margin
prepaid
airtime
vouchers
sold
and
an
increase
in
volume
of
other
value-added
services
provided,
as
well
as
higher
transaction volumes processed, insurance premiums collected
and lending revenues following an increase in loan
originations, which
was partially offset
by a lower
number of
hardware sales in
our POS hardware
distribution business
given the
lumpy nature of
bulk
sales.
Cost of goods sold, IT processing, servicing and
support increased by $25.1 million (ZAR
0.8 billion), or 6.0% (in ZAR,
10.5%),
primarily due to
the increase in low
margin prepaid airtime
sales, which were
partially offset by
the lower cost of
goods sold related
to fewer hardware sales.
47
Selling, general
and administration expenses
decreased by
$3.1 million (ZAR
14.8 million), or
3.2% (in ZAR,
0.9%).
In ZAR,
the modest increase
was primarily due to
higher employee-related expenses
related to the expansion
of our senior management
team
and the year-over
-year impact of
inflationary increases on
employee-related expenses,
which were partially
offset by
the benefits of
various cost reduction initiatives in Consumer.
Depreciation and
amortization expense
decreased by
$0.02 million
(in USD,
< 0.1%),
and increased
by ZAR
17.7 million
(in
ZAR, 4.2%). In ZAR, the increase was due to an increase in depreciation expense
related to additional POS devices deployed.
During fiscal 2023, we
recorded an impairment loss
of $7.0 million related
to the impairment of our
hardware/ software supply
business
unit’s
allocated
goodwill.
Refer
to
Note
10
of
our
audited
consolidated
financial
statements
for
additional
information
regarding these impairment losses.
Transaction costs related to Adumo
acquisition includes fees
paid to external
service providers associated
with legal, commercial,
financial and tax due
diligence activities performed,
fees paid to legal advisors
to draft the purchase
agreement as well as
other legal
and advisory services procured related to the transaction.
Our operating income
(loss) margin in
fiscal 2024
and 2023
was 0.6% and (2.9%),
respectively.
We
discuss the components of
operating loss margin under “—Results of operations
by operating segment.”
We
did
not
record
any
changes
in
the
fair
value
of
equity
interests
in
MobiKwik
and
Cell
C
during
fiscal
2024
and
2023,
respectively.
We continue
to carry our investment
in Cell C at $0
(zero). Refer to Note
9 to our consolidated financial
statements for
the methodology
and inputs used
in the fair
value calculation for
MobiKwik and Note
6 for the
methodology and
inputs used in
the
fair value calculation for Cell C.
During fiscal 2024, we
received an outstanding amount
of $0.3 million related
to the sale
of Carbon in fiscal
2023, which resulted
in the reversal
of an allowance
for doubtful
loans receivable
of $0.3
million recorded
in fiscal 2023.
We
recorded a
net loss of
$0.2
million comprising a
loss of $0.4 million
related to the disposal of
a minor portion of
our investment in Finbond
and a $0.25 million
gain related to the disposal of our entire interest in Carbon during fiscal 2023. Refer
to Note 9 to our consolidated financial statements
for additional information regarding these disposals.
Interest on
surplus cash
increased to
$2.3 million
(ZAR 42.9
million) from
$1.9 million
(ZAR 33.2
million), primarily
due to
higher interest rates.
Interest expense increased
to $18.9 million
(ZAR 354.0 million)
from $18.6 million
(ZAR 333.1 million),
primarily as a
result
of higher overall
interest rates and
higher overall borrowings
during fiscal 2024
compared with comparable
period in the
prior year,
which was partially offset by lower interest
expense incurred on certain of our borrowings
for which we were able to negotiate lower
rates of interest during the latter half of fiscal 2023 and again towards the end of calendar 2023
.
Fiscal 2024 tax
expense was
$3.4 million
(ZAR 62.6
million) compared
to a tax
benefit of $2.3
million (ZAR 41.4
million) in
fiscal 2023. Our effective tax
rate for fiscal
2024 was impacted by
the tax expense
recorded by our profitable
South African operations,
a deferred tax
benefit related to
acquisition-related intangible asset
amortization, non-deductible expenses, the
on-going losses incurred
by certain of our
South African businesses and
the associated valuation allowances
created related to the
deferred tax assets recognized
regarding net operating losses incurred by these entities.
Our effective
tax rate for fiscal
2023 was impacted
by a reduction
in the enacted
South African corporate
income tax rate from
28% to 27% from January 2023 (but backdated to July 1, 2022), the tax expense recorded by our profitable South African operations,
a
deferred
tax
benefit
related
to
acquisition-related
intangible
asset
amortization,
non-deductible
expenses,
a
deferred
tax
benefit
related to an expense paid by Connect before
we acquired the business and which subsequently has been
determined to be deductible
for
tax purposes,
the on-going
losses incurred
by certain
of our
South
African
businesses and
the associated
valuation
allowances
created related to the deferred tax assets recognized regarding net operating
losses incurred by these entities.
48
Results of operations by operating segment and group costs
The composition of revenue and the contributions of our business activities to
Group Adjusted EBITDA are illustrated below:
Table 9
In U.S. Dollars
Year
ended June 30,
2024
% of
2023
% of
%
Operating Segment
$ ’000
total
$ ’000
total
change
Consolidated revenue:
Merchant
459,790
81%
416,562
79%
10%
Consumer
69,211
12%
62,801
12%
10%
Enterprise
46,897
8%
50,456
10%
(7%)
Subtotal: Operating segments
575,898
101%
529,819
101%
9%
Not allocated to operating segments
-
-
1,469
-
nm
Eliminations
(11,676)
(1%)
(3,317)
(1%)
252%
Total
consolidated revenue
564,222
100%
527,971
100%
7%
Group Adjusted EBITDA:
Merchant
(1)(2)
29,170
78%
29,008
117%
1%
Consumer
(1)(2)
12,679
34%
1,675
7%
657%
Enterprise
(2)
2,931
8%
3,256
13%
(10%)
Group costs
(7,844)
(21%)
(9,109)
(37%)
(14%)
Group Adjusted EBITDA (non-GAAP)
(3)
36,936
100%
24,830
100%
49%
(1) Segment
Adjusted EBITDA
for fiscal
2024, includes
retrenchment costs
for Merchant
$0.3
million and
Consumer of
$0.2
million.
(2) Lease expenses which
were previously presented on
a separate line in fiscal
2024 are now included
in Merchant, Consumer
and Enterprise Segment Adjusted EBITDA. The prior period has been re-presented
to conform with current period presentation.
(3) Group Adjusted EBITDA
is a non-GAAP measure, refer
to reconciliation below at
“—Results of Operations—Use of
Non-
GAAP Measures”.
Table 10
In South African Rand
Year
ended June 30,
2024
% of
2023
% of
%
Operating Segment
ZAR ’000
total
ZAR ’000
total
change
Consolidated revenue:
Merchant
8,599,450
81%
7,473,122
79%
15%
Consumer
1,294,632
13%
1,126,650
12%
15%
Enterprise
877,317
8%
905,181
10%
(3%)
Subtotal: Operating segments
10,771,399
102%
9,504,953
100%
13%
Not allocated to operating segments
-
-
26,354
-
nm
Eliminations
(218,166)
(2%)
(59,507)
-
267%
Total
consolidated revenue
10,553,233
100%
9,471,800
100%
11%
Group Adjusted EBITDA:
Merchant
(1)(2)
545,472
79%
520,403
117%
5%
Consumer
(1)(2)
237,362
34%
30,049
7%
690%
Enterprise
(2)
54,924
8%
58,413
13%
(6%)
Group costs
(146,815)
(21%)
(163,415)
(37%)
(10%)
Group Adjusted EBITDA (non-GAAP)
(3)
690,943
100%
445,450
100%
55%
(1) Segment Adjusted EBITDA for
fiscal 2024, includes retrenchment costs
for Merchant of ZAR 4.9 million
and Consumer of
ZAR 3.5 million.
(2) Lease expenses
which were previously
presented on a
separate line in
fiscal 2024 are
now included in
Merchant and Consumer
Segment Adjusted EBITDA. The prior period has been re-presented to conform
with current period presentation.
(3) Group Adjusted EBITDA
is a non-GAAP measure, refer
to reconciliation below at
“—Results of Operations—Use of
Non-
GAAP Measures”.
49
Merchant
Segment revenue
increased due
to the
increase in
prepaid airtime
vouchers sold
and other
ADP provided,
which was
partially
offset
by
lower
revenue
generated
from
a
decrease
in
certain
ADP
transaction
volumes
processed
(such
as
international
money
transfers). In ZAR, the increase in Segment Adjusted EBITDA is primarily
due to the higher sales activity.
Our Segment Adjusted EBITDA margin in fiscal 2024
and 2023 was 6.3% and 7.0%, respectively.
Consumer
Segment revenue increased
primarily due to
more transaction fees
generated from the
higher EPE account
holders base, higher
insurance revenues, and an increase
in lending revenue as
a result of an
increase in loan originations.
This increase in revenue,
together
with the cost reduction
initiatives initiated in fiscal
2022 and through
fiscal 2023, have
translated into a turnaround
in the Consumer
Division and
the realization
of sustained
positive Segment
Adjusted EBITDA
in fiscal
2024 compared
with fiscal
2023. Consumer
Segment Adjusted
EBITDA during
fiscal 2024
was also
impacted by
higher credit
losses (as
a result
of an increase
in originations)
and higher insurance-related claims (as a result of a higher number of
insurance policies) compared with fiscal 2023.
Our Segment Adjusted EBITDA margin in fiscal 2024
and 2023
was 18.3% and 2.7%, respectively.
Enterprise
Segment revenue decreased due to a lower number of hardware sales
in our POS hardware distribution business given the lumpy
nature of
bulk sales
as well
as lower
revenue generated,
which was
partially offset
by the increase
in prepaid
airtime vouchers
sold
and
other value-added
services provided
.
In ZAR,
the decrease
in Segment
Adjusted EBITDA
is primarily
due
to lower
hardware
sales.
Our Segment Adjusted EBITDA margin in fiscal 2024
and 2023 was 6.2% and 6.5%, respectively.
Group costs
Our group
costs primarily
include employee
related costs
in relation
to employees
specifically hired
for group
roles and
costs
related
directly
to
managing
the
US-listed
entity;
expenditures
related
to
compliance
with
the
Sarbanes-Oxley
Act
of
2002;
non-
employee directors’ fees; legal fees; group and US-listed related audit
fees; and directors’ and officers’ insurance premiums.
Our group costs for
fiscal 2024 decreased compared
with the prior period
due to lower external
audit, legal and consulting
fees
and lower provision for executive bonuses, which was partially offset
by higher employee costs and travel expenses.
50
Presentation of Merchant, Consumer and Enterprise by segment for fiscal 2025, 2024 and 2023
The tables below present Merchant, Consumer and Enterprise revenue and
EBITDA for fiscal 2025,
2024 and 2023, including
lease charges, as well as the U.S. dollar/ ZAR exchange rates applicable
per fiscal quarter and year:
Table 11
Fiscal 2025
In United States dollars
Quarter 1
Quarter 2
Quarter 3
Quarter 4
F2025
$ ’000
$ ’000
$ ’000
$ ’000
$ ’000
Revenue
Merchant
123,651
145,209
128,781
128,957
526,598
Consumer
21,072
22,929
24,096
27,911
96,008
Enterprise
11,883
8,933
9,444
12,296
42,556
Subtotal: Operating segments
156,606
177,071
162,321
169,164
665,162
Eliminations
(3,038)
(855)
(871)
(697)
(5,461)
Total
consolidated revenue
153,568
176,216
161,450
168,467
659,701
Group Adjusted EBITDA:
Merchant
7,554
10,319
8,103
10,219
36,195
Consumer
4,396
4,342
6,333
8,878
23,949
Enterprise
362
(31)
133
823
1,287
Group costs
(2,949)
(2,820)
(1,772)
(3,202)
(10,743)
Group Adjusted EBITDA (non-GAAP)
9,363
11,810
12,797
16,718
50,688
Income and expense items: $1 = ZAR
17.72
17.85
18.40
17.87
17.90
Table 12
Fiscal 2024
In United States dollars
Quarter 1
Quarter 2
Quarter 3
Quarter 4
F2024
$ ’000
$ ’000
$ ’000
$ ’000
$ ’000
Revenue
Merchant
112,061
117,182
111,801
118,746
459,790
Consumer
15,580
16,707
17,904
19,020
69,211
Enterprise
9,467
11,921
11,322
14,187
46,897
Subtotal: Operating segments
137,108
145,810
141,027
151,953
575,898
Eliminations
(1,019)
(1,917)
(2,833)
(5,907)
(11,676)
Total
consolidated revenue
136,089
143,893
138,194
146,046
564,222
Group Adjusted EBITDA:
Merchant
6,910
7,497
7,420
7,343
29,170
Consumer
2,120
2,575
3,757
4,227
12,679
Enterprise
815
891
725
500
2,931
Group costs
(1,822)
(2,011)
(2,199)
(1,812)
(7,844)
Group Adjusted EBITDA (non-GAAP)
8,023
8,952
9,703
10,258
36,936
Income and expense items: $1 = ZAR
18.71
18.71
18.88
18.47
18.68
51
Table 13
Fiscal 2023
In United States dollars
Quarter 1
Quarter 2
Quarter 3
Quarter 4
F2023
$ ’000
$ ’000
$ ’000
$ ’000
$ ’000
Revenue
Merchant
96,771
105,034
108,414
106,343
416,562
Consumer
15,004
15,434
15,876
16,487
62,801
Enterprise
14,450
16,999
10,157
8,850
50,456
Subtotal: Operating segments
126,225
137,467
134,447
131,680
529,819
Not allocated to segments
-
-
-
1,469
1,469
Eliminations
(1,439)
(1,399)
(479)
-
(3,317)
Total
consolidated revenue
124,786
136,068
133,968
133,149
527,971
Group Adjusted EBITDA:
Merchant
6,406
6,693
7,645
8,264
29,008
Consumer
(1,893)
171
1,263
2,134
1,675
Enterprise
1,174
2,087
335
(340)
3,256
Group costs
(2,300)
(2,256)
(2,293)
(2,260)
(9,109)
Group Adjusted EBITDA (non-GAAP)
3,387
6,695
6,950
7,798
24,830
Income and expense items: $1 = ZAR
17.13
17.52
17.93
18.74
17.94
Use of Non-GAAP Measures
U.S. securities laws
require that when
we publish any
non-GAAP measures, we
disclose the reason
for using these
non-GAAP
measures and provide reconciliations to the most directly comparable GAAP measures. The presentation of Group Adjusted EBITDA
is
a
non-GAAP
measure.
We
provide
this
non-GAAP
measure
to
enhance
our
evaluation
and
understanding
of
our
financial
performance
and
trends.
We
believe
that
this
measure
is
helpful
to
users
of
our
financial
information
understand
key
operating
performance and
trends
in our business
because it
excludes certain
non-cash expenses
(including depreciation
and amortization
and
stock-based compensation charges) and income
and expenses that we consider once-off in nature.
Non-GAAP Measures
Group
Adjusted
EBITDA
is
earnings
before
interest,
tax,
depreciation
and
amortization
(“EBITDA”),
adjusted
for
non-
operational
transactions
(including
loss
on
disposal
of
equity-accounted
investments,
change
in
fair
value
of
equity
securities),
(earnings)
loss
from
equity-accounted
investments,
stock-based
compensation
charges
and
once-off
items.
We
included
an
intercompany interest expense in
our Consumer Segment Adjusted EBITDA
for eight months to February
28, 2025. We
commenced
utilizing our
February 2025
lending facilities
to fund
a portion
of our
Consumer lending
book from
March 1,
2025. Once-off
items
represents non-recurring income and
expense items, including
costs related to
acquisitions and transactions consummated
or ultimately
not pursued.
52
The table below presents the reconciliation between GAAP net loss attributable
to Lesaka to Group Adjusted EBITDA:
Table 14
Years
ended June 30,
2025
2024
2023
$ ’000
$ ’000
$ ’000
Loss attributable to Lesaka - GAAP
(87,634)
(17,440)
(35,074)
Loss from equity accounted investments
(114)
1,279
5,117
Net loss before loss from equity-accounted investments
(87,748)
(16,161)
(29,957)
Income tax expense (benefit)
(18,198)
3,363
(2,309)
Loss before income tax expense
(105,946)
(12,798)
(32,266)
Interest expense
21,453
18,932
18,567
Interest income
(2,596)
(2,294)
(1,853)
Reversal of allowance for doubtful EMI loan receivable
-
(250)
-
Net loss on disposal of equity-accounted investment
161
-
205
Change in fair value of equity securities
59,828
-
-
Operating (loss) income
(27,100)
3,590
(15,347)
Impairment loss
18,863
-
7,039
PPA amortization
(amortization of acquired intangible assets)
21,384
14,419
15,149
Depreciation
12,337
9,246
8,536
Stock-based compensation charges
9,550
7,911
7,309
Interest adjustment
(2,195)
-
-
Once-off items
(1)
17,826
1,853
1,922
Unrealized Loss FV for currency adjustments
23
(83)
222
Group Adjusted EBITDA - Non-GAAP
50,688
36,936
24,830
(1) The table below presents the components of once-off
items for the periods presented:
Table 15
Years
ended June 30,
2025
2024
2023
$ ’000
$ ’000
$ ’000
Transaction costs related to Adumo, Recharger
and Bank Zero acquisitions and
certain compensation costs
16,159
2,325
-
Transaction costs
1,794
480
850
Indirect taxes provision
(127)
-
438
(Income recognized) Expenses incurred related to closure of legacy businesses
-
(952)
639
Non-recurring revenue not allocated to segments
-
-
(1,469)
Employee misappropriation of company funds
-
-
1,202
Separation of employee expense
-
-
262
Total once-off
items
17,826
1,853
1,922
Once-off items are non-recurring in nature, however, certain
items may be reported in
multiple quarters. For instance, transaction
costs include costs incurred related to acquisitions and
transactions consummated or ultimately not pursued. The transactions can span
multiple
quarters,
for
instance
in
fiscal
2025
we
incurred
significant
transaction
costs
related
to
the
acquisition
of
Adumo
and
Recharger over a number of quarters, and the transactions are generally
non-recurring
Indirect tax
provision release
relates to
the reversal
of a
non-recurring indirect
tax provision
created in
fiscal 2023
which was
resolved in
fiscal 2025
following settlement
of the
matter with
the tax
authority.
(Income recognized)
Expenses incurred
related to
closure
of
legacy
businesses
represents
(i)
gains
recognized
related
to
the
release
of
the
foreign
currency
translation
reserve
on
deconsolidation of a subsidiary
and (ii) costs incurred related to subsidiaries which we
are in the process of deregistering/ liquidation
and therefore we consider these costs non-operational and ad hoc in nature. Non-recurring revenue not allocated to segments includes
once off revenue recognized that we
believe does not relate to
either our Merchant or Consumer
divisions. Employee misappropriation
of company funds
represents a once
-off loss incurred.
We
incurred separation
costs related to
the termination of
certain senior-level
employees, including an
executive officer and
senior managers, during
the fiscal year and
we consider these specific
terminations to
be of a non-recurring nature.
53
Liquidity and Capital Resources
At June 30,
2025, our unrestricted
cash and cash
equivalents were $76.5
million and comprised
of ZAR-denominated
balances
of ZAR
1.0 billion
($55.2 million),
U.S. dollar-denominated
balances of
$3.2 million,
and other
currency deposits,
primarily Indian
rupee (related to the sale of MobiKwik), of $18.1 million, all amounts translated at exchange rates
applicable as of June 30, 2025. The
increase in our unrestricted cash balances from June 30, 2024, was primarily due to the positive contribution from all of our operating
segments,
proceeds from the sale of MobiKwik,
and utilizing of our borrowing facilities, which
was partially offset by the utilization
of cash reserves
to fund certain
scheduled and other
repayments of our
borrowings, settle the
cash portion of
the purchase consideration
related to
our various
acquisitions, purchase
ATMs
and vaults
and other
items of
capital expenditure,
pay annual
bonuses, pay
for
expenses included in our group costs, and to make an investment in working
capital.
We generally
invest any surplus cash held by our
South African operations in overnight
call accounts that we maintain at
South
African banking institutions,
and any surplus
cash held by
our non-South African
companies in
U.S. dollar-denominated money market
accounts.
Historically,
we have financed
most of our
operations, research and
development, working capital,
and capital expenditures,
as
well
as
acquisitions
and
strategic
investments,
through
internally
generated
cash
and
our
financing
facilities.
When
considering
whether to borrow under our financing
facilities, we consider the cost
of capital, cost of financing, opportunity cost
of utilizing surplus
cash and availability of tax
efficient structures to moderate
financing costs. Refer to Note 12
to our consolidated financial statements
for the year ended June 30, 2025, for additional information related to our
borrowings.
Our ability to make payments on our indebtedness and to
fund our operations may be dependent upon the operating
income and
the distribution
of funds
from our
subsidiaries. However,
as local laws
and regulations
and/or the
terms of our
indebtedness restrict
certain
of
our
subsidiaries
from
paying
dividends
and
transferring
assets
to
us,
there
is no
assurance
that
our
subsidiaries
will
be
permitted to provide us with sufficient dividends, distributions
or loans when necessary.
We
will make
a cash
payment of
ZAR 175.0
million ($9.9
million translated
at exchange
rates as
of June
30, 2025)
in March
2026 related to the cash portion of the deferred consideration due to the seller of
Recharger.
Available short-term
borrowings
Summarized below are our short-term facilities available and utilized as of
June 30, 2025:
Table 16
RMB GBF
RMB Other
Nedbank
$ ’000
ZAR ’000
$ ’000
ZAR ’000
$ ’000
ZAR ’000
Total
short-term facilities available, comprising:
Total overdraft
39,475
700,901
-
-
-
-
Indirect and derivative facilities
(1)
-
-
5,672
100,718
8,817
156,554
Total
short-term facilities available
39,475
700,901
5,672
100,718
8,817
156,554
Utilized short-term facilities:
Overdraft
24,469
434,461
-
-
-
-
Indirect and derivative facilities
-
-
1,864
33,089
119
2,110
Total
short-term facilities available
24,469
434,461
1,864
33,089
119
2,110
Interest rate, based on South African prime rate
10.25%
N/A
N/A
(1)
Other
facilities
include
indirect
and
derivative
facilities
may
only
be
used
for
guarantees,
letters
of
credit
and
forward
exchange contracts to support guarantees issued by RMB and Nedbank
to various third parties on our behalf.
In terms of
a commitment provided
to the lender
under the CTA
entered into on
February 27, 2025,
we have undertaken
not to
utilize more than ZAR 5.0 million ($0.3 million) of the Nedbank Facility.
Long-term borrowings
We have
aggregate long-term borrowing
outstanding of ZAR 3.6 billion
($200.8 million translated at
exchange rates as of
June
30, 2025) as
described in Note
12. These borrowings
include outstanding
long-term borrowings
obtained by Lesaka
SA of ZAR
3.1
billion, which
was used
to refinance
our previous
long-term borrowings.
We
have utilized
all of
these long-term
borrowings. As
of
September 29, 2025, we also have a revolving credit facility, of ZAR 400.0 million which is utilized to
fund a portion of our merchant
finance loans receivable
book and an asset
backed facility of ZAR
227.0 million which
is utilized to partially
fund the acquisition of
POS devices and vaults.
54
Restricted cash
We have
also entered into cession and pledge
agreements with Nedbank related to
our Nedbank indirect credit facilities
and we
have ceded and pledged
certain bank accounts to
Nedbank. The funds included
in these bank accounts
are restricted as they
may not
be withdrawn without the express
permission of Nedbank. Our cash,
cash equivalents and restricted
cash presented in our
consolidated
statement of cash flows as of June 30, 2025, includes restricted cash of $0.1 million
that has been ceded and pledged.
Arrangement with African Bank to fund our ATMs
In
September
2024,
we
entered into
an
arrangement
with African
Bank Limited
(“African
Bank”)
and
certain
cash-in-transit
service providers
to fund
our ATMs.
Under this
arrangement, African
Bank will
use its
cash resources
to fund
our ATMs
and it
is
specifically recorded that the cash in our ATMs are African Bank’s property.
Therefore, as we have not utilized a facility to
obtain the
cash, and do not own or control the cash for an extended period
of time, we do not record cash or cash equivalents and borrow
ings in
our
consolidated statement
of financial
position. Cash
withdrawn
from our
ATMs
by our
EPE customers
and other
consumers are
settled through the interbank settlement
system from the ATM
users bank account to African
Bank’s bank
accounts. We
pay African
Bank a
monthly fee
for the
service provided
which is calculated
based on
the cumulative
daily outstanding
balance of
cash utilized
multiplied by the South African prime interest rate less 1%.
We are exposed
to the risk of cash lost while it is in our ATMs
(i.e. from
theft) and are required to repay African Bank for any shortages.
Cash flows from operating activities
Net cash used in operating activities during fiscal 2025 was $9.1 million (ZAR 163.3 million) compared to net cash provided by
operating activities of $28.8 million
(ZAR 537.9 million) during fiscal
2024. Excluding the impact of
income taxes, our cash used
in
operating activities during fiscal 2025 includes
cash utilized for the settlement
of working capital movements within our
Merchant and
Enterprise businesses related to quarter-end transaction processing activities and which were settled in the following week (our fourth
quarter of fiscal 2024 closed on
a Sunday), and the net growth in our
Consumer and Merchant finance loans
receivable books, which
was partially offset by the positive contribution from our
Merchant and Consumer businesses.
Net cash
provided by
operating activities
during fiscal
2024 was
$28.8 million
(ZAR 537.9
million) compared
to $0.4
million
(ZAR 7.4 million) during fiscal
2023. Excluding the impact of
income taxes, our cash
provided by operating activities during
the fiscal
2024 was positively impacted by the contribution from Merchant and
Consumer, the sale of Cell C inventory and temporary
working
capital movements within
our merchant business
as a result
of quarter-end
transaction processing activities
closing on a
Sunday and
which were settled in the following week, which was partially offset
by growth in our consumer finance loans receivable book
During fiscal 2025,
we paid our
first provisional South
African tax payments
of $4.2 million
(ZAR 76.1 million)
related to our
2025
tax year. During fiscal 2025, we
also made our second
provisional South African tax
payments
of $2.2 million (ZAR
39.3 million
related to our 2025
tax year and received
tax refunds of $0.44
million (ZAR 7.2 million).
We
also paid taxes totaling
$0.3 million in
other tax jurisdictions, primarily in the Botswana and Namibia.
During fiscal 2024,
we paid our
first provisional South
African tax payments
of $2.7 million
(ZAR 49.5 million)
related to our
2024
tax year. During fiscal 2024, we
also made our second
provisional South African tax
payments of $2.9 million
(ZAR 52.7 million
related to our
2024 tax year
and received
tax refunds of
$0.0 million (ZAR
0.8 million).
We
also paid taxes
totaling $0.4
million in
other tax jurisdictions, primarily in the Botswana.
During fiscal 2023,
we paid our
first provisional South
African tax payments
of $3.0 million
(ZAR 50.8 million)
related to our
2023
tax year. During fiscal 2023, we
also made our second
provisional South African tax
payments
of $4.1 million (ZAR
76.1 million
related to our
2023 tax year
and received
tax refunds of
$0.2 million (ZAR
3.8 million).
We
also paid taxes
totaling $0.4
million in
other tax jurisdictions, primarily in the Botswana.
Taxes paid during
fiscal 2025, 2024 and 2023 were as follows:
Table 17
Year
ended June 30,
2025
2024
2023
2025
2024
2023
$
$
$
ZAR
ZAR
ZAR
‘000
‘000
‘000
‘000
‘000
‘000
First provisional payments
4,182
2,663
2,955
76,118
49,534
50,798
Second provisional payments
2,198
2,861
4,079
39,279
52,721
76,089
Taxation paid related
to prior years
225
641
15
4,081
12,187
273
Tax refund received
(438)
(38)
(210)
(7,173)
(768)
(3,756)
Total South African
taxes paid
6,167
6,127
6,839
112,305
113,674
123,404
Foreign taxes paid
314
379
361
5,738
7,063
6,482
Total
tax paid
6,481
6,506
7,200
118,043
120,737
129,886
55
We expect to make additional provisional
income tax payments in South Africa related to our 2025 tax year in the first quarter of
fiscal 2026, however, the amount was not quantifiable
as of the date of the filing of this Annual Report.
Cash flows from investing activities
Cash used
in investing
activities for
fiscal 2025
included capital
expenditures of
$17.2 million
(ZAR 307.9
million), primarily
due to the acquisition of vaults and POS devices.
We also incurred expenditures of
$3.9 million (ZAR 69.8 million), primarily related
to
the
capitalization
of
development
costs,
during
fiscal
2025.
During
fiscal
2025,
we
paid
$12.9
million
related
to acquisition
of
certain businesses, including Adumo and Recharger. We
also received $16.4 million related to the sale of our
entire equity investment
in MobiKwik in June 2025.
Cash used
in investing
activities for
fiscal 2024
included capital
expenditures of
$12.7 million
(ZAR 236.6
million), primarily
due
to
the
acquisition
of
vaults
and
POS
devices.
During
fiscal
2024,
we
received
proceeds
of
$3.5
million
related
to
the
sale of
remaining interest in Finbond and $0.25 million related to the second (and final) tranche from the
disposal of our entire equity interest
in Carbon.
Cash used
in investing
activities for
fiscal 2023
included capital
expenditures of
$16.2 million
(ZAR 289.8
million), primarily
due to the
acquisition of ATMs
.
During fiscal 2023,
we received proceeds
of $0.25 million
related to the
first tranche (of
two) from
the disposal of our entire equity interest in Carbon and $0.4 million related to
the sale of minor positions in Finbond.
Cash flows from financing activities
During
fiscal
2025,
we
utilized
$98.6
million
from
our
South
African
overdraft
facilities
to
fund
our
ATMs
and
our
cash
management business through
Connect as well
as to partially
fund the acquisition
of Recharger
and for the
February 2025 refinance
of certain of our facilities. We
repaid $89.2 million of those facilities,
including towards our refinanced facilities.
We utilized
$190.1
million of our borrowings
to settle a portion
of the Adumo purchase
consideration, pay certain transaction
expenses, repay Adumo’s
borrowings,
repurchase
shares
of
our
common
stock,
fund
the
acquisition
of
certain
capital
expenditures,
for
working
capital
requirements
and
for
the
February
2025
refinance
of
certain
of
our
facilities.
We
repaid
$131.2
million
of
long-term
borrowings
towards our refinanced facilities and in accordance with our repayment schedule, paid
$7.2 million to settle Adumo’s borrowings, and
settled a portion
of our revolving credit
facility utilized. We also paid an
origination fee of $1.0
million to secure
additional borrowings
as well as paid dividends to the non-controlling interest of $0.4 million.
During fiscal 2024, we utilized approximately $183.0 million
from our South African overdraft facilities to fund our ATMs
and
repaid
$199.6
million
of
these facilities.
We
utilized
$23.7
million
of
our
long-term
borrowings
to
fund
the
acquisition
of
certain
capital
expenditures
and
for
working
capital
requirements.
We
repaid
$20.1
million
of
these
long-term
in
accordance
with
our
repayment schedule as
well as to settle
a portion of
our revolving credit facility
utilized. We
received $0.1 million
from the exercise
of stock options. We also paid $1.5 million to repurchase shares from employees in order for the employees to settle taxes due related
to the vesting of shares of restricted stock.
During
fiscal
2023,
we
utilized
$520.1
million
from
our
South
African
overdraft
facilities
to
fund
our
ATMs
and
our
cash
management
business
through
Connect
and
repaid
$547.3
million
of
these
facilities.
We
utilized
$24.4
million
of
our
long-term
borrowings
to settle $10.5 million of
our revolving credit facilities, fund
our merchant finance loans receivable
business, and to fund
the
acquisition
of
certain
capital
expenditures.
We
repaid
$17.5
million
of
these
long-term,
including
$10.5
million
to
settle
our
revolving credit balance in full. We
received $0.5 million from the exercise of stock options. We
also paid $1.3 million to repurchase
shares from
employees in
order for
the employees to
settle taxes due
related to the
vesting of
shares of restricted
stock and
to settle
the strike price due and taxes due related to the exercise of stock options.
56
Contractual Obligations
The following table sets forth our contractual obligations as of June 30, 2025:
Table 18
Payments due by Period, as of June 30, 2025 (in $ ’000s)
Total
Less than 1
year
2-3 years
3-5 years
Thereafter
Short-term credit facilities
(A)
24,469
24,469
-
-
-
Long-term borrowings
Principal repayments
(A)(B)
200,769
11,956
31,445
157,368
-
Interest payments
(A)(B)
38,652
10,739
19,475
8,438
-
Operating lease liabilities, including imputed interest
(C)
11,660
4,852
5,460
1,348
-
Purchase obligations
2,872
2,872
-
-
-
Capital commitments
157
157
-
-
-
Deferred purchase consideration due to seller of
Recharger
(D)
9,856
9,856
-
-
-
Other long-term obligations reflected on our balance
sheet
(E)(F)
2,991
-
-
-
2,991
Total
291,426
64,901
56,380
167,154
2,991
(A) – Refer to Note 12 to our audited consolidated financial statements.
(B) – Long-term
borrowings principal
repayments for the
3-5 year period
includes all unamortized
fees as of
June 30, 2025.
Interest payments based on
applicable interest rates as of
June 30, 2025, and expected
outstanding long-term borrowings over
the period. All amounts converted from ZAR to USD using the June 30, 2025,
USD/ ZAR exchange rate.
(C) – Refer to Note 8 to our audited consolidated financial statements.
(D) – Represents the
deferred consideration of ZAR
175 million due in
March 2026 to the
seller of Recharger.
Refer to Note
3 to our audited consolidated financial statements.
Translated at exchange rates applicable as of June
30, 2025.
(E) – Includes policyholder liabilities of $3.2 million related to our insurance business. All amounts are translated at exchange
rates applicable as of June 30, 2025.
(F) –
We
have excluded
cross-guarantees in
the aggregate
amount of
$0.1 million
issued as
of June
30, 2025,
to RMB
and
Nedbank
to secure
guarantees it
has issued
to third
parties on
our behalf
as the
amounts that
will be
settled in
cash are
not
known and the timing of any payments is uncertain.
Off-Balance Sheet Arrangements
We have no off
-balance sheet arrangements.
Capital Expenditures
Capital expenditures for the years ended June 30, 2025, 2024 and 2023
were as follows:
Table 19
2025
2024
2023
2025
2024
2023
$
$
$
ZAR
ZAR
ZAR
’000
’000
’000
’000
’000
’000
Merchant
18,117
11,202
12,812
324,350
209,302
229,847
Consumer
1,500
1,317
3,170
26,855
24,607
56,870
Enterprise
1,482
146
174
26,532
2,728
3,122
Total
21,099
12,665
16,156
377,737
236,637
289,839
Our capital expenditures
for fiscal 2025,
2024 and 2023, are
discussed under “—Liquidity
and Capital Resources—Cash
flows
from investing activities.”
All of our capital expenditures
for the past three fiscal
years were funded through
internally-generated funds, except
for certain
capital
expenditures
of
POS
devices
and
vaults,
made
by
Connect
which
were
funded
through
the
utilization
of
asset-backed
borrowings.
We
had outstanding capital
commitments as of June
30, 2025, of $0.2
million. In addition
to these capital expenditures,
we expect that
capital spending for fiscal
2026
will include acquisition of
POS devices, vaults,
computer software, computer and office
equipment,
as well
as for
our ATM
infrastructure
and branch
network in
South Africa
.
Acquisition
of these
assets will
be funded
through the use of internally-generated funds and available
facilities.
57
ITEM 7A.
QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
We seek to manage our exposure to currency exchange, translation, interest rate, credit, microlending credit and equity price and
liquidity risks as discussed below.
Currency Exchange Risk
We are subject to currency exchange risk because we purchase components for vaults, that we assemble, and inventories that we
are required
to settle
in other
currencies, primarily
the euro,
renminbi, and
U.S. dollar.
We
have used
forward contracts
in order
to
limit our exposure
in these transactions
to fluctuations in
exchange rates between
the South African
rand (“ZAR”), on
the one hand,
and the U.S. dollar and the euro, on the other hand.
We
had no outstanding foreign exchange contracts as of June 30,
2025 and 2024.
Translation Risk
Translation risk relates to the risk that our
results of operations will vary significantly as
the U.S. dollar is our
reporting currency,
but we earn a significant amount of our revenues and
incur a significant amount of our expenses in ZAR. The U.S. dollar
to the ZAR
exchange rate has
fluctuated significantly over
the past three
years. As exchange rates
are outside our
control, there can
be no assurance
that future fluctuations will not adversely affect our results
of operations and financial condition.
Interest Rate Risk
As a result
of our normal borrowing
activities, our operating results
are exposed to fluctuations
in interest rates,
which we manage
primarily through regular
financing activities. Interest
rates in South
Africa have been
trending downwards
in recent quarters and
as
of the date of this Annual Report, are expected to decline by a further 25 basis points in the
first quarter of calendar 2026 and stabilize
at that
level for
the remainder
of that
year.
We
periodically evaluate
the cost
and effectiveness
of interest
rate hedging
strategies to
manage
this
risk.
We
generally
maintain
investments
in
cash
equivalents
and
held
to
maturity
investments
and
have
occasionally
invested in marketable securities.
We have
short and long-term borrowings in South
Africa as described in Note 12
to our consolidated financial statements which
attract interest
at rates
that fluctuate
based on
changes in
the South
African prime
and 3-month
JIBAR interest
rates. The
following
table illustrates the effect on
our annual expected interest charge,
translated at exchange rates
applicable as of June 30,
2025, as a result
of changes in the South African prime and 3-month JIBAR interest
rates, using our outstanding short and long-term borrowings
as of
June 30, 2025. The effect of a hypothetical 1% (i.e. 100 basis points) increase and a 1% decrease in the interest rates applicable to the
borrowings as of June 30,
2025, are shown. The
selected 1% hypothetical change does
not reflect what could be considered
the best-
or worst-case scenarios.
Table 20
As of June 30, 2025
Annual expected
interest charge
($ ’000)
Hypothetical
change in
interest rates
Impact of
hypothetical
change in
interest rates
($ ’000)
Estimated annual
expected interest
charge after
hypothetical change
in interest rates
($ ’000)
Interest on South Africa borrowings
23,987
1%
2,262
26,249
(1%)
(2,262)
21,725
Credit Risk
Credit risk
relates to
the risk of
loss that we
would incur
as a
result of non-performance
by counterparties.
We
maintain credit
risk
policies
in
respect
of
our
counterparties
to
minimize
overall
credit
risk.
These
policies
include
an
evaluation
of
a
potential
counterparty’s
financial
condition,
credit
rating,
and
other
credit
criteria
and
risk
mitigation
tools
as
our
management
deems
appropriate.
With
respect to
credit risk
on financial
instruments,
we maintain
a policy
of entering
into such
transactions only
with
South African and European financial institutions that have a credit rating
of “B” (or its equivalent) or better, as determined
by credit
rating agencies such as Standard & Poor’s, Moody’s
and Fitch Ratings.
58
Consumer microlending credit risk
We are exposed
to credit risk in our Consumer microlending activities, which provides unsecured short-term loans
to qualifying
customers. Credit bureau checks as well as an affordability test are conducted as part of the origination process, both of
which are line
with local regulations.
We
consider this policy to be appropriate because the affordability test we perform takes into account a variety
of
factors
such
as
other
debts
and
total
expenditures
on
normal
household
and
lifestyle
expenses.
Additional
allowances
may
be
required should the
ability of our customers
to make payments when
due deteriorate in
the future. A significant
amount of judgment
is required to assess the ultimate recoverability of these
finance loan receivables, including ongoing evaluation of the creditworthiness
of each customer.
Merchant lending
We
maintain an allowance
for doubtful finance
loans receivable related
to its Merchant
services segment with
respect to short-
term loans
to qualifying
merchant customers.
Our risk
management procedures
include adhering
to our
proprietary lending
criteria
which uses an online-system loan
application process, obtaining necessary customer transaction-history data and
credit bureau checks.
We
consider these procedures to be appropriate because it
takes into account a variety of
factors such as the customer’s credit capacity
and customer-specific risk factors when originating a loan.
Equity Securities Price Risk
Equity price risk relates to the risk
of loss that we would incur as
a result of the volatility in the exchange
-traded price of equity
securities that we hold. As of June 30, 2025, we did not have any equity securities that
were exchange-traded and held as available for
sale. Historically, exchange
-traded equity securities held as available for sale were expected to be held for an extended period of time
and we were
not concerned with
short-term equity price volatility
with respect to
these securities provided that
the underlying business,
economic and management characteristics of the company remained
sound.
The market price of these exchange-traded equity securities may fluctuate for a variety of reasons
and, consequently, the amount
we may obtain in a subsequent sale of these securities may significantly differ
from the reported market value.
Equity Securities Liquidity Risk
Equity liquidity risk
relates to the
risk of loss
that we would
incur as a
result of the
lack of liquidity
on the exchange
on which
those securities are
listed.
We
may not
be able to
sell some or
all of these
securities at one
time, or over
an extended period
of time
without influencing the exchange-traded price, or at all.
We monitor these investments for impairment and make appropriate reductions in carrying value when an impairment is deemed
to be other-than-temporary.
As of June 30, 2025, we did not own any exchange-traded equity securities.
59
ITEM 8.
FINANCIAL STATEMENTS
AND SUPPLEMENTARY
DATA
Our audited
consolidated financial
statements, together
with the
reports
of our independent
registered public
accounting firms,
appear on pages F-1 through F-83 of this Annual Report.
60
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls
and procedures
Under the
supervision and
with the
participation of
our management,
including our
Executive Chairman
and our
Group Chief
Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as
such term is defined under Rule 13a-15(e)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our Executive Chairman and
Group Chief
Financial Officer
concluded that
our disclosure
controls and
procedures were
not effective
as of
June 30,
2025, due
to
the material weaknesses in internal control over financial reporting as described
below.
Internal Control over Financial Reporting
Internal control over financial reporting
is a process designed
by, or under the supervision of, our
Executive Chairman and Group
Chief
Financial
Officer,
or
persons
performing
similar
functions,
and
effected
by
our
board
of
directors,
management,
and
other
personnel, to provide
reasonable assurance regarding
the reliability of
financial reporting and
the preparation of
financial statements
for external purposes in accordance with U.S. GAAP.
Internal control over financial reporting includes
those policies and procedures that
(1) pertain to the
maintenance of records that,
in reasonable detail, accurately and fairly
reflect the transactions and dispositions of
our assets; (2) provide reasonable
assurance that
transactions are recorded as
necessary to permit preparation of
financial statements in accordance
with U.S. GAAP,
and that receipts
and expenditures of the company are being made only in accordance with authorizations of our officers and directors; and (3) provide
reasonable assurance regarding prevention
or timely detection of unauthorized
acquisition, use or disposition
of our assets that could
have a material effect on our audited consolidated financial statements.
Inherent Limitations in Internal Control
over Financial Reporting
Internal control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of
its inherent
limitations.
Internal
control
over
financial reporting
is a
process that
involves
human
diligence
and
compliance
and
is
subject
to
lapses
in
judgment and
breakdowns
resulting
from human
failures.
Internal
control over
financial
reporting
also
can
be
circumvented by collusion or improper
management override. Because of such
limitations, there is a risk that
material misstatements
may not
be prevented
or detected
on a
timely basis
by internal
control over
financial reporting.
However,
these inherent
limitations
are known features of the financial reporting
process. Therefore, it is possible to design safeguards into
the process to reduce, though
not eliminate, this risk.
Management’s
Report on Internal Control Over Financial Reporting
Management,
including
our
Executive
Chairman
and
our
Group
Chief
Financial
Officer,
is
responsible
for
establishing
and
maintaining
adequate
internal
control
over
our
financial
reporting.
Management
conducted
an
evaluation
of
the
effectiveness
of
internal control over financial reporting based on criteria established in Internal Control – Integrated Framework
(2013) issued by the
Committee
of Sponsoring
Organizations
of the
Treadway
Commission
(COSO). Based
on this
evaluation
and as
described
below,
management concluded that our internal control over financial reporting was not
effective as of June 30, 2025.
As permitted by
the rules of
the SEC, management
has excluded Adumo
and Recharger
from its evaluation
for the year
ended
June 30, 2025, the year of acquisition. As of June 30, 2025, Adumo and Recharger’s total assets represented approximately 7% of our
consolidated total
assets and approximately
13% of consolidated
total current
assets. Their total
revenues constituted
approximately
8% of our consolidated revenue
and their operating income constituted
approximately 11% of our
consolidated operating loss for the
year ended June 30, 2025.
A material
weakness is
a deficiency,
or a
combination of
deficiencies, in
internal control
over financial
reporting, such
that a
reasonable
possibility
exists that
a
material
misstatement
of
our
annual
or
interim
financial statements
would
not
be
prevented
or
detected on a timely basis.
As of June 30, 2025, we identified material weaknesses related to:
●
Our
Consumer
lending
process,
specifically
insufficient
risk
assessment
and
monitoring
activities
relating
to
changes
in
systems
and
processes,
insufficient
controls
over
internal
information
and
information
from
service
organizations,
and
insufficient design
and implementation
of ITGCs,
controls over
service organizations
and process
level controls,
resulting
in ineffective
process level
controls, including
a lack
of validation
of the
completeness and
accuracy of
information used
within the process;
61
●
Our payroll process, specifically
insufficient risk assessment
and monitoring activities relating
to changes over the
transfer
of
ownership
to
the
centralized
payroll
processes,
insufficient
controls
over
information
from
service
organizations,
and
insufficient design and implementation of ITGCs, controls over service organizations and process level controls resulting in
ineffective process level controls including a lack of validation of
the completeness and accuracy of information used within
this process;
●
Our
annual
goodwill
impairment
process,
specifically
related
to
insufficient
risk
assessment
and
ineffective
design
and
implementation of controls resulting in ineffective process level
controls;
●
Our business
combination process,
specifically insufficient
risk assessment
and ineffective
design and
implementation of
controls
over the
purchase price
allocation of
the Adumo
and Recharger
acquisitions including
insufficient
controls over
information resulting in ineffective process level controls including a lack of validation of the completeness and accuracy
of
information used;
●
Our
revenue
recognition
process
relating
to
prepaid
airtime
sold
and
processing
fees
relating
to
certain
agreements,
specifically insufficient risk assessment and ineffective design and implementation of
controls related to our judgement over
revenue recognized either as principal versus as agent resulting in ineffective
process level controls.;
●
Our journal entry process, specifically relating to insufficient risk assessment, and ineffective design and implementation of
controls including
insufficient controls
over information
resulting in
ineffective process
level controls
including a
lack of
validation of the completeness
of the journal entry
population and a lack of
validation of the completeness
and accuracy of
information used within the process; and
●
An insufficient number of experienced and trained resources to execute
on their internal control responsibilities resulting in
ineffective
design, implementation
and operating
effectiveness of
process level
controls for
processes in
the scope
of our
internal control over financial reporting evaluation.
Of the
material weaknesses
described above,
the material
weaknesses related
to the
revenue recognition
process resulted
in a
material corrected misstatement for the
year ended June 30,
2025 and a restatement for
each of the quarters
ended September 30, 2024,
December 31,
2024 and
March 31,
2025 of
our revenue
and cost
of goods
sold, IT
processing, servicing
and support,
exclusive of
depreciation and amortization. There
was no impact on the
Company’s reported
operating income (loss), net
loss or loss per share
in
any of such quarters.
Of the material weaknesses described above, the material weaknesses
related to the annual goodwill impairment process resulted
in
a
corrected
material
misstatement
and
a
corrected
immaterial
misstatement
of
goodwill
and
impairment
loss in
the
Company’s
consolidated financial statements for the year ended June 30, 2025
.
Of the material weaknesses described above, the
material weaknesses related to the journal entry process
resulted in a corrected
immaterial misstatement
to our
revenue and
cost of
goods sold,
IT processing,
servicing and
support, exclusive
of depreciation
and
amortization in the Company’s consolidated
financial statements for the year ended June 30, 2025.
Of the material weaknesses described above, the material weakness related to an insufficient
number of experienced and trained
resources to
execute on
their internal
control responsibilities
also resulted
in a
corrected material
misstatement of
current and
long-
term borrowings in the Company’s
consolidated financial statements for the year ended June 30, 2025.
All
other
material
weaknesses
did
not
result
in
any
corrected
material
or
immaterial
misstatements,
however
a
reasonable
possibility exists that material misstatements in the Company’s consolidated financial statements may not be prevented or detected on
a timely basis.
Lesaka’s independent registered public accounting
firm, KPMG Inc, who audited the consolidated financial statements included
in this Annual
Report, has expressed
an adverse report
on the operating
effectiveness of our
internal control over
financial reporting
as of June 30, 2025, which appears in Part II, Item 9 of this Annual Report.
Remediation of Newly Identified Material Weaknesses
To address the material weaknesses, our management,
including our Information Technology
(“IT”) team, has commenced with
remediation of these material
weaknesses including, but not
limited to: (1) developing
and implementing a comprehensive
remediation
plan that includes specific actions aimed at enhancing the
understanding of control owners related to the operation and
importance of
internal
controls
over
financial
reporting,
including
the principles
and
requirements
of
each control,
with
a focus
on
the impacted
processes
including
controls
over
service
organizations,
ITGCs,
and
other
process
level
controls;
(2)
mandating
improved
risk
assessment
procedures
with governance
requirements
upon implementing
new systems
within the
Group together
with the
design,
implementation and monitoring
of control activities;
(3) the recruitment
of additional appropriately
skilled resources across
the Finance
and
Risk
and
Compliance
disciplines
coupled
with
the
further
upskilling
and
training
of
existing
resources
responsible
for
the
execution
of
key
controls
as
well
as
a
focus
on
a
greater
degree
of
automation
of
controls
throughout
the
organization,
(4)
the
embedding of
controls compliance
in the
key performance
indicators of
senior executives
across the
business and
(5) collaborating
closely with internal and external assurance partners to ensure the robustness of
our remediation plan.
62
While we are actively taking steps
to implement our remediation plan, the material weaknesses
will not be deemed resolved until
the enhanced controls
operate for a
sufficient period of
time and management
has confirmed through testing
that the same
are operating
effectively.
We
will continue to
monitor the remediation
plan's effectiveness
and adjust
our efforts
as needed. As
we assess and
test
our internal control over financial reporting, we may identify the need for additional
measures or modifications to the plan.
Remediation of Previously Identified Material Weaknesses
Management has,
however, made
progress in remediating
the material weaknesses
identified in the
previous fiscal year
related
to the failure of
specific ITGCs for certain
IT systems to operate
effectively as well
as the insufficient
design and implementation
of
controls and policies
and procedures
related to the
goodwill impairment
assessment. As a
result, controls
in the areas
of user access
and
program-change
management
for
associated
IT
systems
that
support
our
financial
reporting
processes
have
been
remediated.
Revised procedures
have been
implemented related
to the
validation of
completeness and
accuracy of
the data used
in the
goodwill
impairment model together with additional procedures implemented to enhance the precision levels in evaluating certain assumptions
utilized in this model. Even though the controls for the goodwill impairment process have been strengthened,
it has not yet been fully
remediated as model errors persisted.
Changes in Internal Control over Financial Reporting
Except as described above,
there were no changes
in our internal control over
financial reporting during the
quarter ended June
30, 2025, that
have materially affected,
or are reasonably
likely to materially
affect, our
internal control over
financial reporting.
As
stated,
management
has
excluded
Adumo and
Recharger
from
its evaluation
of the
effectiveness
of
internal control
over
financial
reporting for
the year
ended June
30, 2025,
the year of
acquisition, however
continues to
evaluate Adumo
and Recharger’s
internal
control
over
financial
reporting
(refer
to
Item
1A—“Risk
Factors—Failure
to
maintain
effective
internal
control
over
financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act).
63
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the shareholders
and Board of Directors of Lesaka Technologies,
Inc.
Opinion on Internal Control Over Financial Reporting
We have audited
Lesaka Technologies, Inc.
and subsidiaries’ (the Company) internal control over financial reporting as of
June
30, 2025,
based on
criteria established
in
Internal Control
– Integrated
Framework (2013)
issued by
the Committee
of Sponsoring
Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses, described below, on the
achievement of the objectives
of the control
criteria, the Company has
not maintained effective internal
control over financial reporting
as of
June 30,
2025, based
on criteria
established
in
Internal Control
– Integrated
Framework (2013)
issued by
the Committee
of
Sponsoring Organizations of the Treadway
Commission.
We
also have
audited, in
accordance with
the standards
of the
Public Company
Accounting Oversight
Board (United
States)
(PCAOB),
the
consolidated
balance
sheets
of
the
Company
as
of
June
30,
2025
and
2024,
the
related
consolidated
statements
of
operations, comprehensive loss or
income, changes in equity,
and cash flows for
each of the years in the
two-year period ended June
30, 2025, and
the related notes
(collectively, the consolidated financial statements), and
our report dated
September 29, 2025
expressed
an unqualified opinion on those consolidated financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that
a material misstatement of the
company’s annual
or interim financial statements will
not be prevented
or detected on a timely basis. Material weaknesses related to risk assessment, sufficient experienced and trained resources, design and
implementation
of
control
activities,
information
and
communication,
and
monitoring
have
been
identified
and
included
in
management’s
assessment.
The
material
weaknesses
were
considered
in
determining
the
nature,
timing,
and
extent
of
audit
tests
applied
in our
audit of
the 2025
consolidated financial
statements, and
this report
does not
affect
our report
on those
consolidated
financial statements.
The Company acquired the Adumo (RF) Proprietary Limited,
Recharger Proprietary Limited, Master Fuel Software and Support
Proprietary
Limited
and
Genisus
Risk
Proprietary
Limited
(the
“Acquisitions”)
during
2025,
and
management
excluded
from
its
assessment
of
the
effectiveness
of
the
Company’s
internal
control
over
financial
reporting
as
of
June
30,
2025,
the
Acquisitions’
internal
control
over
financial
reporting
associated
with
total
assets
of
$22,840
thousand
and
total
revenues
of
$51,651
thousand
included in
the consolidated
financial statements
of the
Company as
of and
for the
year ended
June 30,
2025. Our
audit of
internal
control over
financial reporting
of the
Company
also excluded
an evaluation
of the
internal control
over financial
reporting
of the
Acquisitions.
Basis for Opinion
The
Company’s
management
is
responsible
for
maintaining
effective
internal
control
over
financial
reporting
and
for
its
assessment of
the effectiveness
of internal
control over
financial reporting,
included in
the accompanying
Management’s
Report on
Internal Control over Financial Reporting. Our
responsibility is to express
an opinion on the Company’s internal control over financial
reporting based
on our
audit. We
are a
public accounting
firm registered
with the
PCAOB and
are required
to be
independent with
respect to the
Company in accordance
with the U.S. federal
securities laws and
the applicable rules
and regulations of
the Securities
and Exchange Commission and the PCAOB.
We conducted
our audit in accordance with
the standards of the PCAOB. Those
standards require that we plan
and perform the
audit to
obtain reasonable
assurance about
whether effective
internal control
over financial
reporting was
maintained in
all material
respects. Our
audit of internal
control over financial
reporting included
obtaining an understanding
of internal control
over financial
reporting,
assessing
the
risk
that
a
material
weakness
exists,
and
testing
and
evaluating
the
design
and
operating
effectiveness
of
internal control
based on the
assessed risk. Our
audit also included
performing such other
procedures as we
considered necessary
in
the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A
company’s
internal
control
over
financial
reporting
is
a
process
designed
to
provide
reasonable
assurance
regarding
the
reliability of financial
reporting and the
preparation of financial
statements for external
purposes in accordance with
generally accepted
accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted
accounting principles, and that
receipts and expenditures of
the company are being made
only in
accordance
with
authorizations
of
management
and
directors
of
the
company;
and
(3)
provide
reasonable
assurance
regarding
prevention or timely detection of
unauthorized acquisition, use, or disposition
of the company’s assets that could have
a material effect
on the financial statements.
Because
of
its
inherent
limitations,
internal
control
over
financial
reporting
may
not
prevent
or
detect
misstatements.
Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ KPMG Inc.
Johannesburg, Republic of South Africa
September 29, 2025
64
ITEM 9B.
OTHER INFORMATION
Our Section 16 officers and directors, as defined in Rule 16a-1(f) of the Securities
Exchange Act of 1934 (the “Exchange Act”),
may from time to time
enter into plans for the
purchase or sale of our
common stock that are
intended to satisfy the affirmative defense
conditions of Rule 10b5-1(c) of the Exchange Act. During the
quarter ended June 30, 2025, no officers or directors, as defined in
Rule
16a-1(f),
adopted
,
modified
,
or
terminated
a
“Rule
10b5-1
trading
arrangement”
or
a
“non-Rule
10b5-1
trading
arrangement,”
as
defined in Item 408 of Regulation S-K.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not applicable.
65
PART
III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Information
about
our
executive
officers
is
set
out
in
Part
I,
Item
1
under
the
caption
“Our
Executive
Officers.”
The
other
information required
by this
Item is incorporated
by reference
to the
sections of
our definitive
proxy statement
for our
2025 annual
meeting of shareholders entitled “Board of Directors and Corporate
Governance” and “Additional Information.”
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the sections of our definitive proxy
statement for our 2025
annual meeting of shareholders entitled
“Executive Compensation,” “Board of
Directors and Corporate Governance—Compensation
of Directors” and “—Remuneration Committee Interlocks and Insider Participation.”
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER
MATTERS
The information required by this Item is incorporated by reference to the sections of our definitive
proxy statement for our 2025
annual
meeting
of
shareholders
entitled
“Security
Ownership
of
Certain
Beneficial
Owners
and
Management”
and
“Equity
Compensation Plan Information.”
ITEM 13.
CERTAIN
RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this Item is incorporated by reference to the sections of our definitive proxy
statement for our 2025
annual
meeting
of
shareholders
entitled
“Certain
Relationships
and
Related
Transactions”
and
“Board
of
Directors
and
Corporate
Governance.”
ITEM 14.
PRINCIPAL ACCOUNTANT
FEES AND SERVICES
The information required by this Item is incorporated by reference to the sections of our definitive proxy
statement for our 2025
annual meeting of shareholders entitled “Audit and Non-Audit Fees.”
66
PART
IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
a)
The following documents are filed as part of this report
1. Financial Statements
The following financial statements are included on pages F-1 through F-83.
Report of the Independent Registered Public Accounting Firm
–
KPMG, Inc.
(PCAOB Firm ID
1025
)
F-2
Report of the Independent Registered Public Accounting Firm
–
Deloitte & Touche
(South Africa) (PCAOB
Firm ID 0
1130
)
F-4
Consolidated balance sheets as of June 30, 2025 and 2024
F-5
Consolidated statements of operations for the years ended June 30, 2025,
2024 and 2023
F-6
Consolidated statements of comprehensive (loss) income for the years ended June 30, 2025, 2024 and 2023
F-7
Consolidated statements of changes in equity for the years ended June 30, 2025, 2024 and 2023
F-8
Consolidated statements of cash flows for the years ended June 30, 2025, 2024 and 2023
F-11
Notes to the consolidated financial statements
F-12
2. Financial Statement Schedules
Financial statement schedules have been
omitted since they are
either not required, not
applicable, or the
information is otherwise
included.
(b) Exhibits
Incorporated by Reference Herein
Exhibit
No.
Description of Exhibit
Included
Herewith
Form
Exhibit
Filing Date
2.1
Sale of Shares Agreement, dated October 31, 2021,
by and among Net1 Applied Technologies South
Africa Proprietary Limited; Net1 UEPS
Technologies, Inc.; Old Mutual Life Assurance
Company (South Africa) Limited; Lirast (Mauritius)
Company Limited; SIG International Investment
(BVI) Limited; Aldgate International Limited; Ivan
Michael Epstein; PFCC (BVI) Limited; PCF
Investments (BVI) Limited; Ovobix (RF) Proprietary
Limited; Luxanio 227 Proprietary Limited; Vista
Capital Investments Proprietary Limited; Vista
Treasury Proprietary Limited; K2021477132 (South
Africa) Proprietary Limited; and Cash Connect
Management Solutions Proprietary Limited.
8-K
10.1
November 2, 2021
2.2
Sale and Purchase Agreement, dated May 7, 2024,
between Lesaka Technologies Proprietary Limited;
Lesaka Technologies, Inc. and the parties listed in
Annexure A.
8-K
10.1
May 7, 2024
2.3
First Addendum to Sale and Purchase Agreement,
dated
October 1, 2024, between Lesaka Technologies
Proprietary
Limited; Lesaka Technologies, Inc. and
the parties listed in
Annexure A
8-K
2.2
October 1, 2025
2.4
Transaction Implementation Agreement, dated June
26, 2025, entered into between the parties listed in
Annexure A and the parties listed in Annexure B and
Lesaka Technologies Proprietary Limited and Zero
Research Proprietary Limited and Bank Zero Mutual
Bank and Naught Holdings Ltd.
8-K
2.1
June 26, 2025
3.1
Amended and Restated Articles of Incorporation
8-K
3.1
May 17, 2022
67
3.2
Amended and Restated By-Laws of Lesaka
Technologies, Inc.
8-K
3.2
May 17, 2022
4.1
Form of common stock certificate
10-K
4.1
September 9, 2022
4.2
Description of registrant’s securities
X
10.1*
Form of Restricted Stock Agreement
10-Q
10.49
February 7, 2023
10.2*
Form of Stock Option Agreement
10-Q
10.50
February 7, 2023
10.3*
Form of Restricted Stock Agreement (non-employee
directors)
10-Q
10.51
February 7, 2023
10.4*
Form of Indemnification Agreement
10-K
10.4
September 11, 2024
10.5*
Form of non-employee director agreement
10-K
10.5
August 24, 2017
10.6*
Amended and Restated 2022 Stock Incentive Plan of
Lesaka Technologies, Inc.
14A
A
September 30, 2022
10.7*
Amendment to the 2022 Amended and Restated
Stock Incentive Plan of Lesaka Technologies, Inc.
14A
B
April 22, 2024
10.8*
Employment Agreement, dated as of December 4,
2023, between Lesaka Technologies, Inc. and Ali
Mazanderani
8-K
10.1
December 4, 2023
10.9*
Option Award Agreement between Ali Mazanderani
and Lesaka Technologies, Inc.
14A
A
April 22, 2024
10.10*
Contract of Employment, effective February 5, 2021,
between Net1 Applied Technologies South Africa
Proprietary Limited and Lincoln Mali
8-K
10.1
February 11, 2021
10.11*
Restrictive Covenants Agreement, effective February
5, 2021, between Net1 Applied Technologies South
Africa Proprietary Limited and Lincoln Mali
8-K
10.2
February 11, 2021
10.12*
Contract of Employment, dated as of December 9,
2021, between Net1 Applied Technologies South
Africa (Pty) Ltd and Naeem Kola
8-K
10.1
December 10, 2021
10.13*
Restrictive Covenants Agreement, dated as of
December 9, 2021, between Net1 Applied
Technologies South Africa (Pty) Ltd and Naeem Kola
8-K
10.2
December 10, 2021
10.14*
Employment Agreement, dated as of December 9,
2021, between Net 1 UEPS Technologies, Inc. and
Naeem Kola
8-K
10.3
December 10, 2021
10.15*
Restrictive Covenants Agreement, dated as of
December 9, 2021, between Net 1 UEPS
Technologies, Inc. and Naeem Kola
8-K
10.4
December 10, 2021
10.16*
Employment Agreement, dated as of February 8,
2023, between Lesaka Technologies, Inc. and Steven
John Heilbron
10-Q
10.52
May 9, 2023
10.17*
Restrictive Covenants Agreement, dated as of
February 8, 2023, between Lesaka Technologies, Inc.
and Steven John Heilbron
10-Q
10.53
May 9, 2023
10.18*
Contract of Employment, dated as of October 1,
2024,
between Lesaka Technologies (Pty) Ltd and
Daniel Luke
Smith
10-Q
10.53
May 7, 2025
10.19*
Restrictive Covenants Agreement, dated as of October
1,
2024, between Lesaka Technologies (Pty) Ltd and
Daniel
Luke Smith
10-Q
10.54
May 7, 2025
10.20*
Employment Agreement, dated as of October 1, 2024,
between Lesaka Technologies, Inc. and Daniel Luke
Smith
10-Q
10.55
May 7, 2025
10.21*
Restrictive Covenants Agreement, dated as of October
1,
2024, between Lesaka Technologies, Inc. and
Daniel Luke Smith
10-Q
10.56
May 7, 2025
10.22
Policy Agreement, dated April 11, 2016, among the
Company and the IFC Investors
8-K
10.32
April 12, 2016
68
10.23
Amended & Restated Policy Agreement, dated
October 28,
2024, among Lesaka Technologies, Inc.
and the IFC
Investors
10-Q
10.43
February 5, 2025
10.24
Cooperation Agreement, dated May 13, 2020, by and
between Net 1 UEPS Technologies, Inc. and VCP
(Proprietary) Limited
8-K
10.1
May 14, 2020
10.25
Amendment No. 1 to Cooperation Agreement, dated
December 9, 2020, by and between Net 1 UEPS
Technologies, Inc. and Value Capital Partners (Pty)
Ltd
8-K
10.1
December 10, 2020
10.26
Amendment No. 2 to Cooperation Agreement, dated
March 22, 2022, by and between Net 1 UEPS
Technologies, Inc. and Value Capital Partners (Pty)
Ltd
10-K
10.32
September 9, 2022
10.27
Securities Purchase Agreement, dated March 22, 2022,
among Net1 UEPS Technologies, Inc., Net1 Applied
Technologies South Africa Proprietary Limited and
Value Capital Partners Proprietary Limited
10-Q
10.58
May 10, 2022
10.28
Amendment No. 1 to Securities Purchase Agreement
dated March 16, 2023, among Lesaka Technologies,
Inc. (formerly Net1 UEPS Technologies, Inc.), Lesaka
Technologies Proprietary Limited (formerly Net1
Applied Technologies South Africa Proprietary
Limited) and Value Capital Partners Proprietary
Limited
8-K
10.3
March 22, 2023
10.29
Sale of Shares Agreement dated October 1, 2024,
between
Lesaka Technologies Proprietary Limited and
Crossfin
Holdings Proprietary Limited
8-K
10.40
October 1, 2024
10.30
Trust Deed of the Lesaka Employee Share Trust
entered
into between Lesaka Technologies, Inc. and
Nomaxabiso
Norma Teyise and Zwelethu Masinga
14A
A
October 2, 2024
10.31
Relationship Agreement between Lesaka
Technologies,
Inc. and the Trustees for the time being
of the Lesaka
Employee Share Trust
14A
B
October 2, 2024
10.32
Common Terms Agreement Senior Term Loan,
Revolving
Loan and Working Capital Facilities and
Lesaka
Technologies Proprietary Limited (as
Term/RCF Borrower)
and FirstRand Bank Limited
(acting through its Rand
Merchant Bank division) (as
Facility Agent) and Bowwood
and Main No 408 (RF)
Proprietary Limited (as Debt
Guarantor) dated
February 27, 2025
10-Q
10.46
May 7, 2025
10.33
Senior Term Facility A Agreement between Lesaka
Applied Technologies Proprietary Limited (as
Term/RCF
Borrower) and The Persons Listed in
Annexure A (as
Original Senior Term Facility A
Lenders) and FirstRand
Bank Limited (acting through
its Rand Merchant Bank
Division) (as Facility Agent)
dated February 27, 2025
10-Q
10.47
May 7, 2025
10.34
Senior Term Facility B Agreement between Lesaka
Applied
Technologies Proprietary Limited (as
Term/RCF Borrower)
and The Persons Listed in
Annexure A (as Original Senior
Term Facility B
Lenders) and FirstRand Bank Limited
(acting through
its Rand Merchant Bank Division) (as
Facility Agent)
dated February 27, 2025
10-Q
10.48
May 7, 2025
69
10.35
Senior RCF Agreement between Lesaka Applied
Technologies Proprietary Limited (as Term/RCF
Borrower)
and The Persons Listed in Annexure A (as
Original Senior
RCF Lenders) and FirstRand Bank
Limited (acting through
its Rand Merchant Bank
Division) (as Facility Agent) dated
February 27, 2025
10-Q
10.49
May 7, 2025
10.36
Pledge and Cession in Security Agreement between
Lesaka
Technologies, Inc. (as Cedent) and Lesaka
Technologies
Proprietary Limited (as Obligors' agent
and Term/RCF
Borrower) and Bowwood and Main No
408 (RF)
Proprietary Limited (as Debt Guarantor) and
FirstRand
Bank Limited (acting through its Rand
Merchant Bank
Division) (as Facility Agent) dated
February 27, 2025
10-Q
10.50
May 7, 2025
10.37
Subordination Agreement between Lesaka Applied
Technologies Proprietary Limited (as Term/RCF
Borrower)
and The Persons Listed in Annexure A (as
Original
Subordinated Parties) and The Persons Listed
in Annexure
B (as Original Obligors) and The Persons
Listed in
Annexure C (As Original Lenders) and
FirstRand Bank
Limited (acting through its Rand
Merchant Bank Division)
(as Facility Agent) and
Bowwood and Main No 408 (RF)
Proprietary Limited
(as Debt Guarantor) dated February 28,
2025
10-Q
10.51
May 7, 2025
10.38
General Banking Facility Agreement dated February
27,
2025 between Lesaka Technologies (Proprietary)
Limited
and FirstRand Bank Limited (acting through
its Rand
Merchant Bank division)
10-Q
10.52
May 7, 2025
10.39
Facility Letter between Nedbank Limited and Net1
Applied Technologies South Africa Limited and
certain of its subsidiaries dated as of December 13,
2013 and First Addendum thereto dated as of
December 18, 2013
8-K
10.27
December 19, 2013
10.40
Letter from Nedbank Limited to Net1 Applied
Technologies South Africa Proprietary Limited and
certain of its subsidiaries, dated December 7, 2016
8-K
10.50
December 9, 2016
10.41
Revolving Credit Facility Agreement, dated
November 29, 2022, between Cash Connect Capital
Proprietary Limited, the Parties Listed in Part I of
Schedule 1 (the Original Guarantors) and FirstRand
Bank Limited (acting through its Rand Merchant Bank
division) (as Lender)
8-K
10.1
December 5, 2022
10.42
Senior Facility E Agreement, dated September 26,
2018, among Net1 Applied Technologies South Africa
Proprietary Limited, FirstRand Bank Limited (acting
through its Rand Merchant Bank division), as lender,
and FirstRand Bank Limited (acting through its Rand
Merchant Bank division), as agent
8-K
10.96
October 2, 2018
10.43
Letter of Amendment, dated August 2, 2021, among
Net1 Applied Technologies South Africa Proprietary
Limited and FirstRand Bank Limited (acting through
its Rand Merchant Bank division), as lender, related to
the amendment to the Senior Facility E Agreement
8-K
10.1
August 2, 2021
10.44
Letter of Amendment, dated January 22, 2024, among
Lesaka Proprietary Limited and FirstRand Bank
Limited (acting through its Rand Merchant Bank
division), as lender, related to the amendment to the
Senior Facility E Agreement
8-K
10.1
January 23, 2024
70
10.45
Fifth Amendment and Restatement Agreement, dated
March 16, 2023, between Lesaka Technologies
Proprietary Limited (as borrower), and FirstRand Bank
Limited (acting through its Rand Merchant Bank
division) (as lender), and FirstRand Bank Limited
(acting through its Rand Merchant Bank division) (as
facility agent)
8-K
10.1
March 22, 2023
10.46
Amendment and Restatement Agreement, dated
November 24, 2023, between Lesaka Technologies
Proprietary Limited (as borrower), and FirstRand Bank
Limited (acting through its Rand Merchant Bank
division) (as lender), and FirstRand Bank Limited
(acting through its Rand Merchant Bank division) (as
facility agent)
8-K
10.1
December 1, 2023
10.47
First Amendment and Restatement Agreement, dated
March 22, 2023, between Cash Connect Management
Solutions Proprietary Limited (as borrower), arranged
by FirstRand Bank Limited (acting through its Rand
Merchant Bank division) (as mandated lead arranger),
and FirstRand Bank Limited (acting through its Rand
Merchant Bank division) (as facility agent)
8-K
10.2
March 22, 2023
10.48
Third Addendum to Facility Letter no.:
LM/CCMS/01/2021
between FirstRand Bank Ltd,
Cash Connect Management
Solutions (Pty) Ltd, Main
Street 1723 (Pty) Ltd, Cash
Connect Rentals (Pty) Ltd;
and K2020 Connect (Pty) Ltd
dated October 29, 2024
10-Q
10.41
November 6, 2024
10.49
Facility Letter dated September 30, 2024 between
Lesaka
Technologies (Proprietary) Limited and
FirstRand Bank
Limited (acting through its Rand
Merchant Bank division)
8-K
10.1
October 1, 2024
10.50
First Addendum to the Facility Letter dated December
10,
2024 between Lesaka Technologies (Proprietary)
Limited
and FirstRand Bank Limited (acting through
its Rand
Merchant Bank division)
8-K
10.1
December 10, 2024
14
Code of Ethics
X
19
Insider Trading Policy
X
21
Subsidiaries of Registrant
X
23.1
Consent of Independent Registered Public
Accounting Firm - KPMG, Inc.
X
23.2
Consent of Independent Registered Public
Accounting Firm - Deloitte & Touche (South Africa)
X
31.1
Certification of Principal Executive Officer pursuant
to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as amended
X
31.2
Certification of Principal Financial Officer pursuant
to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as amended
X
32
Certification pursuant to 18 USC Section 1350
X
97
Compensation Clawback Policy
X
101.INS
XBRL Instance Document
X
101.SCH
XBRL Taxonomy
Extension Schema
X
101.CAL
XBRL Taxonomy
Extension Calculation Linkbase
X
101.DEF
XBRL Taxonomy
Extension Definition Linkbase
X
101.LAB
XBRL Taxonomy
Extension Label Linkbase
X
101.PRE
XBRL Taxonomy
Extension Presentation Linkbase
X
104
Cover Page Interactive Data File (formatted as inline
XBRL and continued in Exhibit 101)
X
* Indicates a management contract or compensatory plan or arrangement.
71
ITEM 16.
FORM 10-K SUMMARY
None.
72
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LESAKA TECHNOLOGIES, INC.
By: /s/ Ali Mazanderani
Ali Mazanderani
Executive Chairman and Director
Date: September 29, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report
has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
NAME
TITLE
DATE
/s/ Kuben Pillay
Lead Independent Director and Director
September 29, 2025
Kuben Pillay
/s/ Ali Mazanderani
Executive Chairman and Director (Principal Executive
Officer)
September 29, 2025
Ali Mazanderani
/s/ Dan L. Smith
Group Chief Financial Officer and Director (Principal
Financial and Accounting Officer)
September 29, 2025
Dan L. Smith
/s/ Antony C. Ball
Director
September 29, 2025
Antony C. Ball
/s/ Nonkululeko N. Gobodo
Director
September 29, 2025
Nonkululeko N. Gobodo
/s/ Naeem E. Kola
Director
September 29, 2025
Naeem E. Kola
/s/ Steven J. Heilbron
Director
September 29, 2025
Steven J. Heilbron
/s/ Lincoln C. Mali
Director
September 29, 2025
Lincoln C. Mali
/s/ Sharron Venessa
Naidoo
Director
September 29, 2025
Sharron Venessa
Naidoo
/s/ Ekta Singh-Bushell
Director
September 29, 2025
Ekta Singh-Bushell
/s/ Dean Sparrow
Director
September 29, 2025
Dean Sparrow
F-1
LESAKA TECHNOLOGIES, INC.
LIST OF CONSOLIDATED
FINANCIAL STATEMENTS
Report of the Independent Registered Public Accounting Firm – KPMG Inc.
F-2
Report of the Independent Registered Public Accounting Firm
– Deloitte & Touche (South
Africa)
F-4
Consolidated balance sheets as of June 30, 2025 and 2024
F-5
Consolidated statements of operations for the years ended June 30, 2025, 2024 and 2023
F-6
Consolidated statements of comprehensive (loss) income for the years ended June 30, 2025, 2024 and 2023
F-7
Consolidated statements of changes in equity for the years ended June 30, 2025, 2024 and 2023
F-8
Consolidated statements of cash flows for the years ended June 30, 2025, 2024 and 2023
F-11
Notes to the consolidated financial statements
F-12
F-2
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the shareholders
and Board of Directors of Lesaka Technologies,
Inc.
Opinion on the Consolidated Financial Statements
We
have audited
the accompanying
consolidated balance
sheets of
Lesaka Technologies,
Inc. and subsidiaries
(the Company)
as of June 30, 2025 and 2024,
the related consolidated statements of operations, comprehensive loss or income, changes
in equity, and
cash
flows
for
each of
the years
in
the
two-year
period
ended
June
30,
2025,
and
the related
notes
(collectively,
the consolidated
financial statements). In our opinion, the consolidated
financial statements present fairly, in all material respects, the
financial position
of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year
period ended June 30, 2025, in conformity with U.S. generally accepted
accounting principles.
We
also have
audited, in
accordance with
the standards
of the
Public Company
Accounting
Oversight Board
(United States)
(PCAOB), the Company’s internal
control over financial
reporting as of
June 30, 2025,
based on criteria
established in
Internal Control
– Integrated Framework
(2013)
issued by the Committee
of Sponsoring Organizations
of the Treadway
Commission, and our report
dated September 29,
2025 expressed
an adverse opinion
on the
effectiveness of the
Company’s internal control over
financial reporting.
Basis for Opinion
These consolidated
financial statements
are the
responsibility of
the Company’s
management. Our
responsibility is
to express
an opinion on these
consolidated financial statements based on
our audits. We are a public accounting
firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the
audit to
obtain reasonable
assurance about
whether the
consolidated financial
statements are
free of
material misstatement,
whether
due
to
error
or
fraud.
Our
audits included
performing
procedures
to
assess
the
risks
of
material
misstatement
of
the
consolidated
financial statements, whether
due to error or
fraud, and performing
procedures that respond
to those risks. Such
procedures included
examining, on
a test basis,
evidence regarding
the amounts
and disclosures
in the
consolidated financial
statements. Our
audits also
included evaluating
the accounting principles
used and significant
estimates made by
management, as well
as evaluating
the overall
presentation of the consolidated financial statements. We
believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical
audit matters
communicated
below are
matters arising
from the
current period
audit of
the
consolidated
financial
statements
that
were
communicated
or
required
to
be
communicated
to
the
audit
committee
and
that:
(1)
relate
to
accounts
or
disclosures
that
are
material
to
the
consolidated
financial
statements
and
(2)
involved
our
especially
challenging,
subjective,
or
complex judgments. The
communication of critical audit
matters does not alter
in any way our
opinion on the
consolidated financial
statements, taken
as a whole,
and we are
not, by communicating
the critical audit
matters below,
providing separate opinions
on the
critical audit matters or on the accounts or disclosures to which they
relate.
Assessment of goodwill impairment test for certain reporting units
As discussed in Notes 2 and 10
to the consolidated financial statements,
the Company recorded goodwill
of $199,395 thousand
as of June 30, 2025.
The Company tests for impairment
of goodwill on an annual
basis and at any
other time if events
or circumstances
change
that could
trigger an
impairment
test. The
Company uses
a discounted
cash flow
model to
estimate the
fair value
for each
reporting
unit,
which
requires
the
Company
to
make
significant
estimates
and
certain
assumptions
related
to
the
reporting
units’
revenue growth rates, terminal revenue growth rates, forecast period for
certain reporting units and weighted average cost of capital.
We
identified the
assessment of
the Company’s
goodwill impairment
test for
certain reporting
units as
a critical
audit matter.
Subjective
auditor
judgement
and
specialized
skills
and
knowledge
were
required
to
evaluate
certain
assumptions
used
in
the
discounted
cashflow
model.
Specifically,
reporting
units’ revenue
growth
rates,
terminal revenue
growth
rates, forecast
period
for
certain reporting units and
the weighted average cost of capital.
Changes in these assumptions
could have a significant impact
on the
fair value of the reporting units.
The following are the primary procedures we performed to address this critical audit
matter:
•
We
evaluated
the
revenue
growth
rates
by
comparing
the
revenue
growth
rates
against
historic
performance,
approved
budgets and challenged management on the expected future performance
based on reporting unit specific factors.
•
We performed sensitivity analyses over revenue growth rates and the
forecast period of certain reporting
units to assess their
impact on the Company’s determination
of the fair values in respect to the reporting units.
F-3
•
We involved
valuation professionals with specialized skills and knowledge who assisted in:
o
independently recalculating
the terminal revenue
growth rates for the
reporting units considering
industry,
product
and country specific information;
o
evaluating the weighted average cost of capital, by developing an independent estimate of weighted average cost of
capital range and
comparing it to
the weighted average
cost of capital
selected by the
Company for each
reporting
unit; and
o
performing a sensitivity
and scenario type
analysis on terminal
revenue growth rates
and weighted average
cost of
capital to assess the impact of changes in those
assumptions on the Company’s
determination of fair value for each
reporting unit.
Assessment of certain intangibles assets acquired through business combinations
As
discussed
in
Notes
2,
3
and
10
to
the
consolidated
financial
statements,
the
Company,
through
its
subsidiary,
Lesaka
Technologies
Proprietary Limited, acquired 100%
of the equity interests of Adumo
(RF) Proprietary Limited (“Adumo”)
on October
1, 2024 and Recharger Proprietary
Limited (“Recharger”) on March 3,
2025, respectively. As a result of
the transactions, the Company
recognized
intangible
assets,
such
as
brands
of
$3,623
thousand
which
related
to
Adumo,
and
customer
relationships
of
$11,185
thousand and $15,010 thousand related to Adumo and Recharger,
respectively. The fair values of
the brands were estimated based on
a relief
from royalty
approach, which
included assumptions
such as
useful lives
and the
weighted average
cost of
capital. The
fair
values
of
the
customer
relationships
were
estimated
based
on
a
multi-periods
excess
earnings
method,
which
included
certain
assumptions such as expected future revenues, useful lives, and weighted
average costs of capital.
We
identified
the
assessment
of
the
fair
value
of
the
brands
and
customer
relationships
acquired
through
the
Adumo
and
Recharger business
combinations as
a critical
audit matter.
A high
degree of
auditor judgement
was required
to assess the
expected
future revenues used to estimate the fair value of the
customer relationships; and the useful lives and weighted average costs
of capital
used to estimate the fair value of the brands
and customer relationships. Changes in these assumptions
could have a significant effect
on the fair value of the intangible assets.
The following are the primary procedures we performed to address this critical audit
matter:
•
We performed sensitivity analyses over expected
future revenues, useful lives
and weighted average
costs of capital
to assess
their
impact
on
the
Company’s
determination
of
the
fair
values
of
the
respective
intangible
assets
acquired
through
the
business combination.
•
We
involved valuation professionals with specialized skills and
knowledge who assisted in evaluating the:
o
estimated useful lives for brands by comparing them to observable useful
lives in similar transactions;
o
estimated useful
lives for customer
relationships by
developing independent
estimated useful
lives and comparing
them to the useful lives selected by the Company; and
o
weighted average costs of capital
used by developing an independent estimated
of a weighted average cost
of capital
range and comparing this range to the weighted average costs of capital selected
by the Company.
/s/
KPMG Inc.
We have served
as the Company’s auditor since 2024.
Johannesburg, Republic of South Africa
September 29, 2025
F-4
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the shareholders
and the Board of Directors of Lesaka Technologies,
Inc.
Opinion on the Financial Statements
We have audited the accompanying
consolidated statements of operations, comprehensive (loss) income, changes in equity,
and
cash
flows,
for
the
year
ended
June
30,
2023,
and
the
related
notes
(collectively
referred
to
as the
“financial
statements”).
In
our
opinion, the 2023 financial statements present fairly, in all material respects, the results
of its operations and its cash
flows for the year
ended June 30, 2023, in conformity with accounting principles generally accepted
in the United States of America.
Basis for Opinion
These financial statements
are the responsibility
of the Company's
management. Our
responsibility is to express
an opinion on
the
Company's
financial
statements
based
on
our
audit.
We
are
a
public
accounting
firm
registered
with
the
Public
Company
Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance
with the
U.S. federal
securities laws
and
the applicable
rules and
regulations
of the
Securities and
Exchange
Commission
and
the
PCAOB.
We conducted
our audit in accordance with
the standards of the PCAOB. Those
standards require that we plan
and perform the
audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether
due to error or
fraud. Our audit included performing
procedures to assess the risks of
material misstatement of the financial
statements, whether due
to error or fraud, and
performing procedures that respond to those risks.
Such procedures included examining, on a
test basis, evidence
regarding the
amounts and disclosures
in the financial
statements. Our audit
also included evaluating
the accounting principles
used
and significant estimates made by
management, as well as evaluating
the overall presentation of the financial
statements. We
believe
that our audit provides a reasonable basis for our opinion.
/s/ Deloitte & Touche
Deloitte & Touche
Registered Auditors
Johannesburg, South Africa
September 12, 2023 (September 29, 2025 as to Notes 10, 16 and 21)
We began serving
as the Company's auditor in 2004. In 2023 we became the predecessor auditor.
LESAKA TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
as of June 30, 2025 and 2024
F-5
June 30,
June 30,
2025
2024
(A)
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
76,520
$
59,065
Restricted cash related to ATM funding
and short-term credit facilities (Note 12)
119
6,853
Accounts receivable, net and other receivables (Note 4)
42,525
36,667
Finance loans receivable, net (Note 4)
74,110
44,058
Inventory (Note 5)
23,551
18,226
Total current assets before settlement assets
216,825
164,869
Settlement assets
27,098
22,827
Total current assets
243,923
187,696
PROPERTY,
PLANT AND EQUIPMENT, NET (Note 7)
44,924
31,936
OPERATING LEASE RIGHT-OF-USE (Note 8)
9,691
7,280
EQUITY-ACCOUNTED INVESTMENTS
(Note 9)
199
206
GOODWILL (Note 10)
199,395
138,551
INTANGIBLE ASSETS, NET (Note 10)
139,215
111,353
DEFERRED TAX ASSETS, NET
12,554
3,446
OTHER LONG-TERM ASSETS, including equity securities (Note 9 and 11)
3,809
77,982
TOTAL ASSETS
653,710
558,450
LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities for ATM funding (Note 12)
-
6,737
Short-term credit facilities (Note 12)
24,469
9,351
Accounts payable
19,867
16,674
Other payables (Note 13)
72,079
56,051
Operating lease liability - current (Note 8)
4,007
2,343
Current portion of long-term borrowings (Note 12)
11,956
15,719
Income taxes payable
1,400
654
Total current liabilities before settlement obligations
133,778
107,529
Settlement obligations
26,695
22,358
Total current liabilities
160,473
129,887
DEFERRED TAX LIABILITIES, NET
33,921
38,128
OPERATING LEASE LIABILITY - LONG TERM (Note 8)
6,129
5,087
LONG-TERM BORROWINGS (Note 12)
188,813
127,467
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 11)
2,991
2,595
TOTAL LIABILITIES
392,327
303,164
REDEEMABLE COMMON STOCK (Note 14)
88,957
79,429
EQUITY
COMMON STOCK (Note 14)
Authorized:
200,000,000
with $
0.001
par value;
Issued and outstanding shares, net of treasury - 2025:
81,249,097
; 2024:
64,272,243
103
83
PREFERRED STOCK
Authorized shares:
50,000,000
with $
0.001
par value;
Issued and outstanding shares, net of treasury:
2025:
-
; 2024:
-
-
-
ADDITIONAL PAID-IN-CAPITAL
426,950
343,639
TREASURY SHARES, AT
COST: 2025:
29,934,044
; 2024:
25,563,808
(298,523)
(289,733)
ACCUMULATED OTHER
COMPREHENSIVE LOSS (Note 15)
(185,664)
(188,355)
RETAINED EARNINGS
222,719
310,223
TOTAL LESAKA EQUITY
165,585
175,857
NON-CONTROLLING INTEREST
6,841
-
TOTAL EQUITY
172,426
175,857
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY
$
653,710
$
558,450
(A) – The Company reclassified an amount of $
11,841
from long-term borrowings to current portion of long-term borrowings, refer to Note 1.
See accompanying notes to consolidated financial statements.
LESAKA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT
OF OPERATIONS
for the years ended June 30, 2025, 2024 and 2023
F-6
2025
2024
2023
(In thousands, except per share data)
REVENUE (Note 16)
$
659,701
$
564,222
$
527,971
Services rendered
613,201
529,818
486,800
Loan-based fees received
37,344
29,948
25,308
Sale of goods
9,157
4,456
15,863
EXPENSE
Cost of goods sold, IT processing, servicing and support, exclusive of depreciation and
amortization shown separately below
486,546
442,673
417,544
Selling, general and administration, exclusive of depreciation and amortization shown
separately below
(A)
131,512
91,969
95,050
Depreciation and amortization
33,721
23,665
23,685
Transaction costs related to Adumo, Recharger and Bank Zero acquisitions and certain
compensation costs (Note 3)
(A)
16,159
2,325
-
Impairment loss (Note 10)
18,863
-
7,039
OPERATING (LOSS) INCOME
(27,100)
3,590
(15,347)
CHANGE IN FAIR VALUE
OF EQUITY SECURITIES (Note 6 and 9)
(59,828)
-
-
LOSS ON DISPOSAL OF EQUITY-ACCOUNTED INVESTMENT (Note 9)
161
-
205
REVERSAL OF ALLOWANCE FOR
DOUBTFUL EMI DEBT RECEIVABLE
(Note 9)
-
250
-
INTEREST INCOME
2,596
2,294
1,853
INTEREST EXPENSE
21,453
18,932
18,567
LOSS BEFORE INCOME TAX (BENEFIT) EXPENSE
(105,946)
(12,798)
(32,266)
INCOME TAX (BENEFIT) EXPENSE (Note 18)
(18,198)
3,363
(2,309)
LOSS BEFORE EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS
(87,748)
(16,161)
(29,957)
EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS (Note 9)
114
(1,279)
(5,117)
NET LOSS FROM CONTINUING OPERATIONS
(87,634)
(17,440)
(35,074)
ADD NET LOSS ATTRIBUTABLE
TO NON-CONTROLLING INTEREST
130
-
-
NET LOSS ATTRIBUTABLE
TO LESAKA
$
(87,504)
$
(17,440)
$
(35,074)
Net loss per share, in United States dollars
(Note 19):
Basic loss attributable to Lesaka shareholders
$
(1.14)
$
(0.27)
$
(0.56)
Diluted loss attributable to Lesaka shareholders
$
(1.14)
$
(0.27)
$
(0.56)
(A) – Recharger transactions costs for the year ended June 30, 2024, of $
0.03
million have been reallocated from Selling, general and administration
to Transaction costs related to Adumo, Recharger and Bank Zero acquisitions and certain compensation costs in the consolidated statement
operations, refer to Note 3.
See accompanying notes to consolidated financial statements.
LESAKA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT
OF COMPREHENSIVE (LOSS) INCOME
for the years ended June 30, 2025, 2024 and 2023
F-7
2025
2024
2023
(In thousands)
Net loss
$
(87,634)
$
(17,440)
$
(35,074)
Other comprehensive income (loss), net of taxes:
Movement in foreign currency translation reserve
2,502
6,291
(31,183)
Movement in foreign currency translation reserve related to equity-accounted
investments (Note 15)
-
489
3,935
Release of foreign currency translation reserve related to disposal of Finbond
equity
securities (Note 9 and Note 15)
-
1,543
362
Release of foreign currency translation reserve related to liquidation of subsidiaries
(Note 15)
6
(952)
-
Total other comprehensive
income (loss), net of taxes
2,508
7,371
(26,886)
Comprehensive loss
(85,126)
(10,069)
(61,960)
Add comprehensive income attributable to non-
controlling interest
313
-
-
Comprehensive loss attributable to Lesaka
$
(84,813)
$
(10,069)
$
(61,960)
See accompanying notes to consolidated financial statements
LESAKA TECHNOLOGIES, INC.
Consolidated Statement of Changes in Equity for the year ended June 30, 2023 (dollar amounts in thousands)
F-8
Lesaka Technologies, Inc. Shareholders
Number of
Shares
Amount
Number of
Treasury
Shares
Treasury
Shares
Number of
shares, net of
treasury
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
other
comprehensive
loss
Total
Lesaka
Equity
Non-
controlling
Interest
Total
Redeemable
common
stock
Balance – July 1,
2022
87,215,613
$
83
(24,891,292)
$
(286,951)
62,324,321
$
327,891
$
362,737
$
(168,840)
$
234,920
$
-
$
234,920
$
79,429
Treasury shares repurchased
(352,994)
(1,287)
(352,994)
-
(1,287)
(1,287)
Shares issued (Note 17)
206,239
-
206,239
-
-
-
Restricted stock granted
1,418,386
1,418,386
-
-
-
Exercise of stock options
158,659
158,659
481
481
481
Stock-based compensation charge (Note
17)
7,673
7,673
7,673
Reversal of stock-based compensation
charge (Note 17)
(114,365)
(114,365)
(364)
(364)
(364)
Stock-based compensation charge
related to equity-accounted investment
(Note 9)
15
15
15
Net loss
(35,074)
(35,074)
-
(35,074)
Other comprehensive loss (Note 15)
(26,886)
(26,886)
-
(26,886)
Balance – June 30, 2023
88,884,532
$
83
(25,244,286)
$
(288,238)
63,640,246
$
335,696
$
327,663
$
(195,726)
$
179,478
$
-
$
179,478
$
79,429
LESAKA TECHNOLOGIES, INC.
Consolidated Statement of Changes in Equity for the year ended June 30, 2024 (dollar amounts in thousands)
F-9
Lesaka Technologies, Inc. Shareholders
Number of
Shares
Amount
Number of
Treasury
Shares
Treasury
Shares
Number of
shares, net of
treasury
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
other
comprehensive
loss
Total
Lesaka
Equity
Non-
controlling
Interest
Total
Redeemable
common
stock
Balance – July 1,
2023
88,884,532
$
83
(25,244,286)
$
(288,238)
63,640,246
$
335,696
$
327,663
$
(195,726)
$
179,478
$
-
$
179,478
$
79,429
Treasury shares repurchased
(319,522)
(1,495)
(319,522)
-
(1,495)
(1,495)
Shares issued (Note 17)
194,454
194,454
-
-
-
Restricted stock granted
1,002,241
1,002,241
-
-
-
Exercise of stock options
54,287
54,287
165
165
165
Stock-based compensation charge (Note
17)
8,045
8,045
8,045
Reversal of stock-based compensation
charge (Note 17)
(299,463)
(299,463)
(134)
(134)
(134)
Stock-based compensation charge
related to equity-accounted investment
(Note 9)
(133)
(133)
(133)
Net loss
(17,440)
(17,440)
-
(17,440)
Other comprehensive income (Note 15)
7,371
7,371
-
7,371
Balance – June 30, 2024
89,836,051
$
83
(25,563,808)
$
(289,733)
64,272,243
$
343,639
$
310,223
$
(188,355)
$
175,857
$
-
$
175,857
$
79,429
LESAKA TECHNOLOGIES, INC.
Consolidated Statement of Changes in Equity for the year ended June 30, 2025 (dollar amounts in thousands)
F-10
Lesaka Technologies, Inc. Shareholders
Number of
Shares
Amount
Number of
Treasury
Shares
Treasury
Shares
Number of
shares, net of
treasury
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
other
comprehensive
loss
Total
Lesaka
Equity
Non-
controlling
Interest
Total
Redeemable
common
stock
Balance – July 1,
2024
89,836,051
$
83
(25,563,808)
$
(289,733)
64,272,243
$
343,639
$
310,223
$
(188,355)
$
175,857
$
-
$
175,857
$
79,429
Treasury shares repurchased
(5,462,597)
(13,660)
(5,462,597)
-
(13,660)
(13,660)
Shares issued (Note 14 and Note 17)
19,960,181
19
19,960,181
73,237
73,256
73,256
9,528
Gain recognized related to issue of
shares included in treasury shares (Note
3)
1,092,361
4,870
1,092,361
408
5,278
-
5,278
Restricted stock granted
1,499,610
1,499,610
-
-
-
Exercise of stock options
38,011
1
38,011
116
117
117
Stock-based compensation charge (Note
17)
9,639
9,639
9,639
Reversal of stock-based compensation
charge (Note 17)
(150,712)
(150,712)
(89)
(89)
(89)
Stock-based compensation charge
related to equity-accounted investment
(Note 9)
-
-
-
Adumo non-controlling interest
acquired (Note 3)
-
7,586
7,586
Net loss
(87,504)
(87,504)
(130)
(87,634)
Dividends paid to non-controlling
interests
-
(432)
(432)
Other comprehensive income (Note 15)
2,691
2,691
(183)
2,508
Balance – June 30, 2025
111,183,141
$
103
(29,934,044)
$
(298,523)
81,249,097
$
426,950
$
222,719
$
(185,664)
$
165,585
$
6,841
$
172,426
$
88,957
See accompanying notes to consolidated financial statements.
LESAKA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT
OF CASHFLOWS
for the years ended June 30, 2025, 2024 and 2023
F-11
2025
2024
2023
(In thousands)
Cash flows from operating activities
Net loss
$
(87,634)
$
(17,440)
$
(35,074)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
33,721
23,665
23,685
Impairment loss (Note 10)
18,863
-
7,039
Movement in allowance for credit losses
8,011
5,158
6,495
Fair value adjustment related to financial liabilities
(120)
(853)
(20)
Change in fair value of equity securities (Note 6 and 9)
59,828
-
-
Loss (Profit) on disposal of property, plant and equipment
13
(305)
(468)
Stock-based compensation charge (Note 17)
9,550
7,911
7,309
Loss on disposal of equity-accounted investment (Note 9)
161
-
205
(Earnings) Loss from equity-accounted investments (Note 9)
(114)
1,279
5,117
Movement in allowance for doubtful loans to equity-accounted investments
-
(250)
-
Dividends received from equity-accounted investments
96
95
42
Interest payable
4,723
1,119
5,069
Facility fee amortized (Note 12)
429
443
864
Changes in net working capital
Decrease (Increase) in accounts receivable (Note 20)
1,081
(10,873)
(1,687)
Increase in finance loans receivable (Note 20)
(34,614)
(10,029)
(12,353)
Decrease in inventory
169
9,840
2,172
(Decrease) Increase in accounts payable and other payables
(13,401)
22,141
1,705
Deferred consideration due to seller of Recharger included in accounts payable and
other payables (Note 3 and Note 13)
13,586
-
-
Increase (Decrease) in income taxes payable
485
(400)
(800)
Deferred tax expense (benefit)
(23,955)
(2,712)
(8,890)
Net cash (used in) provided by operating activities
(9,122)
28,789
410
Cash flows from investing activities
Capital expenditures
(17,199)
(12,665)
(16,156)
Proceeds from disposal of property, plant and equipment
1,938
1,565
1,497
Acquisition of intangible assets
(3,900)
(294)
(419)
Proceeds from disposal of equity securities (Note 6 and 9)
16,441
-
-
Acquisitions, net of cash acquired (Note 3)
(12,946)
(1,583)
-
Proceeds from disposal of equity-accounted investment (Note 9)
-
3,508
656
Repayment of loans by equity-accounted investments
-
250
112
Loans to equity-accounted investment (Note 9)
-
-
(112)
Net change in settlement assets
4,324
(7,196)
(2,036)
Net cash used in investing activities
(11,342)
(16,415)
(16,458)
Cash flows from financing activities
Proceeds from bank overdraft (Note 12)
98,616
182,990
520,065
Repayment of bank overdraft (Note 12)
(90,309)
(199,642)
(547,271)
Long-term borrowings utilized (Note 12)
190,061
23,728
24,355
Repayment of long-term borrowings (Note 12)
(149,511)
(20,073)
(17,512)
Non-refundable deal origination fees/ guarantee fees (Note 12)
(970)
-
(100)
Acquisition of treasury stock
(13,660)
(1,495)
(1,287)
Proceeds from exercise of stock options
116
165
481
Dividends paid to non-controlling interest
(432)
-
-
Net change in settlement obligations
(4,179)
7,214
2,148
Net cash provided by (used in) financing activities
29,732
(7,113)
(19,121)
Effect of exchange rate changes on cash
1,453
2,025
(10,999)
Net increase (decrease) in cash, cash equivalents and restricted cash
10,721
7,286
(46,168)
Cash, cash equivalents and restricted cash – beginning of period
65,918
58,632
104,800
Cash, cash equivalents and restricted cash – end of period (Note 20)
$
76,639
$
65,918
$
58,632
See accompanying notes to consolidated financial statements
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-12
1.
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
Lesaka Technologies, Inc. (“Lesaka” and collectively
with its consolidated subsidiaries, the “Company”), formerly named Net 1
UEPS Technologies, Inc., was incorporated in
the State of
Florida on May
8, 1997. The
Company is a
provider of financial technology,
or fintech, products and services, primarily in South Africa and neighboring
countries,
to unbanked and underbanked consumers, and
fintech solutions
for merchants
operating in
formal and
informal markets.
The Company
offers
an integrated
multiproduct platform
that provides transactional
accounts (banking), lending,
insurance, payouts, card
acquiring, cash
management, software and
Alternative
Digital Products (“ADP”). ADP includes the Company’s prepaid solutions and supplier
enabled payments. By providing a
full-service
fintech platform in its connected ecosystem, the Company facilitates the digitization of commerce in its markets and participate in the
secular shift from cash to digital.
Basis of presentation
The accompanying
consolidated financial
statements include
subsidiaries over
which Lesaka
exercises control
and have
been
prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”).
Revision of Previously Issued Financial Statements
In
April
2025,
the
Company
identified
that
it
had
misclassified
certain
of
its
long-term
borrowings.
The
Company’s
CCC
Revolving Credit Facility was scheduled to be repaid in full on November 2024, at the date of issue of the June 30, 2024 consolidated
financial statements,
but this
was extended
a number
of times
and was
ultimately refinanced
in September
2025 (refer
to Note
12).
The
Company
incorrectly
classified
amounts
due
under
its
CCC
Revolving
Credit
Facility
as
long-term
borrowings
instead
of
as
current portion
of long-term borrowings
in its audited
balance sheet as
of June 30,
2024. The table
below presents the
impact of the
revision of the Company’s financial
statements for the year ended June 30, 2024:
Consolidated balance sheet
As of June 30, 2024
As
previously
reported
Correction
Revised
Current portion of long-term borrowings
$
3,878
$
11,841
$
15,719
Long-term borrowings
$
139,308
$
(11,841)
$
127,467
The
correction
did
not
impact
the
Company’s
audited
consolidated
statements
of
operations,
consolidated
statements
of
comprehensive (loss) income, consolidated statement of changes
in equity, or consolidated statements of cash flows
for the year ended
June 30,
2024 and,
except as
noted above,
the Company’s
audited balance
sheet as
of June
30, 2024.
The misclassification
did not
affect compliance
with any
debt covenants.
The Company
assessed the
materiality of
this error and
change in
presentation on
prior
period consolidated
financial statements in
accordance with
SEC Staff
Accounting Bulletin
(“SAB”) No. 99
“Materiality” and SAB
No.
108,
“Considering
the
Effects
of
Prior
Year
Misstatements
when
Quantifying
Misstatements
in
the
Current
Year
Financial
Statements.” Based
on this
assessment, the
Company has
concluded that
previously issued
financial statements
were not
materially
misstated based upon overall considerations of both quantitative and qualitative
factors.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-13
2.
SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The financial statements of
entities which are controlled
by Lesaka, referred to as
subsidiaries, are consolidated. Inter-company
accounts and transactions are eliminated upon consolidation.
The Company, if it is the primary beneficiary,
consolidates entities which are considered to be variable interest entities (“VIE”).
The primary beneficiary is considered
to be the entity that will absorb a
majority of the entity's expected losses,
receive a majority of
the entity's expected residual returns, or both. The Company has an obligation to absorb the
financial losses of the Lesaka ESOP Trust
and also
has the
ability to
control this
trust and
therefore it
has been
consolidated. This
trust does
not generate
significant losses
or
residual returns.
Business combinations
The
Company
accounts
for
its
business
acquisitions
under
the
acquisition
method
of
accounting.
The
total
value
of
the
consideration paid
for acquisitions is
allocated to
the underlying
net assets acquired,
based on their
respective estimated fair
values.
The Company uses a number
of valuation methods to determine
the fair value of assets and
liabilities acquired, including discounted
cash
flows,
external
market
values,
valuations
on
recent
transactions
or
a
combination
thereof,
and
believes
that
it
uses
the
most
appropriate
measure
or
a
combination
of
measures
to
value
each
asset
or
liability.
The Company
recognizes
measurement-period
adjustments in the reporting period in which the adjustment amounts are determined.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions
that
affect
the
reported
amounts
of
assets
and
liabilities
and
disclosure
of
contingent
assets
and
liabilities
at
the
date
of
the
financial
statements
and
the reported
amounts
of revenues
and
expenses during
the reporting
period.
Actual results
could
differ
from
those
estimates.
Translation of foreign
currencies
The primary
functional currency
of the
consolidated entities
is the
South African
Rand (“ZAR”)
and the
Company’s
reporting
currency is the U.S. dollar.
Assets and liabilities are translated
at the exchange rates in effect
at the balance sheet date. Revenues
and
expenses are translated at average
rates for the period. Translation
gains and losses are reported in
accumulated other comprehensive
income in total
equity.
The Company releases the
foreign currency translation
reserve included in accumulated
other comprehensive
income attributable
to a foreign
entity upon sale
or complete, or
substantially complete,
liquidation of the
investment in that
foreign
entity and includes the release in the gain or loss reported related to the sale or
liquidation of the foreign entity.
Foreign exchange transactions are translated at the spot rate ruling at the date of the transaction. Monetary items are translated at
the closing
spot rate
at the
balance sheet
date. Transactional
gains and
losses are
recognized
in selling,
general and
administration
expense on the Company’s consolidated
statement of operations for the period.
Cash, cash equivalents and restricted cash
Cash and cash equivalents
include cash on hand and funds
deposited in bank accounts with
financial institutions that are liquid,
unrestricted and
readily available.
Restricted cash
represents cash
which is
legally or
contractually restricted
as to
use and
includes
cash related to cash withdrawn from the Company’s debt facilities to fund ATMs
as well cash in certain bank accounts that have been
ceded to under certain of the Company’s
borrowings.
Allowance for credit losses
The Company uses historical default experience over the lifetime of loans in order to calculate a lifetime loss rate for its lending
books. The allowance for credit losses related
to Consumer finance loans receivables is calculated by multiplying the
lifetime loss rate
with
the
month-end
outstanding
lending
book.
The
allowance
for
credit
losses
related
to
Merchant
finance
loans
receivables
is
calculated
by
adding
together
actual
receivables
in
default
plus
multiplying
the
lifetime
loss
rate
with
the
month-end
outstanding
lending book. The Company
writes off microlending
finance loans receivable and
related service fees and interest
if a borrower is
in
arrears with
repayments for
more than
three months
or is
deceased. The
Company writes
off merchant
and working
capital finance
receivables and related
fees when it is
evident that reasonable
recovery procedures,
including where deemed
necessary, formal
legal
action, have failed. Prior to July 1, 2023, the Company regularly reviewed the ageing of outstanding amounts due from borrowers and
adjusted its allowance based on management’s
estimate of the recoverability of the finance loans receivable.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-14
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Allowance for credit losses (continued)
The Company uses a lifetime loss rate by expressing write-off
experience as a percentage of corresponding invoice amounts (as
opposed to outstanding balances).
The allowance for credit
losses related to these
receivables has been calculated
by multiplying the
lifetime loss
rate with
recent invoice/origination amounts.
Prior to
July 1,
2023, a specific
provision is
established where it
is considered
likely that all or
a portion of
the amount due
from customers renting
safe assets, point of
sale (“POS”) equipment,
receiving support
and
maintenance
or
transaction
services
or
purchasing
licenses
or
SIM
cards
from
the
Company
will
not
be
recovered.
Non-
recoverability
is assessed
based
on a
quarterly
review
by management
of
the ageing
of outstanding
amounts,
the
location
and
the
payment history of the customer in relation to those specific amounts.
Inventory
Inventory
is valued
at the
lower of
cost and
net realizable
value. Cost
is determined
on a
first-in,
first-out basis
and includes
transport and handling costs.
Property, plant
and equipment
Property,
plant and
equipment are
shown at
cost less accumulated
depreciation. Property,
plant and
equipment are
depreciated
on the straight-line basis at rates which
are estimated to amortize the assets to
their anticipated residual values over their useful
lives.
Within the following asset classifications, the expected
economic useful lives are approximately:
Vaults
10
years
Computer equipment
3
to
8
years
Office equipment
2
to
10
years
Vehicles
3
to
8
years
Furniture and fittings
3
to
10
years
The gain or loss arising
on the disposal or retirement
of an asset is determined
as the difference between
the sales proceeds and
the carrying amount of the asset and is recognized in income.
Leases
The Company determines whether an arrangement is a lease at inception.
Operating leases are included in operating lease right-
of-use assets (“ROU”),
operating lease liability
- current, and
operating lease liability
– long term
in its consolidated
balance sheets.
The Company
does not
have any
significant finance
leases as
of June
30, 2025
and 2024,
respectively,
but its
policy is
to include
finance leases in property and equipment, other payables, and other
long-term liabilities in its consolidated balance sheets.
A ROU asset
represents the
Company’s
right to use
an underlying
asset for the
lease term and
the lease liabilities
represent its
obligation to
make lease
payments arising
from the
lease arrangement.
Operating lease
ROU assets
and liabilities
are recognized
at
commencement date based on
the present value of
lease payments over the
lease term. As
most of the
Company’s leases do not provide
an implicit rate,
the Company generally
uses its incremental
borrowing rate
based on
the estimated rate
of interest for
collateralized
borrowing over
a similar term
of the lease
payments at commencement
date. The operating
lease ROU asset
also includes any
lease
prepayments made
and excludes lease
incentives. The terms
of the Company’s
lease arrangements may
include options to
extend or
terminate
the
lease
when
it is
reasonably
certain
that
the Company
will exercise
that
option.
Lease
expense
for
lease payments
is
recognized on a straight-line basis over the lease term.
The Company does not recognize right-of-use assets and lease liabilities for lease arrangements with a term of twelve months or
less. The Company
accounts for all
components in a
lease arrangement as
a single combined
lease component. Costs
incurred in the
adaptation of leased properties to
serve the requirements of
the Company (leasehold improvements) are
capitalized and amortized over
the shorter of the estimated useful life of the asset and the remaining term of
the lease.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-15
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Equity-accounted investments
The Company uses the equity
method to account for
investments in companies when
it has significant influence but
not control
over
the operations
of the
company.
Under the
equity method,
the Company
initially records
the investment
at cost
and
thereafter
adjusts the carrying value of the investment to recognize its proportional share of the equity-accounted company’s net income or loss.
In addition, when an investment qualifies for the equity
method (as a result of an increase in the level of ownership
interest or degree
of influence),
the cost
of acquiring
the additional
interest in
the investee
is added
to the
current basis
of the
Company’s
previously
held interest and the equity method would be
applied subsequently from the date on which
the Company obtains the ability to exercise
significant influence over the investee.
The Company
releases a
pro rata
portion of
the foreign
currency translation
reserve related
to an
equity-accounted investment
that is
included
in accumulated
other comprehensive
income to
earnings upon
the sale
of a
portion of
its ownership
interest in
the
equity-accounted
investment.
The
release
of
the
pro
rata
portion
of
the
foreign
currency
translation
reserve
is
included
in
the
measurement of
the gain
or loss
on sale
of a
portion of
the Company’s
ownership interest
in the
equity-accounted investment.
The
Company does not recognize cumulative losses in excess of its investment or loans in an equity-accounted
investment except if it has
an obligation to provide additional financial support.
Dividends received from an equity-accounted investment reduce the carrying value
of the Company’s investment. The Company
has elected to classify distributions received from equity method investees using the nature of the distribution approach.
This election
requires the Company to evaluate
each distribution received on the
basis of the source of the
payment and classify the distribution
as
either
operating
cash
inflows
or
investing
cash
inflows.
The
Company
reviews
its
equity-accounted
investments
for
impairment
whenever events or circumstances indicate that the carrying amount of
the investment may not be recoverable.
Goodwill
Goodwill
represents
the
excess
of
the
purchase
price
of
an
acquired
enterprise
over
the
fair
values
of
the
identifiable
assets
acquired and liabilities assumed based
upon their estimated fair
value at the date
of purchase. The Company
reviews the carrying value
of goodwill annually or more frequently if circumstances indicate impairment
has occurred.
Circumstances that
could trigger
an impairment test
include but are
not limited to:
a significant adverse
change in the
business
climate or legal
factors; an adverse
action or assessment
by a regulator;
unanticipated competition; loss
of key personnel;
the likelihood
that a reporting unit or
significant portion of a reporting
unit will be sold
or otherwise disposed; and results
of testing for recoverability
of a significant asset group within a reporting unit. If goodwill is allocated to a reporting unit
and the carrying amount of the reporting
unit exceeds
the fair value
of that reporting
unit, an impairment
loss is recorded
in the statement
of operations.
Measurement of
the
fair value of a reporting unit is based on present value techniques of estimated
future cash flows.
Intangible assets
Intangible assets are shown at
cost less accumulated amortization. Intangible assets
are amortized over the following
useful lives:
Customer relationships
1
to
15
years
Software, integrated platform and unpatented technology
3
to
10
years
FTS patent
10
years
Exclusive licenses
7
years
Brands and trademarks
0.5
to
20
years
Intangible assets
are periodically
evaluated for
recoverability,
and those
evaluations take
into account
events or
circumstances
that warrant revised estimates of useful lives or that indicate that impairment
exists.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-16
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Debt and equity securities
Debt securities
The Company is required to
classify all applicable debt securities
as either trading securities, available
for sale or held
to maturity
upon investment in the security.
Held to maturity
Debt securities acquired by the Company which it has the ability and the positive intent to hold to maturity are classified as held
to maturity debt securities. The Company is required to make an election to classify these debt securities as held to maturity and these
securities are carried at amortized cost. The amortized cost
of held to maturity debt securities
is adjusted for amortization of premiums
and accretion of discounts to maturity.
Interest received from the held to
maturity security together with this amortization
is included
in interest income in the Company’s consolidated statement of operations. The Company had
a held to maturity security as of
June 30,
2025 and
2024, respectively,
refer to
Note 4.
The Company
uses historical
default experience
over the
lifetime of
debt securities
in
order
to
calculate
a
lifetime loss
rate
for
its held
to
maturity debt
securities.
As of
each of
June 30,
2024,
and
June 30,
2025,
the
carrying value of the Company’s
held to maturity debt securities was $
0
.
Impairment of debt securities
Up
until
the
adoption
of
guidance
regarding
Measurement
of
Credit
Losses
on
Financial
Instruments
on
July
1,
2023,
the
Company’s available for sale and held to maturity debt securities with unrealized
losses are reviewed quarterly to identify other-than-
temporary impairments in value.
With regard to available for sale and held to maturity debt securities, the Company considers (i) the ability and intent to hold the
debt security for a
period of time to
allow for recovery of
value (ii) whether it
is more likely than
not that the Company
will be required
to sell the debt security;
and (iii) whether it expects
to recover the entire carrying
amount of the debt security.
The Company records
an impairment
loss in its
consolidated statement
of operations representing
the difference between
the debt securities
carrying value
and the current fair value as
of the date of the impairment
if the Company determines that
it intends to sell the debt
security or if that
it is
more likely
than not
that it
will be
required to
sell the
debt security
before recovery
of the
amortized cost
basis. However,
the
impairment loss
is split
between a
credit loss
and a
non-credit loss
for debt
securities that
the Company
determines that
it does
not
intend to sell or that it is more likely than not that it will
not be required to sell the debt securities before the recovery of the amortized
cost basis. The credit loss portion, which is measured as the difference
between the debt security’s cost
basis and the present value of
expected future cash flows,
is recognized in the Company’s
consolidated statement of operations.
The non-credit loss portion,
which
is measured
as the
difference between
the debt
security’s
cost basis and
its current
fair value,
is recognized
in other
comprehensive
income, net of applicable taxes.
Equity securities
Equity
securities
are
measured
at
fair
value.
Changes
in
the
fair
value
of
equity
securities
are
recorded
in
the
Company’s
consolidated statement
of operations within
the caption titled
“change in fair
value of equity
securities”. The
Company may elect
to
measure equity securities without readily determinable fair
values at its cost
minus impairment, if any, plus or minus changes resulting
from observable price changes in orderly transactions for the identical or
a similar investment of the same issuer (“cost minus changes
in observable
prices equity
securities”). Changes
in the fair
value of
the Company’s
cost minus
changes in
observable prices
equity
securities are discussed
in Note 9.
During the Company’s
second and third
quarter of fiscal
2025, the Company
recorded changes in
the
fair
value
of
equity
securities
as
a
result
of
changes
in
market
prices
related
to
its
investment
in
One
MobiKwik
Limited
(“MobiKwik”). During the fourth quarter of fiscal 2025, the Company disposed
of its entire interest in MobiKwik and incurred a loss
on disposal.
The changes
in fair
value and
the loss
on disposal
are included
in the
caption change
in fair
value of
equity securities
during the
year ended
June 30,
2025. There
were
no
changes in
the fair
value of
the Company’s
cost minus
changes in
observable
prices equity securities during the years ended June 30, 2024 and 2023, respectively.
The Company performs a qualitative assessment
on a quarterly basis and recognizes an impairment loss if there are sufficient indicators
that the fair value of the equity security is less
than its carrying value.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-17
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Policy reserves and liabilities
Reserves for policy benefits and claims payable
The Company determines its reserves for policy benefits under
its life insurance products using a model which estimates claims
incurred
that have
not been
reported
and
total
present
value
of disability
claims-in-payment
at
the balance
sheet
date. This
model
allows for
best estimate
assumptions based
on experience
(where sufficient)
plus prescribed
margins,
as required
in the
markets
in
which these products are offered, namely South Africa.
The best estimate assumptions include (i) mortality and morbidity assumptions reflecting the company’s
most recent experience
and (ii) claim reporting delays reflecting Company specific and industry experience. Most of the disability claims-in-payment reserve
is
reinsured
and
the
reported
values
were
based
on
the
reserve
held
by
the
relevant
reinsurer.
The
values
of
matured
guaranteed
endowments are increased by late payment interest (net of the asset management
fee and allowance for tax on investment income).
Deposits on investment contracts
For the Company’s interest-sensitive
life contracts, liabilities approximate the policyholder’s account
value.
Reinsurance contracts held
The Company enters into reinsurance
contracts with reinsurers under
which the Company is compensated
for the entire amount
or a portion of losses arising on one or more of the insurance contracts it issues.
The expected benefits to which the Company is
entitled under its reinsurance contracts held are recognized as reinsurance
assets.
These assets consist
of short-term
balances due from
reinsurers (classified within
Accounts receivable,
net and other
receivables) as
well as long-term receivables (classified within other long-term assets) that are dependent on the expected claims and benefits arising
under the
related reinsurance
contracts. Amounts
recoverable from
or due
to reinsurers
are measured
consistently with
the amounts
associated with the reinsured contracts and in accordance with the terms of each reinsurance contract. Reinsurance assets are assessed
for impairment at
each balance sheet
date. If there
is reliable
objective evidence that
amounts due may
not be recoverable,
the Company
reduces the carrying amount of the reinsurance asset to its recoverable amount and recognizes that impairment loss in its consolidated
statement of operations. Reinsurance premiums are recognized when
due for payment under each reinsurance contract.
Redeemable common stock
Common stock
that is
redeemable (1)
at a
fixed or
determinable price
on a
fixed or
determinable date,
(2) at
the option
of the
holder,
or (3)
upon the
occurrence of
an event
that is
not solely
within the
control of
Company is
presented outside
of total
Lesaka
equity (i.e. permanent equity). Redeemable common stock is
initially recognized at issuance date fair value
and the Company does not
adjust
the
issuance date
fair value
if redemption
is not
probable.
The Company
re-measures
the redeemable
common
stock
to the
maximum
redemption
amount
at
the
balance
sheet
date
once
redemption
is
probable.
Reduction
in
the
carrying
amount
of
the
redeemable common stock is
only appropriate to the
extent that the Company
has previously recorded increases
in the carrying amount
of the
redeemable
equity instrument
as the
redeemable common
stock may
not be
carried at
an amount
that is
less than
the initial
amount reported outside of permanent equity.
Redeemable common stock is reclassified as permanent equity when presentation outside
permanent equity is no longer required
(if, for example, a redemption
feature lapses, or there
is a modification of the
terms of the instrument). The
existing carrying amount
of the redeemable common
stock is reclassified to permanent
equity at the date of
the event that caused the
reclassification and prior
period consolidated financial statements are not adjusted.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-18
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue recognition
The
Company
recognizes
revenue
upon
transfer
of
control
of
promised
products
or
services
to
customers
in
an
amount
that
reflects
the
consideration
the
Company
expects
to
receive
in
exchange
for
those
products
or
services.
The
Company
enters
into
contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted
for as
separate performance
obligations
based on
observable standalone
selling prices.
Revenue is
recognized net
of allowances
for
returns and any taxes collected from customers, which are subsequently remitted
to governmental authorities.
Nature of products and services
Prepaid airtime sold
The Company purchases airtime vouchers for resale to customers and acts as
a principal in these transactions.
Airtime purchased
for resale is included in inventory and released to cost of goods sold,
IT processing, servicing and support upon sale of the inventory.
The Company negotiates and agrees sales prices for airtime sales
with its customers and revenue is measured at the agreed contractual
price. The Company recognizes revenue when the airtime is delivered
to the customer.
Processing fees
The Company earns processing fees from transactions processed for its customers.
The Company provides its customers with transaction processing services that involve the collection, transmittal and retrieval of
all transaction data in exchange for consideration upon completion of the transaction and recognizes revenue from these activities at a
point in time.
In certain instances,
the Company also
provides a funds
collection and settlement
service for its
customers and recognizes
revenue from these activities at a point in time.
The Company also provides customers with cash management and digitization services which enables its merchant customers to
deposit
cash into
digital vaults
operated
by the
Company,
after which
the funds
are then
electronically
accessible by
customers
to
either transfer to their nominated bank account or to pay certain pre-selected suppliers and recognizes revenue from these activities at
a point in time.
The Company considers
each of these services
as a single performance
obligation. The Company’s
contracts specify
a transaction
price for
services provided.
Processing revenue fluctuates
based on
the type and
the volume of
transactions processed.
Revenue is recognized on the completion of the processed transaction.
The Company provides
rental and support
services under a
master rental agreement
with customers. Control
of the rental
asset
is transferred through the right of
use on a monthly basis as per
the master rental agreement terms. Customers
are required to pay the
monthly
rental and
support fee
in advance
.
The performance
obligation
for the
service component
is provided
over the
month and
revenue is recognized at the end of the month. The Company recognizes revenue
from these activities over time.
The
Company,
as
a
transaction
processor
and
in
the
capacity
of
an
agent,
facilitates
the
delivery
of
ADP
to
its
customers
(including
prepaid
airtime
vouchers,
prepaid
electricity
and
gaming
vouchers)
and
earns
a
commission
once
these
services
are
delivered to the customer.
The Company recognizes revenue from these activities at
a point in time. Revenue from these transactions
fluctuates based on the volume of ADP services distributed.
Customers
serviced
by the
Company’s
Consumer
operating segment
that have
a bank
account managed
by the
Company
are
issued cards that can be utilized to withdraw
funds at an ATM or to transact at a merchant point of sale device
(“POS”). The Company
also earns processing
fees from transactions
processed for these
customers. The
Company’s contracts
specify a transaction
price for
each service
provided (for
instance, ATM
withdrawal,
balance enquiry,
etc.). Processing
revenue
fluctuates
based on
the type
and
volume of transactions performed by the customer. Revenue is recognized on the completion of the processed transaction at a point in
time.
Account holder fees
The Company
provides bank accounts
to customers
and this service
is underwritten
by a regulated
banking institution
because
the Company is not
a bank. The Company
charges its customers
a fixed monthly
bank account administration
fee for all active
bank
accounts regardless of
whether the account
holder has transacted
or not. The
Company recognizes account
holder fees on a
monthly
basis on
all active
bank
accounts,
which
are earned
over
time and
billed
on a
monthly
basis. Revenue
from account
holders’
fees
fluctuates based on the number of active bank accounts.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-19
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue recognition (continued)
Nature of products and services (continued)
Lending revenue
The Company provides
short-term loans to
customers (consumers) in
South Africa and charges
up-front initiation fees,
interest
and monthly
service fees.
Interest earned
from customers
is recognized
using the
effective interest
rate method,
which requires
the
utilization of the rate of return implicit in the loan, that is, the contractual interest rate adjusted for any
net deferred loan initiation fees
or costs, premium,
or discount existing at
the origination or acquisition
of the loan. Monthly
service fee revenue is
recognized under
the contractual terms of
the loan. The monthly service
fee are earned over time
and is fixed upon initiation
and does not change over
the term of the loan and is recognized when billed on a monthly basis.
Interest earned from
customers
The Company provides short-term loans to merchants in South Africa and levies interest on the amount lent. The Company does
not charge
these customers
up-front initiation
fees or
monthly service
fees. Interest
earned from
customers is
recognized using
the
effective interest
rate method,
which requires
the utilization
of the
rate of
return implicit
in the
loan, that
is, the
contractual interest
rate adjusted
for any net
deferred loan
fees or
costs, premium,
or discount
existing at
the origination
or acquisition
of the
loan. The
interest rate included in the contract with the customer generally changes with changes to benchmark rates of interest set by the South
African Reserve Bank (“SARB”).
Technology
products
The Company supplies hardware and licenses for its customers to use the Company’s
technology. Hardware includes the sale of
POS devices, SIM cards and other consumables which
can occur on an ad
hoc basis. The Company recognizes revenue from hardware
at
the
transaction
price
specified
in
the contract
as the
hardware
is delivered
to the
customer.
Licenses
include
the right
to access
certain technology developed by the Company and the associated revenue
is recognized ratably over the license period.
Insurance revenue
The Company writes
life insurance contracts, and
policy holders pay
the Company a
monthly insurance premium at
the beginning
of each month. Premium revenue
is recognized on a monthly basis net of
policy lapses. Policy lapses are provided
for on the basis of
expected non-payment of policy premiums.
Accounts Receivable, Contract Assets and Contract Liabilities
The
Company
recognizes
accounts
receivable
when
its
right
to
consideration
under
its
contracts
with
customers
becomes
unconditional. The Company has no contract assets or contract liabilities.
Research and development expenditure
Research and
development expenditure
is charged
to net
income in
the period
in which
it is
incurred. During
the years
ended
June 30, 2025,
2024 and 2023, the
Company incurred research
and development expenditures
of $
0.5
million, $
0.5
million and $
0.5
million, respectively.
Computer software development
Product
development
costs in
respect
of
software
intended
for
sale
to
licensees
are
expensed
as
incurred
until
technological
feasibility is attained.
Technological
feasibility is attained
when the Company’s
software has completed
system testing and has
been
determined
to
be
viable
for
its
intended
use.
Once
technological
feasibility
is
reached,
the
Company
capitalized
such
costs
and
amortizes
these costs over
the products’
estimated life. The
time between
the attainment
of technological feasibility
and completion
of software development is generally short with insignificant amounts of development
costs incurred during this period.
Costs in
respect of
the development
of software
for the
Company’s
internal use
are expensed
as incurred,
except to
the extent
that
these
costs
are
incurred
during
the
application
development
stage.
All
other
costs
including
those
incurred
in
the
project
development and post-implementation stages are expensed as incurred.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-20
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Income taxes
The Company
provides for income
taxes using the
asset and liability
method. This
approach recognizes
the amount of
income
taxes payable or refundable
for the current year,
as well as deferred
tax assets and liabilities for
the future tax consequence
of events
recognized in the financial statements and tax returns. Deferred taxes are
adjusted to reflect the effects of changes in tax laws or rates
in the
period of
enactment. The
majority of
the Company’s
income
taxes and
deferred tax
balances arise
in the
South Africa.
The
Company used the enacted statutory tax rate of
27
% for the years ended June 30, 2025, 2024 and 2023 to measure current
tax expense
(benefit) and deferred tax expense (benefit) in South Africa. There was a change in the South African enacted tax rate during the year
ended June 30,
2023, from
28
% to
27
%. The Company
measured its South African
current tax expense
for the years
ended June 30,
2025
and 2024 and
its South African
deferred tax assets and
liabilities as of
June 30, 2025
and 2024, using
the enacted statutory
tax
rate in South Africa of
27
%.
In establishing the appropriate deferred tax asset valuation allowances, the Company assesses the realizability of its deferred tax
assets, and based on all available evidence, both positive
and negative, determines whether it is more likely than not
that the deferred
tax
assets
or
a
portion
thereof
will
be
realized.
The
Company
does
not
consider
future
reversals
of
existing
taxable
temporary
differences associated with indefinite lived assets
where the timing of the
reversal cannot be predicted as
a source of income to
support
deferred tax assets for carryforward that do not expire.
Unrecognized tax
benefits are recorded
in the financial
statements for positions
which are not
considered more likely
than not,
based on
the technical
merits of the
position, of being
sustained upon
examination by
the taxing authorities.
For positions that
meet
the more likely than not
standard, the measurement of
the tax benefit recognized
in the financial statements is based
upon the largest
amount of tax benefit that, in management’s judgement, is greater than 50% likely of being
realized based on a cumulative probability
assessment
of
the possible
outcomes.
The
Company’s
policy
is to
include
interest
related
to
income
taxes
in
interest expense
and
penalties in selling, general and administration in the consolidated statements of
operations.
The Company has elected the period cost method
and records U.S. inclusions in taxable income related to global
intangible low
taxed income (“GILTI”)
as a current-period expense when incurred.
Stock-based compensation
Stock-based compensation represents the
cost related to
stock-based awards granted.
The Company measures
equity-based stock-
based compensation cost at
the grant date, based on
the estimated fair value of
the award, and recognizes the
cost as an expense on
a
straight-line basis (net of estimated forfeitures) over the requisite
service period. In respect of awards with only service
conditions that
have a graded
vesting schedule, the
Company recognizes compensation
cost on a straight-line
basis over the
requisite service period
for the
entire award.
The forfeiture
rate is
estimated using
historical trends
of the
number of
awards forfeited
prior to
vesting.
The
expense is recorded in
the statement of operations and
classified based on the recipients’
respective functions. The Company
records
deferred tax
assets for awards
that result in
deductions on the
Company’s
income tax returns,
based on the
amount of compensation
cost recognized and the Company’s
statutory tax rate in the jurisdiction
in which it will receive a deduction.
Differences between the
deferred tax
assets recognized
for financial
reporting purposes
and the
actual tax
deduction reported
on the
Company’s
income tax
return are recorded in income tax expense in the consolidated statement
of operations.
Equity instruments issued to third parties
Equity
instruments issued
to third
parties
for services
provided
represents the
cost related
to equity
instruments granted.
The
Company measures
this cost at
the grant date,
based on the
estimated fair value
of the award,
and recognizes the
cost as an
expense
on a
straight-line basis
(net of
estimated forfeitures)
over the
requisite service
period. The
forfeiture rate
is estimated
based on
the
Company’s
expectation of the
number of awards
that will be forfeited
prior to vesting.
The Company records
deferred tax assets
for
equity instrument
awards that
result in
deductions on
the Company’s
income tax
returns, based
on the
amount of
equity instrument
cost recognized and the Company’s
statutory tax rate in the jurisdiction
in which it will receive a deduction.
Differences between the
deferred tax
assets recognized
for financial
reporting purposes
and the
actual tax
deduction reported
on the
Company’s
income tax
return are recorded in the statement of operations.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-21
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Settlement assets and settlement obligations
The
Company
provides
customers
with
cash
management
and
digitization
services
which
enable
its
merchant
customers
to
deposit
cash into
digital vaults
operated
by the
Company,
after which
the funds
are then
electronically
accessible by
customers
to
either transfer to their nominated bank account or to pay certain pre-selected suppliers.
Settlement assets comprise (1) cash received from merchant customers
from cash deposits into the Company’s safe assets, which
are
then
electronically
accessible
by
customers
to
either
transfer
to
their
nominated
bank
account
or
to
pay
certain
pre-selected
suppliers,
and
(2)
cash
received
from
credit
card
companies
(as
well
as
other
types
of
payment
services)
which
have
business
relationships
with
merchants
selling
goods
and
services
that
are
the
Company’s
customers
and
on
whose
behalf
it
processes
the
transactions between various parties.
Settlement
obligations
comprise
(1)
amounts
that
the
Company
is
obligated
to
disburse
to
merchant
customers
or
to
their
nominated pre-selected suppliers, and (2)
amounts that the Company is obligated
to disburse to merchants selling goods
and services
that are the Company’s customers and on whose behalf it processes
the transactions between various parties and settles the funds from
the credit card companies to the Company’s
merchant customers.
The balances
at each reporting
date may vary
widely depending on
the timing of
the receipts and
payments of these
assets and
obligations.
Recent accounting pronouncements adopted
In November 2023,
the Financial Accounting
Standards Board (“FASB”)
issued guidance regarding
Segment Reporting (Topic
280)
to
improve
reportable
segment
disclosure
requirements,
primarily
through
enhanced
disclosures
about
significant
segment
expenses. In addition, the
guidance enhances interim disclosure
requirements, clarifies circumstances in
which an entity can disclose
multiple
segment
measures
of
profit
or
loss,
provides
new
segment
disclosure
requirements
for
entities
with
a
single
reportable
segment, and contains other disclosure requirements. This guidance was effective for the Company beginning July 1, 2024
for its year
ended June 30, 2025, and for interim periods commencing from July 1, 2025 (i.e. for the quarter ended September 30, 2025). Refer to
Note 21.
Recent accounting pronouncements not yet adopted
as of June 30, 2025
In
December
2023,
the
FASB
issued
guidance
regarding
Income
Taxes
(Topic
740)
to
improve
income
tax
disclosure
requirements. The guidance requires
entities, on an
annual basis, to
(1) disclose specific categories
in the income tax
rate reconciliation
and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect
of those reconciling items
is equal
to or
greater
than
five percent
of the
amount computed
by multiplying
pre-tax
income
or loss
by the
applicable
statutory
income tax rate). This guidance
is effective for the Company
beginning July 1, 2025. The Company
is currently assessing the impact
of this guidance on its financial statements and related disclosures.
In
November
2024,
the
FASB
issued
guidance
regarding
Income
Statement—Reporting
Comprehensive
Income—Expense
Disaggregation
Disclosures
(Subtopic
220-40)
which
requires
disaggregated
disclosure
of
income
statement
expenses
for
public
business entities. The guidance does not change the expense captions an
entity presents on the face of the income statement; rather,
it
requires
disaggregation
of
certain
expense
captions
into
specified
categories
in
disclosures
within
the
footnotes
to
the
financial
statements. This guidance is effective for the
Company beginning July 1, 2027. Early
adoption is permitted. The Company is
currently
assessing the impact of this guidance on its financial statements and related disclosures.
In
July
2025,
the
FASB
issued
guidance
regarding
Financial
Instruments-Credit
Losses
(Topic
326)
Measurement
of
Credit
Losses for Accounts Receivable and Contract Assets
which amends current guidance to provide a practical
expedient (for all entities)
and an accounting
policy election (for
all entities, other than
public business entities,
that elect the practical
expedient) related to
the
estimation of expected credit
losses for current accounts receivable
and current contract assets that
arise from transactions accounted
for under
Revenue From Contracts With
Customers (Topic
606).
This guidance is effective for
the Company beginning July 1, 2026,
and interim
reporting periods during
that fiscal year.
Early adoption
is permitted. The
Company is currently
assessing the impact
of
this guidance on its financial statements and related disclosures.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-22
3.
ACQUISITIONS
The Company did not make any acquisitions during the year ended June 30, 2023.
The cash paid, net of cash received related to
the Company’s acquisition during
the years ended June 30, 2025 and 2024, is summarized in the table below:
2025
2024
Total cash paid
$
24,161
$
2,248
Less: cash acquired
11,215
665
Total cash paid, net
of cash received
$
12,946
$
1,583
2025
Acquisitions
October 2024 acquisition of Adumo
On May 7,
2024, the Company
entered into a
Sale and Purchase
Agreement (the “Purchase
Agreement”) with Lesaka
SA, and
Crossfin Apis Transactional
Solutions (Pty) Ltd
and Adumo ESS
(Pty) Ltd (“the
Sellers”). Pursuant to
the Purchase Agreement
and
subject to its terms and
conditions, Lesaka, through its
subsidiary,
Lesaka SA, agreed to
acquire, and the Sellers agreed
to sell, all of
the
outstanding
equity
interests
and
certain
claims
in
the
Adumo
(RF)
Proprietary
Limited
(“Adumo”).
The
transaction
closed
on
October 1, 2024.
Adumo is an
independent payments and commerce
enablement platform in Southern
Africa, with operations across
South Africa,
Namibia,
Botswana
and
Kenya.
For
more
than
two
decades,
Adumo
has
facilitated
physical
and
online
commerce
between
retail
merchants
and
end-consumers
by
offering
a
unique
combination
of
payment
processing
and
integrated
software
solutions,
which
currently include
embedded payments,
integrated payments,
reconciliation services,
merchant lending,
customer engagement
tools,
card issuing program management and data analytics.
Adumo operates
across three businesses,
which provide
payment processing
and integrated software
solutions to different
end
markets:
●
The
Adumo
Payments
business
offers
payment
processing,
integrated
payments
and
reconciliation
solutions
to
small-and-
medium (“SME”) merchants
in South Africa,
Namibia and Botswana, and
the Adumo Payouts
business provides card
issuing
program management to
corporate clients
such as Anglo
American and Coca-Cola
(Adumo Payments was
allocated to Merchant
operating segment and Adumo Payouts was allocated to the Consumer
operating segment);
●
The Adumo ISV business,
known as GAAP,
has operations in South
Africa, Botswana and
Kenya, and clients in
a number of
other
countries, and
is the
leading
provider of
integrated
point-of-sales
software
and
hardware
to the
hospitality
industry in
Southern Africa, serving clients such as KFC, McDonald’s,
Pizza Hut, Nando’s and Krispy Kreme
(Adumo ISV was allocated
to Merchant operating segment); and
●
The Adumo
Ventures
business offers
online commerce
solutions (Adumo
Online), cloud-based,
multi-channel point-of-sales
solutions
(Humble)
and
an
aggregated
payment
and
credit platform
for
in-store
and
online
commerce
(SwitchPay)
to SME
merchants
and
corporate
clients
in
South
Africa
and
Namibia
(Adumo
Venture
was
allocated
to
the
Merchant
operating
segment).
The total purchase
consideration was ZAR
1.67
billion ($
96.2
million) and comprised
the issuance of
17,279,803
shares of the
Company’s
common stock
(“Consideration Shares”)
with a
value of
$
82.8
million (
17,279,803
multiplied by
$
4.79
per share)
and
cash of $
13.4
million. The purchase consideration was settled through
the combination of the Consideration Shares and a ZAR
232.2
million ($
13.4
million, translated at the prevailing
rate of $1: ZAR
17.3354
as of October 1, 2024)
payment in cash. The Company’s
closing price on
the Johannesburg
Stock Exchange on
October 1, 2024,
was ZAR
83.05
($
4.79
using the October
1, 2024, $1:
ZAR
exchange rate). Certain indirect shareholders of the sellers were investors in Adumo and the Company.
These shareholders ultimately
received
an aggregate
of
1,989,162
shares of
the Company’s
common stock
at a
price of
$
4.79
which was
included in
redeemable
common stock (refer to Note 14).
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-23
3.
ACQUISITIONS (continued)
2025
Acquisitions (continued)
October 2024 acquisition of Adumo (continued)
The closing
of the
transaction was
subject to
customary closing
conditions which
we fulfilled
prior to
closing. The
Company
agreed to file a resale registration statement with the United States Securities and Exchange Commission (“SEC”) covering the resale
of the Consideration Shares by the Sellers. The resale registration statement was declared effective by the SEC on December 6, 2024.
The Company incurred
transaction-related expenditures
of $
1.6
million and $
2.3
million during the
years ended June
30, 2025
and
2024,
respectively,
related
to
the
acquisition
of
Adumo.
The
Company’s
accruals
presented
in
Note
13
of
as
June
30,
2025,
includes an accrual
of transaction related
expenditures of $
0.1
million and the
Company does not
expect to incur
any further significant
transaction costs during the 2026
fiscal year.
March 2025 acquisition of Recharger
On November 19,
2024, the Company,
through Lesaka SA,
entered into a
Sale of Shares Agreement
(the “Recharger
Purchase
Agreement”) with
Imtiaz Dhooma
(Recharger’s
former chief
executive officer)
and Ninety
Nine Proprietary
Limited (“the
Seller”).
Pursuant to
the Recharger
Purchase Agreement
and subject
to its
terms and
conditions, Lesaka,
through its
subsidiary,
Lesaka SA,
agreed to acquire, and the Seller agreed to sell, all of the outstanding equity interests in Recharger Proprietary Limited (“Recharger”).
The transaction closed on March 3, 2025.
At the same time, Recharger also entered into
independent contractor agreement with Recharger’s former chief executive officer
which has a
term of
12
months and required
him, among other
things, to support
operational activities of
the Recharger
business, in
consultation with Company representatives, facilitate the handover process and
assist Recharger in transitioning ownership to Lesaka
SA, avail himself for important
customer and vendor meetings, attend
scheduled weekly management committee
meetings regarding
operational and
business activities of
the Recharger
business, and providing
support on an
ad-hoc basis to
Company representatives
with regard to operational matters and in facilitating the hand over,
as and when reasonably required.
This acquisition has
been reported
as part
of the
Company’s Enterprise operating segment
and demonstrates positive
advancement
of the Company’s strategy in its Enterprise operating segment. The Company expects the acquisition to act as an entry point for it
into
the South African private utilities space while augmenting Enterprise’s
alternative payment offering.
The
transaction
consideration per
the Recharger
Purchase Agreement
was ZAR
503.4
million
($
27.0
million)
and comprised
ZAR
328.4
million ($
17.6
million) in
cash and
ZAR
175.0
million ($
9.4
million) in
shares of
the Company’s
common stock,
to be
settled
in
two
tranches.
The
share
price
applied
to
determine
the
number
of
shares
of
common
stock
to
be
issued
for
the
equity
consideration is
based on
the volume-weighted
average price
of the
Company’s
common shares
for the
three-month period
prior to
the
disbursal
of
each
tranche.
Lesaka
SA
extended
a
ZAR
43.1
million
($
2.3
million)
loan
to
Recharger
at
closing
which
was
exclusively used to repay an existing loan due by Recharger
to the Seller.
The first tranche,
comprising ZAR
153.4
million ($
8.2
million) in cash
and
1,092,361
shares of the
Company’s
common stock
with a value of ZAR
98.3
million ($
5.3
million), was settled at
closing. The value of the
shares of common stock were
calculated using
the shares issued multiplied
by the Company’s
closing price on the Johannesburg
Stock Exchange on March
3, 2025, of ZAR
90.00
,
and translated
to U.S.
dollars at
the exchange
rate of
$1: ZAR
18.63
. Lesaka
SA delivered
the
1,092,361
shares of
the Company’s
common stock from
a pool of shares
it purchased in
October 2024, and
the Company recognized
a gain in
additional paid-in-capital
of $
0.4
million related to the difference between in the value on March 3, 2025,
and the price paid per share in October 2024.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-24
3.
ACQUISITIONS (continued)
2025
Acquisitions (continued)
March 2025 acquisition of Recharger (continued)
The total purchase consideration
was ZAR
294.8
million ($
15.8
million) and comprised the
issuance of the
1,092,361
shares of
the
Company’s
common
stock
with
a
value
of
ZAR
98.3
million
($
5.3
million),
the
settlement
of
the
pre-existing
relationship
shareholder loan of ZAR
43.1
million ($
2.3
million) and cash of ZAR
153.4
million ($
8.2
) million.
The second
and final
tranche is due
on March
3, 2026,
and comprises
a contractual
cash payment
of ZAR
175.0
million ($
9.4
million) and the delivery
of shares of Lesaka’s
common stock with a
contractual value of ZAR
75.0
million ($
4.0
million). Pursuant
to the
Recharger
Purchase Agreement,
payment
of the
second tranche
in March
2026 was
contingent
on Recharger’s
former
chief
executive officer’s ongoing service under the independent contractor agreement until June 30, 2025. The second tranche would not be
paid if
he failed
to provide
the requisite
service, except
if failure
to provide
future services
is due
to expiry
of the
contract, mutual
agreement
or death
of the
former chief
executive officer.
The former
chief
executive officer
was also
a director
of the
Seller,
and
signed the Recharger
Purchaser Agreement on behalf
of himself, Recharger
and the Seller.
He also signed an independent
contractor
agreement under which he
is required to
provide post-combination service to Recharger until
March 2026 (but the
vesting of the shares
is only for services to
June 30, 2025). The Company
has determined that as the payment
of the second tranche is
contingent on these
post-combination services, the value of the
second tranche is not
treated as purchase consideration and
rather, under GAAP, represents
compensation for post-combination services.
In late May 2025, an addendum was signed to reduce
the post-combination period from
twelve months to four months (i.e. from March 2025 to June 2025).
The post-combination
services for the
year ended June 30,
2025, of $
13.6
million was calculated
as the sum of
the future cash
payment and the
value of
future shares to
be provided. The
value of
the future shares
to be
provided was calculated
using the
contractual
value of ZAR
75.0
million divided by
the volume-weighted average price
of the Company’s common shares
for the three-month
period
prior
to June
30,
2025, and
at the
applicable
exchange
rate. The
post-combination
compensation charge
is included
in the
caption
transaction costs related to
Adumo, Recharger and Bank
Zero acquisitions and
certain compensation costs
included on the
consolidated
statement of operations.
The
Company
records
stock-based
compensation
charges
that
are
cash-settled
awards
in other
payables.
The
liability for
the
future payments is included in
the caption Other payables in
the consolidated balance sheet
as of June 30,
2025, refer to Note
13. There
is no unrecognized compensation costs related to the post-combination
compensation charge as of June 30, 2025.
The
Company
incurred
transaction-related
expenditures
of $
0.4
million
during
the year
ended
June 30,
2025,
related
to
the
acquisition of Recharger.
The Company’s accruals presented in Note 13 of as June 30, 2025, includes an accrual of transaction
related
expenditures of $
0.1
million and the Company does not expect to incur
any further significant transaction costs during the 2026 fiscal
year.
Other acquisitions
Effective
November
1,
2024,
the
Company,
through
its
wholly
owned
subsidiary
Adumo
Technologies
Proprietary
Limited
(“Adumo AT”),
acquired the remaining
shares (representing
50
% of the issued and
outstanding shares) it did
not own in Innervation
Value
Added Services Namibia Pty Ltd
(“IVAS
Nam”) for $
0.4
million (ZAR
6.0
million, translated at November 1, 2024
exchange
rates). IVAS
Nam was accounted for using the equity method prior to the acquisition of a controlling interest in the company. Adumo
paid ZAR
2.0
million of
the purchase
price prior
to the
acquisition of
Adumo by
the Company
and the balance
of ZAR
4.0
million
will be paid
in
two
equal tranches, one
in March 2025
and the other
in September 2025.
The Company did
not incur any
significant
transaction costs related to this acquisition.
The
Company,
through
Lesaka
SA,
acquired
100
%
of
Genisus
Risk
Proprietary
Limited
(“Genisus
Risk”)
for
a
cash
consideration of ZAR
2.0
million ($
0.1
million). The Company
did not incur
any significant transaction
costs related to
this acquisition.
The
Company,
through
its
wholly
owned
subsidiary
Cash
Connect
Management
Solutions
Proprietary
Limited
(“CCMS”),
acquired
100
% of
Master Fuel
Proprietary Limited
(“Master Fuel)
for a
cash consideration
of ZAR
2.0
million ($
0.1
million). The
Company did not incur any significant transaction costs related to this acquisition.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-25
3.
ACQUISITIONS (continued)
2026 Proposed acquisitions of Bank Zero
On
June
26,
2025,
Lesaka
SA
entered
into
a
Transaction
Implementation
Agreement
(the
“Transaction
Implementation
Agreement”) with
Zero Research
Proprietary Limited
(“Zero Research”),
Bank Zero
Mutual Bank
(“Bank Zero”),
and other
parties
identified in
Annexure A
to the
Transaction
Implementation Agreement
(being all
of the
shareholders
of Bank
Zero save
for Zero
Research and
Naught
Holdings Ltd,
the “Bank
Zero Sellers”),
the parties
listed in
Annexure
B to
the Transaction
Implementation
Agreement (being
all of the
shareholders of
Zero Research save
for Naught
Holdings Ltd, the
“Zero Research
Sellers”) and
Naught
Holdings Ltd. All amounts below translated at the closing rate of $1: ZAR
17.76
as of June 30, 2025.
The
purchase
consideration
payable
by
Lesaka
SA
in
exchange
for
the
relevant
shares
in
Bank
Zero
and
the
subscription
consideration payable by
Lesaka SA in exchange
the subscription shares will be
settled through a combination
of delivery of Lesaka
shares of
common stock
and up
to ZAR
91.0
million ($
5.1
million)
in cash.
Zero Research
will apply
the cash
and Lesaka
shares
received by it to settle
the repurchase consideration due to the
Zero Research Sellers. Following implementation of
each of these steps,
and subject to the below
adjustment, the Bank Zero Sellers, Zero
Research Sellers and Naught Holdings
Ltd will own approximately
12
% of Lesaka's
fully diluted shares
at the time
of completion of
the proposed transaction.
The Transaction Implementation Agreement
allows a
mechanism (in
certain circumstances)
pursuant to which
the Bank
Zero Sellers and
the Zero
Research Sellers
may acquire
fewer shares in Lesaka and a larger cash consideration.
The
Transaction
Implementation
Agreement
includes
customary
interim
period
undertakings
which
required
each
of
Zero
Research
and
Bank
Zero,
among
other
things
(i)
to
conduct
their
business
in
the
ordinary
course
during
the
period
between
the
execution of the Transaction Implementation
Agreement and the
closing of the
transaction contemplated thereby, and (ii)
not to engage
in certain kinds of transactions during
such period. The Transaction
Implementation Agreement is subject to
the fulfilment of certain
conditions
precedent.
The
Transaction
Implementation
Agreement
will
lapse
if
all
of
the
conditions
precedent
are
not
met
or
not
waived by August 6, 2026 (or such later date as may be agreed).
Bank
Zero
and
Lesaka
SA
have
agreed
to
implement
a
long-term
incentive
arrangement
following
implementation
of
the
transaction, under which an agreed portion of a number of shares of
Lesaka's shares of common stock calculated will be granted by (i)
dividing
ZAR
70.0
million
($
3.9
million)
by
an
agreed
value
(as
defined
in
the
Transaction
Implementation
Agreement)
(the
“Retention LTIP
Shares”) and (ii) dividing
ZAR
30.0
million ($
1.7
million) by such
agreed value (the “Performance
LTIP
Shares”).
The
Retention
LTIP
Shares
will be
subject
to
time
and
certain
performance-based
vesting
conditions.
The
terms
of the
long-term
incentive plan are required to be considered, and if necessary approved, by Lesaka's remuneration
committee.
The
Company
incurred
transaction-related
expenditures
of $
0.6
million
during
the year
ended
June 30,
2025,
related
to
the
proposed
acquisition
of
Bank
Zero.
The
Company’s
accruals
presented
in
Note
13
of
as
June
30,
2025,
includes
an
accrual
of
transaction related expenditures of $
0.6
million and the Company expects to incur further
transaction costs of $
0.4
million during the
2026 fiscal year.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-26
3.
ACQUISITIONS (continued)
2025
Acquisitions (continued)
The purchase
price allocation
for all acquisitions
have been
finalized as of
June 30,
2025, except for
Recharger.
The purchase
price allocation of acquisitions during the year ended June 30, 2025,
translated at the foreign exchange rates applicable on the date of
acquisition, is provided in the table below:
Acquisitions during fiscal 2025
Adumo
Recharger
Other
Total
Final
Preliminary
Final
Cash and cash equivalents
$
9,227
$
1,720
$
268
$
11,215
Accounts receivable
6,799
17
728
7,544
Inventory
5,122
194
3
5,319
Property, plant and equipment
9,170
39
28
9,237
Operating lease right of use asset
1,025
401
-
1,426
Equity-accounted investment
477
-
-
477
Goodwill
71,992
3,614
508
76,114
Intangible assets
28,806
16,171
69
45,046
Deferred income taxes assets
1,061
81
55
1,197
Other long-term assets
2,809
-
-
2,809
Current portion of long-term borrowings
(1,178)
-
-
(1,178)
Accounts payable
(3,266)
(149)
(440)
(3,855)
Other payables
(28,116)
(1,439)
(252)
(29,807)
Operating lease liability - current
(948)
(185)
-
(1,133)
Income taxes payable
(150)
(4)
(42)
(196)
Deferred income taxes liabilities
(7,107)
(4,366)
(19)
(11,492)
Operating lease liability - long-term
(326)
(269)
-
(595)
Long-term borrowings
(7,308)
-
-
(7,308)
Other long-term liabilities
(140)
-
-
(140)
Settlement assets
8,603
-
-
8,603
Settlement liabilities
(8,530)
-
-
(8,530)
Fair value of assets and liabilities on acquisition
$
88,022
$
15,825
$
906
$
104,753
The
fair
value
of
the
non-controlling
interests
recorded
was $
7.6
million.
The
fair
value
of
the
non-controlling
interest
was
determined as
the non-controlling
interests respective
portion of
the equity value
of the entity
acquired by
the Company,
and which
was adjusted for a
20
% minority discount.
The preliminary allocation of the Recharger purchase price is
based upon preliminary estimates which used information that
was
available
to management
at the
time
the consolidated
financial
statements
were
prepared
and
these
estimates
and
assumptions
are
subject to change
within the measurement
period, up to
one year from
the acquisition date.
Accordingly,
the allocation may
change.
We continue
to refine certain inputs to the calculation of acquired intangible assets.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-27
3.
ACQUISITIONS (continued)
2025 Acquisitions (continued)
Transaction costs and certain compensation
costs
The Company
did
no
t incur
any transaction
costs related
to the
Adumo, Recharger
and the
Bank Zero
acquisitions during
the
year ended June 30, 2023, and did
no
t incur any transaction costs related to the Bank Zero acquisitions during the year ended June 30,
2024.
The
table
below
presents
transaction
costs
incurred
related
to
the
acquisition
of
Adumo
and
Recharger,
and
the
proposed
acquisition of Bank Zero, as well as certain post-combination compensation costs expensed during the years ended June 30, 2025 and
2024:
Year
ended June 30,
2025
2024
Adumo transaction costs
$
1,564
$
2,293
Recharger transaction costs
(1)
410
32
Recharger post-combination services expensed
13,586
-
Bank Zero transaction costs
599
-
Total
$
16,159
$
2,325
(1) Recharger transactions costs for the year ended June
30, 2024, of $
0.03
million have been allocated from Selling, general
and
administration
to Transaction
costs related
to Adumo
and Recharger
and
certain compensation
costs in
the consolidated
statement
operations for the year ended June 30, 2024.
Pro forma results related
to acquisitions
Pro forma results of operations have not been
presented for the acquisition of IVAS Nam, Genisus Risk and Master Fuel because
the effect of these acquisitions, individually and in aggregate, are
not material to the Company. Since the closing of these acquisitions,
they have contributed revenue and net income of $
0.8
million and $
0.1
million, respectively, for the
year ended June 30, 2025.
The results of the Adumo and Recharger’s operations are reflected in the Company’s
financial statements from October 1, 2024,
and
March
3,
2025,
respectively.
The
following
unaudited
pro
forma
consolidated
revenue
and
net
income
information
has
been
prepared as if the acquisitions
of Adumo and Recharger had occurred on
July 1, 2023, using the applicable average foreign exchange
rates for the periods presented:
Year
ended June 30,
2025
2024
Revenue
$
673,536
$
630,672
Net loss
$
(68,367)
$
(37,324)
The unaudited pro forma financial
information presented above includes the
business combination accounting and
other effects
from the
acquisitions including
(1) amortization
expense related
to acquired
intangibles and
the related
deferred tax;
(2) the
loss of
interest income, net of
taxation, as a
result of funding a
portion of the
purchase price in
cash; (3) an
adjustment to exclude all
applicable
transaction-related costs
recognized in
the Company’s
consolidated statement
of operations
for three
and nine
months ended
March
31, 2025,
and include
the applicable
transaction-related costs
for the
year ended
June 30,
2024; an
adjustment to
exclude the
post-
combination
compensation
expenses
related
to
the
Recharger
acquisition
recognized
in
the
Company’s
consolidated
statement
of
operations
for
three
and
nine
months
ended
March
31,
2025,
and
include
the
expense
during
the
year
ended
June
30,
2024.
The
unaudited
pro
forma
net
income
presented
above
does
not
include
any
cost
savings
or
other
synergies
that
may
result
from
the
acquisition.
The unaudited pro forma
information as presented above
is for information purposes
only and is not indicative
of the results of
operations that would have been achieved if the acquisition had occurred on
these dates.
Since the
closing of
the acquisitions,
Adumo and
Recharger have
contributed aggregate
revenue of
$
48.6
million and
net loss
attributable to
the Company,
including intangible
assets amortization
related to
assets acquired,
net of
deferred taxes
and the
post-
combination compensation charge, of $
16.4
million.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-28
3.
ACQUISITIONS (continued)
2024 Acquisitions
April 2024 acquisition of Touchsides
In
April
2024
the
Company
closed
the
acquisition
of
Touchsides
Proprietary
Limited
(“Touchsides”).
Touchsides
has
been
allocated to our
Merchant operating segment.
The final purchase
price allocation of
the Touchsides acquisition, translated at
the foreign
exchange rates applicable on the date of acquisition, is provided in the table below:
Touchsides
Cash and cash equivalents
$
665
Accounts receivable
788
Property, plant and equipment
1,106
Operating lease right of use asset
112
Intangible assets
33
Accounts payable
(53)
Other payables
(279)
Operating lease liability – current
(63)
Deferred income taxes liabilities
(9)
Operating lease liability - long-term
(52)
Fair value of assets and liabilities on acquisition
$
2,248
Pro forma
results of
operations have
not been
presented because
the effect
of the
Touchsides
acquisition is
not material
to the
Company. During
the year ended June 30, 2024, the Company
incurred acquisition-related expenditure of
$
0.1
million related to this
acquisition.
Since
the
closing
of
the
Touchsides
acquisition,
it
contributed
revenue
and
net
loss
of
$
0.9
million
and
$
0.2
million,
respectively, for the
year ended June 30, 2024.
2023 Acquisitions
None.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-29
4.
ACCOUNTS RECEIVABLE,
net AND OTHER RECEIVABLES
and FINANCE LOANS RECEIVABLE,
net
Accounts receivable, net and other receivables
The Company’s
accounts receivable,
net, and other
receivables as of
June 30,
2025, and June
30, 2024, are
presented in the
table below:
June 30,
June 30,
2025
2024
Accounts receivable, trade, net
$
16,433
$
13,262
Accounts receivable, trade, gross
18,186
14,503
Allowance for credit losses, end of period
1,753
1,241
Beginning of period
1,241
509
Reversed to statement of operations
(521)
(511)
Charged to statement of operations
1,856
1,305
Write-offs
(847)
(67)
Foreign currency adjustment
24
5
Current portion of amount outstanding related to sale of interest in Carbon,
net of
allowance: 2025: $
750
, 2024: $
750
-
-
Current portion of total held to maturity investments
-
-
Investment in
7.625
% of Cedar Cellular Investment 1 (RF) (Pty) Ltd
8.625
%
notes
-
-
Other receivables
26,092
23,405
Total accounts receivable,
net
$
42,525
$
36,667
Trade receivables include amounts
due from customers
which generally have
a very
short-term life from
date of invoice
or service
provided to settlement. The duration
is less than a year in all cases and
generally less than 30 days in many
instances. The short-term
nature
of
these
exposures
often
results
in
balances
at
month-end
that
are
disproportionately
small
compared
to
the
total
invoiced
amounts.
The
month-end
outstanding
balance
are
more
volatile
than
the
monthly
invoice
amounts
because
they
are
affected
by
operational timing issues and
the fact that a balance
is outstanding at month-end
is not necessarily an indication
of increased risk but
rather a matter of operational timing.
Credit risk in respect of trade receivables are generally not
significant and the Company has not developed a sophisticated model
for these basic
credit exposures. The
Company determined to
use a lifetime
loss rate by
expressing write-off experience as
a percentage
of corresponding
invoice amounts
(as opposed
to outstanding
balances). The
allowance for credit
losses related to
these receivables
has
been
calculated
by
multiplying
the
lifetime
loss
rate
with
recent
invoice/origination
amounts.
Management
actively
monitors
performance of these receivables over
short periods of time. Different
balances have different rules to
identify an account in distress.
Once balances
in distress are
identified, specific
allowances are immediately
created. Subsequent
recovery from distressed
accounts
is not significant.
Current portion of amount outstanding related to sale of interest in Carbon represents the amount due from the purchaser related
to the sale of
the Company’s interest in Carbon Tech Limited (“Carbon”),
which was accounted for
as an equity-accounted investment,
of $
0.25
million, net of an allowance for doubtful loans receivable of $
0.25
million as of June 30, 2023, and an amount due related to
the sale of
the loan,
with a face
value of
$
3.0
million, which was
sold in September
2022 for
$
0.75
million, net of
an allowance
for
doubtful loans
receivable of
$
0.75
million, refer
to Note 9
for additional
information. The Company
received the
outstanding $
0.25
million
related
to the
sale of
the equity
-accounted
investment in
October
2023,
and
has reversed
the allowance
for
doubtful
loans
receivable of
$
0.25
million during
the year
ended June
30, 2024.
The Company
has not
yet received
the outstanding
$
0.75
million
related to the sale of the $
3.0
million loan, and continues to engage with the purchaser to recover
the outstanding balance.
Investment in
7.625
% of Cedar Cellular
Investment 1 (RF) (Pty) Ltd
8.625
% notes represents the
investment in a note which was
due to mature
in August 2022 and
forms part of
Cell C’s
capital structure. The
carrying value as
of each of
June 30, 2025
and 2024,
respectively was $
0
(zero).
No
interest income from the Cedar Cellular note was recorded during the years ended June 30, 2025, 2024
and 2023, respectively.
Interest, if any,
on this investment
will only be
paid, at Cedar
Cellular’s election, on
its maturity which
is in
the process of being extended beyond its original date of August 2022.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-30
4.
ACCOUNTS RECEIVABLE,
net AND OTHER RECEIVABLES
and FINANCE LOANS RECEIVABLE,
net
(continued)
Accounts receivable, net and other receivables (continued)
The Company does not expect
to recover the amortized cost
basis of the Cedar
Cellular notes due to its
assessment that the equity
in Cell
C currently
has no
value
which
would
result in
there
being
no future
cash flows
to be
collected
from
the debt
security
on
maturity.
The Company could
not calculate an
effective interest
rate on the
Cedar Cellular note
because the carrying
value was zero
($
0.0
million) as of June 30, 2025 and 2024. The Company
therefore could not calculate the present value of the expected cash flows
to be collected from the debt security by discounting these cash flows at the interest rate implicit in the security upon acquisition (at a
rate of
24.82
%) because there are no future cash flows to discount.
Other receivables include prepayments, deposits, income taxes receivable and
other receivables.
Contractual maturities of held to maturity investments
Summarized below is the contractual maturity of the Company’s
held to maturity investment as of June 30, 2025:
Cost basis
Estimated
fair
value
(1)
Due in one year or less
(2)
$
-
$
-
Due in one year through five years
-
-
Due in five years through ten years
-
-
Due after ten years
-
-
Total
$
-
$
-
(1) The estimated fair value of the Cedar Cellular note has been calculated utilizing the
Company’s portion of the assets held by
Cedar Cellular, namely,
Cedar Cellular’s investment in Cell C.
(2) The cost basis is zero ($
0.0
million).
Finance loans receivable, net
The Company’s finance
loans receivable, net, as of June 30, 2025, and June 30, 2024, is presented in the table
below:
June 30,
June 30,
2025
2024
Microlending finance loans receivable, net
$
52,492
$
28,184
Microlending finance loans receivable, gross
56,140
30,131
Allowance for credit losses - finance loans receivable, end of period
3,648
1,947
Beginning of period
1,947
1,432
Reversed to statement of operations
(161)
(210)
Charged to statement of operations
4,301
2,454
Write-offs
(2,499)
(1,795)
Foreign currency adjustment
60
66
Merchant finance loans receivable, net
21,618
15,874
Merchant finance loans receivable, gross
23,214
18,571
Allowance for credit losses - finance loans receivable, end of period
1,596
2,697
Beginning of period
2,697
2,150
Reversed to statement of operations
(22)
(359)
Charged to statement of operations
2,576
2,479
Write-offs
(3,709)
(1,672)
Foreign currency adjustment
54
99
Total finance
loans receivable, net
$
74,110
$
44,058
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-31
4.
ACCOUNTS RECEIVABLE,
net AND OTHER RECEIVABLES
and FINANCE LOANS RECEIVABLE,
net
(continued)
Finance loans receivable, net (continued)
Total finance
loans receivable, net, comprises microlending finance loans receivable related to the Company’s
microlending
operations
in South
Africa as
well as
its merchant
finance loans
receivable related
to Connect’s
lending activities
in South
Africa.
Certain merchant finance
loans receivable with
an aggregate balance
of $
20.7
million as
of June 30,
2025 have been
pledged as security
for the Company’s revolving
credit facility (refer to Note 12).
Allowance for credit losses
Microlending finance loans receivable
Microlending finance loans receivable is related to the Company’s
microlending operations in South Africa whereby it provides
unsecured short-term loans to qualifying customers. Loans to customers
have a tenor of up to
nine months
, with the majority of loans
originated having
a tenor of
six months
. The Company
analyses this lending
book as a
single portfolio
because the
loans within the
portfolio have similar characteristics and management uses similar processes to monitor and assess
the credit risk of the lending book.
Refer to Note 6 related to the Company risk management process related to
these receivables.
The Company has operated this lending book for more than
five years
and uses historical default experience over the lifetime of
loans in order
to calculate a
lifetime loss rate
for the lending
book. The allowance
for credit losses
related to these
microlending finance
loans receivables
is calculated
by multiplying
the lifetime
loss rate
with the
month end
outstanding lending
book. The
lifetime loss
rate as of each of June 30,
2025 and 2024, was
6.50
%. The performing component (that is, outstanding
loan payments not in arrears)
of the book exceeds more than
98
% of outstanding lending book as of June 30, 2025.
Merchant finance loans receivable
Merchant finance loans
receivable is related
to the Company’s
Merchant lending activities
in South Africa
whereby it provides
unsecured
short-term loans
to qualifying
customers. Loans
to customers
have a
tenor of
up to
twelve months
, with
the majority
of
loans originated having a tenor of approximately
eight months
. The Company analyses this lending book as a single portfolio because
the loans within the portfolio have similar characteristics and management uses similar processes to monitor and assess the credit risk
of the lending book.
Refer to Note 6 related to the Company risk management process related to these receivables.
The Company has
commenced lending
to merchant customers
approximately four years
ago and
uses historical default
experience
over the
lifetime of
loans generated
thus far
in order
to calculate
a lifetime
loss rate
for the
lending book.
The allowance
for credit
losses related to
these merchant finance
loans receivables is
calculated by adding
together actual receivables
in default plus
multiplying
the
lifetime
loss
rate
with
the
month-end
outstanding
lending
book.
The
lifetime
loss
rate
as
of
June
30,
2025
and
2024,
was
approximately
1.14
% and
1.18
%, respectively.
The performing component (that is,
outstanding loan payments not in arrears),
under-
performing
component (that
is, outstanding
loan payments
that are
in arrears)
and non-performing
component (that
is, outstanding
loans
for
which
payments
appeared
to
have
ceased)
of
the
book
represents
approximately
95
%,
4
%
and
1
%,
respectively,
of
the
outstanding lending book as of June 30, 2025.
5.
INVENTORY
The Company’s inventory
comprised the following categories as of June 30, 2025, and 2024.
June 30,
June 30,
2025
2024
Raw materials
$
2,963
$
2,791
Work in progress
293
71
Finished goods
20,295
15,364
$
23,551
$
18,226
Finished goods as
of June 30, 2024,
includes $
1.8
million of Cell C
airtime inventory that was
previously classified as
finished
goods subject to sale restrictions. The Company sold all of this inventory during the first two months of the year ended June 30, 2025.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-32
6.
FAIR VALUE
OF FINANCIAL INSTRUMENTS
Fair value of financial instruments
Initial recognition and measurement
Financial instruments
are recognized
when the
Company becomes
a party
to the
transaction. Initial
measurements are
at cost,
which includes transaction costs.
Risk management
The Company manages its exposure
to currency exchange, translation, interest rate,
credit, microlending credit and equity price
and liquidity risks as discussed below.
Currency exchange risk
The Company is subject to currency exchange risk because it purchases components
for its vaults, that the Company assembles,
and inventories
that it is
required to
settle in other
currencies, primarily
the euro, renminbi,
and U.S. dollar.
The Company
has used
forward contracts in order to limit its
exposure in these transactions to fluctuations
in exchange rates between the South African
rand
(“ZAR”), on the one hand, and the U.S. dollar and the euro, on the other hand.
Translation risk
Translation risk relates to
the risk that
the Company’s results of operations
will vary significantly
as the U.S.
dollar is its
reporting
currency,
but it earns a
significant amount of its
revenues and incurs a
significant amount of its
expenses in ZAR. The
U.S. dollar to
the ZAR
exchange rate
has fluctuated
significantly over
the past
three years.
As exchange
rates are
outside the
Company’s
control,
there can be no
assurance that future fluctuations will
not adversely affect the Company’s results of operations and
financial condition.
Interest rate risk
As a result of its
normal borrowing activities, the Company’s operating results are exposed to fluctuations in
interest rates, which
it
manages
primarily
through
regular
financing
activities.
Interest
rates
in
South
Africa
have
been
trending
downwards
in
recent
quarters and
as of the
date of this
Annual Report,
are expected to
decline by a
further 25 basis
points in the
first quarter
of calendar
2026
and stabilize at
that level for
the remainder of
that year. Therefore, ignoring the impact
of changes to
the margin on its
borrowings
(refer
to
Note
12)
and
value
of
borrowings
outstanding,
the
Company
expects
its
cost
of
borrowing
to
decline
moderately
in
the
foreseeable future, however, the Company would expect a higher cost of borrowing if interest rates were to increase in the future. The
Company
periodically
evaluates
the
cost
and
effectiveness
of
interest
rate
hedging
strategies
to
manage
this
risk.
The
Company
generally
maintains surplus
cash in
cash equivalents
and held
to maturity
investments and
has occasionally
invested in
marketable
securities.
Credit risk
Credit
risk
relates
to
the
risk
of
loss
that
the
Company
would
incur
as
a
result
of
non-performance
by
counterparties.
The
Company
maintains
credit
risk
policies
in
respect
of
its
counterparties
to
minimize
overall
credit
risk.
These
policies
include
an
evaluation
of
a
potential
counterparty’s
financial
condition,
credit
rating,
and
other
credit
criteria
and
risk
mitigation
tools
as
the
Company’s
management deems
appropriate.
With
respect to
credit risk
on certain
financial instruments,
the Company
maintains a
policy of entering
into such transactions only
with South African
and European financial
institutions that have
a credit rating
of “B”
(or its equivalent) or better, as determined by
credit rating agencies such as Standard & Poor’s, Moody’s
and Fitch Ratings.
Consumer microlending credit
risk
The Company
is exposed
to credit
risk in
its Consumer
microlending activities,
which provides
unsecured short-term
loans to
qualifying customers.
Credit bureau
checks as
well as
an affordability
test are
conducted as
part of
the origination
process, both
of
which are in line with local regulations. The Company considers this
policy to be appropriate because the affordability test it
performs
takes into account
a variety of
factors such
as other debts
and total expenditures
on normal household
and lifestyle expenses.
Additional
allowances
may
be required
should the
ability of
its customers
to make
payments when
due
deteriorate
in the
future. Judgment
is
required to assess
the ultimate recoverability
of these finance
loan receivables, including
ongoing evaluation
of the creditworthiness
of each customer.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-33
6.
FAIR VALUE
OF FINANCIAL INSTRUMENTS (continued)
Risk management (continued)
Merchant lending
The Company maintains an allowance for
doubtful finance loans receivable related to
its Merchant services segment with
respect
to short-term loans to qualifying merchant customers. The
Company’s risk management procedures include adhering to its proprietary
lending criteria which uses
an online-system loan application
process, obtaining necessary customer transaction-history
data and credit
bureau checks.
The Company considers
these procedures
to be appropriate
because it takes
into account
a variety of
factors such
as
the customer’s credit capacity and customer-specific
risk factors when originating a loan.
Equity price and liquidity risk
Equity price risk relates to the risk of loss that the Company would incur as a result of the volatility in the exchange-traded price
of equity
securities that
it holds.
The market
price of
these securities
may fluctuate
for a
variety of
reasons and,
consequently,
the
amount that the Company may obtain in a subsequent sale of these securities may significantly differ
from the reported market value.
Equity liquidity risk
relates to the risk
of loss that the
Company would incur as
a result of the lack
of liquidity on the
exchange
on
which
those
securities
are
listed.
The
Company
may
not be
able
to
sell some
or
all
of
these
securities
at
one
time,
or
over
an
extended period of time without influencing the exchange-traded price,
or at all.
Financial instruments
Fair value
is defined
as the price
that would
be received
upon sale
of an
asset or
paid upon
transfer of
a liability
in an orderly
transaction between
market participants
at the
measurement date
and in
the principal
or most
advantageous market
for that
asset or
liability. The
fair value should be calculated based
on assumptions that market participants
would use in pricing the asset
or liability,
not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk
including the Company’s own credit
risk.
Fair value measurements and inputs are categorized into a
fair value hierarchy which prioritizes the inputs into
three levels based
on the
extent to which
inputs used
in measuring
fair value
are observable
in the
market. Each fair
value measurement
is reported in
one of the three levels which is determined by the lowest level input that is significant
to the fair value measurement in its entirety.
These levels are:
●
Level 1 – inputs are based upon unadjusted quoted prices for identical instruments
traded in active markets.
●
Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar
instruments in
markets that
are not
active, and
model-based valuation
techniques for
which all
significant assumptions
are
observable
in the
market or
can be
corroborated
by observable
market
data for
substantially the
full term
of the
assets or
liabilities.
●
Level
3
–
inputs
are
generally
unobservable
and
typically
reflect
management’s
estimates
of
assumptions
that
market
participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques
that include option pricing models, discounted cash flow models, and
similar techniques.
The following
section describes
the valuation
methodologies the
Company uses
to measure
its significant
financial assets
and
liabilities at fair value.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-34
6.
FAIR VALUE
OF FINANCIAL INSTRUMENTS (continued)
Financial instruments (continued)
Asset measured at fair value using significant observable inputs – investment in MobiKwik
The Company’s
disposed of its entire holding,
comprising
6,215,620
equity shares, in MobiKwik in
late June 2025. MobiKwik
listed on the National Stock
Exchange of India (“NSE”) on December
18, 2024. Up until its listing
MobiKwik did not have a
readily
determinable fair
value and
the Company
elected to
measure its
investment in
MobiKwik at
cost minus
impairment, if
any,
plus or
minus changes
resulting from
observable price
changes in
orderly transactions
for the
identical or
a similar
investment of
the same
issuer (“cost plus or minus changes
in observable prices equity securities”).
From the date of MobiKwik’s
listing, the Company used
MobiKwik’s closing price reported on
the NSE on the last trading day related to last day of each of the Company’s external reporting
periods
through
March
31,
2025
to
determine
the
fair
value
of
the
equity
securities
owned
by
the
Company.
Refer
to
Note
9
for
additional information.
Asset measured at fair value using significant unobservable inputs – investment
in Cell C
The Company’s
Level 3 asset represents
an investment of
75,000,000
class “A” shares in Cell
C, a significant
mobile telecoms
provider in South Africa.
The Company used a discounted cash flow model developed by the Company to determine
the fair value of
its investment
in Cell
C as of
June 30,
2025 and
June 30, 2024,
respectively,
and valued Cell
C at $
0.0
(zero) and
$
0.0
(zero) as
of
June 30, 2025, and June 30, 2024, respectively.
The Company incorporates the payments under Cell C’s
lease liabilities into the cash
flow forecasts and assumes
that Cell C’s
deferred tax assets would
be utilized over the
forecast period. The Company
has assumed a
marketability discount
of
15
% (2024:
20
%) and a
minority discount
of
17
% (2024:
24
%). The Company
utilized the
latest business
plan
provided
by Cell
C management
for
the period
ended
May
31,
2030,
for
the
June 30,
2025,
valuation
and
the business
plan
approved by
Cell C management
for the period
ended December 31,
2027, for
the June 30,
2024, valuation. Adjustments
have been
made to the WACC
rate to reflect the Company’s
assessment of risk to Cell C achieving its business plan.
The following key valuation inputs were used as of June 30, 2025 and 2024:
Weighted Average
Cost of Capital ("WACC"):
24
% as of June 30, 2025 and between
21
% and
23
% as of June 30, 2024
Long-term growth rate:
4.5
% (
4.5
% as of June 30, 2024)
Marketability discount:
15
% (
20
% as of June 30, 2024)
Minority discount:
17
% (
24
% as of June 30, 2024)
Net adjusted external debt - June 30, 2025:
(1)
ZAR
8.3
billion ($
0.5
billion), no lease liabilities included
Net adjusted external debt - June 30, 2024:
(2)
ZAR
8
billion ($
0.4
billion), no lease liabilities included
(1) translated from ZAR to U.S. dollars at exchange rates applicable as of
June 30, 2025.
(2) translated from ZAR to U.S. dollars at exchange rates applicable as of
June 30, 2024.
The fair value
of Cell C
as of June
30, 2025, utilizing
the discounted
cash flow valuation
model developed
by the Company
is
sensitive to the following inputs: (i)
the ability of Cell C to achieve
the forecasts in their business case; (ii)
the WACC
rate used; and
(iii) the
minority and marketability
discount used. Utilization
of different inputs,
or changes to
these inputs, may
result in
a significantly
higher or lower fair value measurement.
The following table presents the impact on the carrying value of the Company’s
Cell C investment of a
1.0
% decrease and
1.0
%
increase in the WACC rate and the EBITDA margins used
in the Cell
C valuation on June
30, 2025, all amounts translated at
exchange
rates applicable as of June 30, 2025:
Sensitivity for fair value of Cell C investment
1.0% increase
1.0% decrease
WACC
rate
$
(669)
$
1,095
EBITDA margin
$
1,780
$
(1,444)
The aggregate fair value of Cell C’s shares as of
June 30, 2025, represented
0.0
% of the Company’s total assets, including these
shares. The Company expects that there will
be short-term equity price volatility with respect
to these shares given that Cell
C remains
in a turnaround process
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-35
6.
FAIR VALUE
OF FINANCIAL INSTRUMENTS (continued)
Financial instruments (continued)
Derivative transactions - Foreign exchange contracts
As part
of the
Company’s
risk management
strategy,
the Company
enters into
derivative transactions
to mitigate
exposures to
foreign
currencies
using
foreign
exchange
contracts. These
foreign
exchange
contracts
are
over-the-counter
derivative
transactions. Substantially all of the Company’s derivative exposures are with counterparties that have long-term credit ratings of “B”
(or equivalent)
or better.
The Company
uses quoted
prices in
active markets
for similar
assets and liabilities
to determine
fair value
(Level 2). The
Company has
no derivatives
that require
fair value
measurement under
Level 1,
Level 2
or Level
3 of
the fair
value
hierarchy.
The Company had
no
outstanding foreign exchange contracts as of June 30, 2025 and June 30,
2024, respectively.
The following table presents the
Company’s assets measured
at fair value on a recurring basis as of
June 30, 2025, according to
the fair value hierarchy:
Quoted Price in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Assets
Investment in Cell C
$
-
$
-
$
-
$
-
Related to insurance business:
Cash, cash equivalents and
restricted cash (included in other
long-term assets)
125
-
-
125
Fixed maturity investments
(included in cash and cash
equivalents)
4,739
-
-
4,739
Total assets at fair value
$
4,864
$
-
$
-
$
4,864
The following table presents the Company’s
assets measured at fair value on a recurring basis as of
June 30, 2024, according to
the fair value hierarchy:
Quoted Price in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Assets
Investment in Cell C
$
-
$
-
$
-
$
-
Related to insurance business
Cash and cash equivalents
(included in other long-term
assets)
216
-
-
216
Fixed maturity investments
(included in cash and cash
equivalents)
4,635
-
-
4,635
Total assets at fair value
$
4,851
$
-
$
-
$
4,851
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-36
6.
FAIR VALUE
OF FINANCIAL INSTRUMENTS (continued)
Financial instruments (continued)
There have been
no
transfers in or out of Level 3 during the years ended June 30, 2025 and 2024, respectively.
There was
no
movement in the carrying value of assets measured at fair value on a recurring basis, and categorized within Level
3, during the years ended June 30, 2025
and 2024. Summarized below is the movement in
the carrying value of assets measured at fair
value on a recurring basis, and categorized within Level 3, during the year
ended June 30, 2025:
Carrying value
Assets
Balance as of June 30, 2024
$
-
Foreign currency adjustment
(1)
-
Balance as of June 30, 2025
$
-
(1) The
foreign currency
adjustment represents
the effects
of the fluctuations
of the South
African rand
against the
U.S. dollar
on the carrying value.
Summarized below is the movement in the carrying value of
assets and liabilities measured at fair value on a recurring
basis, and
categorized within Level 3, during the year ended June 30, 2024:
Carrying value
Assets
Balance as at June 30, 2023
$
-
Foreign currency adjustment
(1)
-
Balance as of June 30, 2024
$
-
(1) The
foreign currency
adjustment represents
the effects
of the fluctuations
of the South
African rand
against the
U.S. dollar
on the carrying value.
Trade, finance loans and other receivables
Trade, finance loans and other receivables originated by the Company are
stated at cost less allowance for credit losses. The fair
value of trade, finance loans and other receivables approximates their carrying
value due to their short-term nature.
Trade and other payables
The fair values of trade and other payables approximates their carrying amounts, due
to their short-term nature.
Assets and liabilities measured at fair value on a nonrecurring basis
The Company
measures equity
investments without
readily determinable
fair values
at fair
value on
a nonrecurring
basis. The
fair values of
these investments are
determined based on
valuation techniques using
the best information
available, and may
include
quoted market prices, market comparables, and discounted cash flow
projections. An impairment charge is recorded when the cost
of
the
asset
exceeds
its
fair
value
and
the
excess
is
determined
to
be
other-than-temporary.
Refer
to
Note
9
for
impairment
charges
recorded during the
reporting periods presented
herein. The Company
has
no
liabilities that
are measured at
fair value
on a
nonrecurring
basis.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-37
7.
PROPERTY,
PLANT AND EQUIPMENT,
net
Summarized below
is the cost,
accumulated depreciation
and carrying amount
of property,
plant and
equipment as of
June 30,
2025 and 2024:
June 30,
June 30,
2025
2024
Cost
Vaults
$
33,276
$
24,641
Computer equipment
45,597
44,538
Furniture and office equipment
9,723
9,365
Motor vehicles
4,873
3,088
Plant and machinery
91
66
93,560
81,698
Accumulated depreciation:
Vaults
11,911
8,838
Computer equipment
27,708
32,871
Furniture and office equipment
7,225
6,854
Motor vehicles
1,747
1,165
Plant and machinery
45
34
48,636
49,762
Carrying amount:
Vaults
21,365
15,803
Computer equipment
17,889
11,667
Furniture and office equipment
2,498
2,511
Motor vehicles
3,126
1,923
Plant and machinery
46
32
$
44,924
$
31,936
8.
LEASES
The
Company
has
entered into
leasing
arrangements
classified
as operating
leases under
accounting
guidance.
These leasing
arrangements
relate primarily
to the
lease of
its corporate
head
office,
administration
offices,
a manufacturing
facility,
and branch
locations through which the
Company operates its financial services
business in South Africa.
The Company’s
operating leases have
a remaining
lease term
of between
one year
to
five years
. The
Company also
operates parts
of its
financial services
business from
locations which it leases for a period of less than
one year
.
The Company’s
operating lease expense
during the years
ended June 30,
2025, 2024 and
2023, was $
4.8
million, $
3.2
million,
and $
2.9
million, respectively. The Company
does not have any significant leases that have not commenced as of June 30, 2025.
The Company
has entered into
short-term leasing
arrangements, primarily
for the lease
of branch
locations and other
locations
to operate
its financial
services business
in South
Africa.
The Company’s
short-term lease
expense during
the years
ended June
30,
2025, 2024 and 2023, was $
4.7
million, $
3.6
million and $
4.2
million, respectively.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-38
8.
LEASES (continued)
The following
table presents
supplemental
balance sheet
disclosure related
to our
right-of-use assets
and our
operating leases
liabilities as of June 30, 2025 and 2024:
June 30,
June 30,
2025
2024
Right-of-use assets obtained in exchange for lease obligations
Weighted average
remaining lease term (years)
2.84
3.07
Weighted average
discount rate
9.8
%
10.5
%
Maturities of operating lease liabilities
2026
$
4,852
2027
3,344
2028
2,116
2029
944
2030
404
Thereafter
-
Total undiscounted
operating lease liabilities
11,660
Less imputed interest
1,524
Total operating lease liabilities,
included in
10,136
Operating lease liability - current
4,007
Operating lease liability - long-term
$
6,129
9.
EQUITY-ACCOUNTED
INVESTMENTS AND OTHER LONG-TERM ASSETS
Equity-accounted investments
The Company’s ownership percentage
in its equity-accounted investments as of June 30, 2025 and 2024, was as follows:
June 30,
June 30,
2025
2024
Sandulela Technology
Proprietary Limited ("Sandulela")
49
%
49
%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)
50
%
50
%
Finbond
In December
2023, the
Company sold
its entire
remaining equity
interest in
Finbond which
comprised of
220,523,358
shares,
and which represented approximately
27.8
% of Finbond’s issued and
outstanding ordinary shares immediately
prior to the
sale. Lesaka
SA had pledged, among other things, its entire equity interest in Finbond as security for its previous South African facilities described
in Note 12.
Sale of Finbond shares during the years ended
June 30, 2024
and 2023
On
August
10,
2023,
the
Company,
through
its
wholly
owned
subsidiary
Net1
Finance
Holdings
(Pty)
Ltd,
entered
into
an
agreement with Finbond to sell its remaining shareholding to Finbond for a cash consideration of ZAR
64.2
million ($
3.5
million), or
ZAR
0.2911
per share. The transaction closed in December 2023. The Company did
no
t record a gain or loss on the disposal because
the sale
proceeds were
equivalent to
the net
carrying value,
including accumulated
reserves, of
the investment
in Finbond
as of
the
disposal
date.
The
cash
proceeds
received
of
ZAR
64.2
million
($
3.5
million)
were
used
to
repay
capitalized
interest
under
our
borrowing facilities, refer to Note 12.
The
Company
sold
25,456,545
shares
in Finbond
for
cash during
the
year
ended
June 30,
2023,
and
recorded
a
loss of
$
0.4
million in the caption loss on equity-accounted investment in the Company’s consolidated statement of operations for the years ended
June 30, 2023.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-39
9.
EQUITY-ACCOUNTED
INVESTMENTS AND OTHER LONG-TERM ASSETS (continued)
Equity-accounted investments (continued)
Finbond (continued)
Sale of Finbond shares during the years ended
June 30, 2024 and 2023 (continued)
The following table presents the
calculation of the loss on disposal
of Finbond shares during the
years ended June 30, 2024
and
2023:
Year
ended June 30,
2024
2023
Loss on disposal of Finbond shares:
Consideration received in cash
$
3,508
$
265
Less: carrying value of Finbond shares sold
(2,112)
(363)
Less: release of foreign currency translation reserve from accumulated other
comprehensive
loss
(1,543)
(252)
Add: release of stock-based compensation charge related
to equity-accounted investment
147
9
Loss on sale of Finbond shares
$
-
$
(341)
Finbond impairments
recorded during
the year ended June 30, 2024
The Company performed an impairment assessment of its holding in Finbond, including the foreign currency translation reserve
and other equity
account amounts, as
of September
30, 2023. The
Company recorded
an impairment
loss of $
1.2
million during the
quarter ended September
30, 2023, which
represented the difference
between the determined
fair value of
the Company’s
interest in
Finbond and the Company’s carrying value, including the foreign currency translation reserve (before the impairment). The Company
used the
price of
ZAR
0.2911
referenced in
the August
2023 agreement
referred to
above to
calculate the
determined fair
value for
Finbond.
Finbond impairments
recorded during
the year ended June 30, 2023
The Company
considered the combination
of the ongoing
losses incurred and
reported by Finbond
and its lower
share price as
impairment indicators as of
September 30, 2022. The
Company performed an impairment
assessment of its holding
in Finbond as of
September 30,
2022. The Company
recorded an impairment
loss of $
1.1
million during the
year ended
June 30, 2023,
related to the
other-than-temporary
decrease
in
Finbond’s
value,
which
represented
the
difference
between
the
determined
fair
value
of
the
Company’s interest
in Finbond and the Company’s
carrying value (before the impairment).
During fiscal 2023, there continued
to be
limited trading
in Finbond
shares on
the JSE
because a
small number
of shareholders
owned approximately
80
% of
its issued
and
outstanding shares between them. The Company calculated a fair value per share for Finbond by applying a liquidity discount of
25
%
to the September 30, 2022, Finbond closing price of ZAR
0.49
. The Company increased the liquidity discount from
15
% (used in the
previous impairment assessment)
to
25
% (used in
the September 30,
2022 assessment) as
a result of
the ongoing limited
trading activity
observed on the JSE.
Carbon
In September 2022, the
Company entered into a binding
term sheet to sell its entire
interest, or
25
%, in Carbon for $
0.5
million
and a
loan due from
Carbon, with a
face value of
$
3
million, for $
0.75
million. Both
the equity
interest and
the loan had
a carrying
value of
$
0
(zero) at June
30, 2022.
The Company
received $
0.25
million on closing
and the outstanding
balance due by
Etobicoke
was expected to be paid
as follows: (i) $
0.25
million on September 30,
2023 (the amount was received
in October 2023), and (ii)
the
remaining
amount, of
$
0.75
million in
March 2024
(the amount
has not
been received
as of
June 30,
2024 (refer
to Note
4)). The
Company
has
allocated
the $
0.25
million
received
on closing
to the
sale of
the
equity interest
and
allocated
the subsequent
funds
received first to the sale of the equity interest and then to the loans.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-40
9.
EQUITY-ACCOUNTED
INVESTMENTS AND OTHER LONG-TERM ASSETS (continued)
Equity-accounted investments (continued)
Carbon (continued)
The Company
believed that
the fair
value of
the Carbon
shares provided
as security
was $
0
(zero), which
was in
line with
the
carrying value as
of June 30, 2022,
and created an allowance
for doubtful loans receivable
related to the $
1.0
million previously due
from Etobicoke.
The Company
did not
incur any significant
transaction costs.
The Company
has included
the gain of
$
0.25
million
related to the sale of the Carbon equity interest in the caption net
gain on disposal of equity-accounted investments in the Company’s
consolidated statements of operations.
The following table presents the calculation of the gain on disposal of Carbon
during the year ended June 30, 2023:
Year
ended
June 30,
2023
Gain on disposal of Carbon shares:
Consideration received in cash in September 2022
$
250
Less: carrying value of Carbon
-
Gain on disposal of Carbon shares:
(1)
$
250
(1)
The
Company
did
not
pay
taxes
related
to
the
sale
of
Carbon
because
the
base
cost
of
its
investment
exceeds
the
sales
consideration
received.
The Company
does not
believe
that it
will be
able to
utilize the
loss generated
because
Net1 BV
does
not
generate taxable income.
VantagePay
Limited
The Company provided VantagePay with a working capital
facility of $
1.5
million. The Company created
an allowance for credit
losses related to loans receivable of $
1.5
million during the year ended June 30,
2021, related to the full amount
outstanding as of June
30, 2021. This amount was still outstanding as of June 30, 2025.
Summarized
below is
the movement
in equity-accounted
investments during
the years
ended June
30, 2025
and 2024,
which
includes the investment in equity and the investment in loans provided
to equity-accounted investees:
Finbond
Other
(1)
Total
Investment in equity
Balance as of June 30, 2023
$
3,040
$
131
$
3,171
Stock-based compensation
14
-
14
Comprehensive loss:
(956)
166
(790)
Other comprehensive income
489
-
489
Equity accounted (loss) earnings
(1,445)
166
(1,279)
Share of net (loss) income
(278)
166
(112)
Impairment
(1,167)
-
(1,167)
Dividends received
-
(95)
(95)
Sale of shares in equity-accounted investment
(2,096)
-
(2,096)
Foreign currency adjustment
(2)
(2)
4
2
Balance as of June 30, 2024
-
206
206
Comprehensive income:
-
114
114
Equity accounted earnings
-
114
114
Share of net income
-
114
114
Dividends received
-
(96)
(96)
Sale of shares in equity-accounted investment
-
(507)
(507)
Equity-accounted investment acquired in business combination (Note
3)
-
477
477
Foreign currency adjustment
(2)
-
5
5
Balance as of June 30, 2025
$
-
$
199
$
199
(1) Includes Sandulela and SmartSwitch Namibia;
(2) The foreign currency
adjustment represents the
effects of the fluctuations
of the ZAR and
Namibian dollar, against
the U.S.
dollar on the carrying value.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-41
9.
EQUITY-ACCOUNTED
INVESTMENTS AND OTHER LONG-TERM ASSETS (continued)
Other long-term assets
Summarized below is the breakdown of other long-term assets as of June 30,
2025, and June 30, 2024:
June 30,
June 30,
2025
2024
Total equity investments
$
-
$
76,297
Investment in MobiKwik (June 30, 2024:
10
%)
(1)
-
76,297
Investment in
5
% of Cell C (June 30, 2024:
5
%) at fair value (Note 6)
-
-
Investment in
87.50
% of CPS (June 30, 2024:
87.50
%) at fair value
(1)(2)
-
-
Policy holder assets under investment contracts (Note 11)
125
216
Reinsurance assets under insurance contracts (Note 11)
1,837
1,469
Other long-term assets
1,847
-
Total other long-term
assets
$
3,809
$
77,982
(1) The
Company determined
that MobiKwik
(up until
December 2024)
and CPS do
not have
readily determinable
fair values
and therefore elected
to record these
investments at cost
minus impairment, if
any,
plus or minus
changes resulting from
observable
price changes in orderly
transactions for the identical
or a similar investment
of the same issuer.
The Company disposed
of its entire
investment in MobiKwik in late June 2025.
(2) On October 16, 2020, the
High Court of South Africa, Gauteng Division,
Pretoria ordered that Cash Paymaster Services (Pty)
Ltd (“CPS”) be placed into liquidation.
MobiKwik
The Company
signed a
subscription agreement
with MobiKwik,
which is
one of
India’s
largest independent
mobile payments
networks and buy now
pay later businesses.
Pursuant to the
subscription agreement, the Company agreed
to make an
equity investment
of up to $
40.0
million in MobiKwik over a
24
-month period. The Company made an
initial $
15.0
million investment in August 2016
and a
further
$
10.6
million investment
in June
2017,
under this
subscription
agreement.
During the
year ended
June 30,
2019, the
Company
paid
$
1.1
million
to
subscribe
for
additional
shares
in
MobiKwik.
The
Company
owned
6,215,620
equity
shares
in
MobiKwik, which as of June 30, 2024, represented approximately
10
% of MobiKwik’s issued share capital.
Refer to Note 6 for additional information
regarding the determination of the fair value
of Company’s investment
in MobiKwik
as of June 30, 2025. The Company disposed of its entire equity interest in
MobiKwik for $
16.4
million during the year ended June 30,
2025,
and
recorded
a
loss of
$
59.8
million.
This
loss comprised
of (i)
fair
value
adjustments
to
decrease
the carrying
value
of its
investment by $
54.2
million from $
76.3
million as of June 30, 2024, to $
22.1
million as of March 31, 2025, and (ii) a further loss $
5.6
million upon disposal in the
fourth quarter of fiscal 2025. The
loss is included in the
caption “Change in fair value of
equity securities”
in the consolidated statement of operations for the year ended June 30, 2025.
The Company
did not
identify any
observable transactions
during
the years
ended June
30, 2024
and 2023,
respectively,
and
therefore there
was no
change in
the fair
value of
MobiKwik during
these years.
During the
year ended
June 30,
2021, MobiKwik
entered
into
a number
of
separate
agreements
with
new
shareholders
to
raise
additional capital
through
the
issuance
of additional
shares. The Company used the
valuation from MobiKwik’s June 2021 capital raise as
the basis for its
fair value determination of $
76.3
million as of June 30, 2024.
Cell C
On
August
2,
2017,
the
Company,
through
its
subsidiary,
Net1SA,
purchased
75,000,000
class
“A”
shares
of
Cell
C
for
an
aggregate purchase price of ZAR
2.0
billion ($
151.0
million) in cash. The Company funded the transaction through
a combination of
cash and a borrowing facility. Net1 SA has pledged, among other things, its entire equity interest in Cell
C as security for the previous
South African
facilities described
in Note 12.
On September 30,
2022, Cell C
completed its
recapitalization process
which included
the issuance of
additional equity instruments
by Cell C. The
Company’s
effective percentage
holding in Cell C’s
equity has reduced
from
15
% to
5
% following
the
recapitalization.
The Company’s
investment
in
Cell C
is carried
at
fair
value.
Refer
to Note
6
for
additional information regarding changes in the fair value of Cell C.
CPS
The Company
deconsolidated
its investment
in CPS
in May
2020. As
of June
30, 2025
and 2024,
respectively,
the Company
owned
87.5
% of CPS’ issued share capital.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-42
9.
EQUITY-ACCOUNTED
INVESTMENTS AND OTHER LONG-TERM ASSETS (continued)
Other long-term assets (continued)
Summarized below
are the components
of the Company’s
equity securities
without readily
determinable fair
value and held
to
maturity investments as of June 30, 2025:
Cost basis
Unrealized
holding gains
Unrealized
holding losses
Carrying
value
Equity securities:
Investment in CPS
$
-
$
-
$
-
$
-
Held to maturity:
Investment in Cedar Cellular notes
-
-
-
-
Summarized below are the components of the Company’s
equity securities without readily determinable fair value and held to
maturity investments as of June 30, 2024:
Cost basis
Unrealized
holding gains
Unrealized
holding losses
Carrying
value
Equity securities:
Investment in MobiKwik
$
26,993
$
49,304
$
-
$
76,297
Investment in CPS
-
-
-
-
Held to maturity:
Investment in Cedar Cellular notes
-
-
-
-
Total
$
26,993
$
49,304
$
-
$
76,297
10.
GOODWILL AND INTANGIBLE
ASSETS,
net
Goodwill
Summarized below is the movement in the carrying value of goodwill
for the years ended June 30, 2025, 2024 and 2023:
Gross value
Accumulated
impairment
Carrying value
Balance as of July 1, 2022
$
175,476
$
(12,819)
$
162,657
Impairment loss
-
(7,039)
(7,039)
Foreign currency adjustment
(1)
(22,857)
982
(21,875)
Balance as of June 30, 2023
152,619
(18,876)
133,743
Foreign currency adjustment
(1)
5,280
(472)
4,808
Balance as of June 30, 2024
157,899
(19,348)
138,551
Impairment loss
-
(17,041)
(17,041)
Acquisitions (Note 3)
(2)
76,114
-
76,114
Foreign currency adjustment
(1)
2,096
(325)
1,771
Balance as of June 30, 2025
$
236,109
$
(36,714)
$
199,395
(1) – The foreign currency adjustment represents the effects of the fluctuations between the South African Rand against the U.S.
dollar on the carrying value.
(2) – Represents
goodwill arising from
the acquisition of Adumo,
Recharger, IVAS
Namibia and Master
Fuel and translated at
the foreign exchange rates applicable on the date the transactions became effective.
This goodwill has been allocated to the Merchant
(a portion Adumo, IVAS Namibia and Master Fuel), Consumer (a portion of Adumo) and Enterprise (Recharger) reportable operating
segments.
Goodwill associated with
the acquisitions represents the
excess of cost
over the fair value
of net assets
acquired. Goodwill arising
from
these
acquisitions
is not
deductible
for
tax
purposes.
See
Note
3
for
the
allocation
of
the
purchase
price
to
the fair
value
of
acquired net assets.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-43
10.
GOODWILL AND INTANGIBLE
ASSETS,
net (continued)
Goodwill (continued)
Impairment loss
The Company assesses the carrying
value of goodwill for impairment
annually, or
more frequently,
whenever events occur and
circumstances change indicating
potential impairment. The Company
performs its annual impairment
test as at June 30 of
each year.
The Company did
not perform a qualitative
assessment during the
years ended June 30,
2025, 2024 or
2023, respectively.
Except as
discussed below, no goodwill
has been impaired during the years ended June 30, 2025, 2024 and 2023,
respectively.
In order to determine the amount of
the goodwill impairments, the estimated fair value of
our reporting units’ business assets and
liabilities were compared to the carrying value of
their assets and liabilities. The Company
used a discounted cash flow model in
order
to determine the
fair value of
the businesses
(this is
a Level-3 fair
value measurement). Based
on this
analysis, the Company
determined
that the carrying value of the reporting units’ business assets and liabilities exceeded
their fair value at the reporting date.
In
determining
the
fair
value
of
the
reporting
units,
the
Company
considered
key
judgements
related
to
the
reporting
units’
revenue growth rates, weighted-average cost of capital (“WACC”)
applicable to peer and industry comparables of the reporting units,
and
the
forecast
periods
used.
The
Company
may
record
an
impairment
loss in
future
if
actual
growth
rates
are
lower
than
those
included in the Company’s discounted cash flow model. Furthermore, use of a higher weighted-average cost of capital may
also result
in an impairment loss in the future.
Year ended
June 30, 2025 goodwill impairment loss
The Company
recognized an impairment
loss of $
17.0
million as a
result of its
annual impairment
analysis related to
goodwill
allocated to its Connect Cash
and Adumo Technologies reporting units within its Merchant segment,
its Adumo Payouts reporting unit
within
Consumer
segment
and
its
EasyPay
reporting
unit
within
its
Enterprise
segment.
The
impairments
are
included
within
the
caption impairment loss in the consolidated statement of operations for
the year ended June 30, 2025.
At June 30, 2024,
the fair value of
the Connect Cash reporting
unit exceeded its carrying
value by
11
%.The impairment loss in
the Connect Cash
reporting unit resulted
from a reassessment of
the business’ growth prospects
in the context
of its strategic market
positioning, optimized capital expenditures and increase WACC
over prior years.
The impairment loss in the
Adumo Technologies
reporting unit resulted from a reassessment
of the business’ growth prospects,
a strategic decision to exit low return
and sub-optimal merchants’ contracts.
The impairment loss in the Adumo Payouts reporting
unit resulted from a reassessment of the business’ growth
prospects of the
reporting unit with lower revenue and therefore lower free cash flow generation expected compared to when performing the purchase
price allocation.
Easypay was acquired
in fiscal 2006.
At June 30,
2024, the fair
value of the
EasyPay reporting unit
exceeded is carrying
value
by
318
%. The impairment loss in the EasyPay reporting unit during the year ended June 30, 2025, resulted from a reassessment of the
business’ growth and the expected impact on its future cash flows as a result the cash outflows
expected from initiatives to modernize
its existing technology platform to retain and expand its product offering
and customer base.
The fair
value of
the ISV
and Humble
reporting unit
s
(both allocated
to Merchant)
included in
the Company’s
acquisition of
Adumo
did
not substantially
exceed
the
carrying
value
of their
respective
reporting
unit.
The
fair
value
of
the
ISV
reporting
unit
exceeded the carrying value by
2.4
% and Humble exceeded the carrying value
by
1
%. As of June 30,
2025, carrying value of goodwill
allocated
to
ISV
and
Humble
was
$
34.0
million
and
$
1.5
million,
respectively.
All
other
reporting
units’
fair
value
exceeded
the
carrying value of the reporting unit by at least
28
%.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-44
10.
GOODWILL AND INTANGIBLE
ASSETS,
net (continued)
Goodwill (continued)
Impairment loss (continued)
Year ended
June 30, 2025 goodwill impairment loss (continued)
The table below
presents the impairment
per reporting unit
for the year
ended June 30,
2025 and the
revenue growth rates,
WACC
and forecast period for
reporting units used
in the discounted
cash flow models
for the June
30, 2025 and June
30, 2024, and
for entities
acquiring during the current fiscal year, the information
used in the purchase price allocation:
Segments and reporting units
with impairments
Impairment
Remaining
goodwill
Range of
revenue
growth rates
(%)
Terminal
revenue
growth rates
(%)
WACC
(%)
Forecast
period
(years)
Merchant
$
9,268
$
22,283
Connect Cash
5,688
22,283
Used at June 30, 2025
3.2
-
23
6.0
15.6
5
Used at June 30, 2024
10
-
13.9
5.0
14.7
5
Adumo Technologies
3,580
-
Used at June 30, 2025
(
10
) -
37
(10.0)
18.5
5
Used at acquisition
6.7
-
14.9
N/A
18.9
Consumer
2,197
6,027
Adumo Payouts
2,197
6,027
Used at June 30, 2025
7.5
-
40.2
6.0
18.2
5
Used at acquisition
11.8
-
26.6
N/A
18.9
4
Enterprise
5,576
3,533
EasyPay
5,576
3,533
Used at June 30, 2025
6
-
65.6
6.0
22.5
10
Used at June 30, 2024
(
21.7
) -
6.9
6.0
14.7
5
Total
$
17,041
$
31,843
In the event that there is a deterioration in the Company’s operating segments, or in any other of the Company’s
businesses, this
may lead to impairments in future periods. Furthermore,
the difficulties of integrating Adumo and Recharger may be increased by the
necessity of integrating personnel with disparate
business backgrounds and combining different corporate cultures. The
Company also
may
not
be
able
to
retain
key
customers
of
an
acquired
business
or
realize
cost
efficiencies
or
synergies
or
other
benefits
that
it
anticipated when selecting its acquisition candidates. These factors
may also lead to impairments in future periods.
Year ended
June 30, 2023 goodwill impairment loss
The Company
recognized an
impairment loss
of $7.0
million as
a result
of its
annual impairment
analysis related
to goodwill
allocated
to
its hardware/
software
support
business
within
its Enterprise
operating
segment. The
impairment
loss resulted
from
a
reassessment
of
the
business’
growth
prospects
given
the
change
in
customer
demand
as
a
result
of
the
introduction
of
cheaper
hardware devices which incorporate
software widely adopted by our customers
customer-base, coupled with a challenging
economic
environment
in
South
Africa.
The
impairment
is
included
within
the
caption
impairment
loss
in
the
consolidated
statement
of
operations for the year ended June 30, 2023.
In order to determine the
amount of the goodwill
impairment, the estimated fair value
of our hardware/ software support business
assets and liabilities were compared to the carrying
value of its assets and liabilities.
The Company used a discounted cash flow model
in order
to determine
the fair value
of the business
(this is
a Level-3
fair value
measurement). Based
on this
analysis, the
Company
determined that the carrying value of the business’ assets and liabilities exceeded
their fair value at the reporting date.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-45
10.
GOODWILL AND INTANGIBLE
ASSETS,
net (continued)
Goodwill (continued)
Impairment loss (continued)
Year ended
June 30, 2023 goodwill impairment loss (continued)
Goodwill has been allocated to the Company’s
reportable segments as follows:
Merchant
Consumer
Enterprise
Carrying value
Balance as of July 1, 2022
$
137,640
$
-
$
25,017
$
162,657
Impairment loss
-
-
(7,039)
(7,039)
Foreign currency adjustment
(1)
(18,523)
-
(3,352)
(21,875)
Balance as of June 30, 2023
119,117
-
14,626
133,743
Foreign currency adjustment
(1)
4,279
-
529
4,808
Balance as of June 30, 2024
123,396
-
15,155
138,551
Impairment loss
(9,268)
(2,197)
(5,576)
(17,041)
Acquisitions (Note 3)
63,808
8,423
3,883
76,114
Foreign currency adjustment
(1)
1,698
(199)
272
1,771
Balance as of June 30, 2025
$
179,634
$
6,027
$
13,734
$
199,395
(1) – The foreign currency adjustment
represents the effects of the fluctuations between
the South African Rand, against the
U.S.
dollar on the carrying value.
10.
GOODWILL AND INTANGIBLE
ASSETS,
net
Intangible assets
Intangible assets acquired
Summarized below
is the
fair value
of intangible
assets acquired,
translated at
the exchange
rate applicable
as of
the relevant
acquisition dates, and the weighted-average amortization period:
Fair value as of
acquisition date
Weighted-average
amortization
period (in years)
Finite-lived intangible asset:
Acquired during the year ended June 30, 2025:
Adumo – technology assets
$
13,998
3
-
7
Adumo – customer relationships
11,185
5
-
10
Adumo – brands
3,623
10
-
15
Recharger – technology assets
1,161
4
Recharger – customer relationships
15,010
5
Genisus Risk – technology assets
$
69
0.1
On acquisition of
these businesses, the
Company recognized an
aggregate deferred
tax liability of approximately
$
12.2
million
related to the acquisition of intangible assets during the year ended
June 30, 2025.
Change in useful lives for certain brand and trademark intangible assets
During early calendar
2025, the
Company’s executive considered the
unification of the
Company’s merchant segments operations
and
the realignment
of the
Company’s
brands under
the master
brand
“Lesaka”. The
Company’s
Board of
Directors
approved
the
realignment of certain of the Company’s brands to the master brand in May 2025. The Company has identified the steps and timing to
realign the
affected
brands under
the master
brand and
expects to
have complete
alignment by
February 2027,
with certain
brands
expected to be
aligned by December
2025. The change
in brands
has resulted in
a change in
the useful lives
of certain of
the Company’s
brand and trademark intangible assets which has resulted in an increase in amortization expense of $
2.6
million during the year ended
June 30, 2025. The change in the useful lives resulted in a $
1.9
million increase in the Company’s net loss from continuing operations
for the year ended June 30, 2025, and did not have a significant impact on loss per
share. The change did not impact prior periods.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-46
10.
GOODWILL AND INTANGIBLE
ASSETS,
net (continued)
Intangible assets (continued)
Impairment loss
The Company
assesses the carrying
value of
intangible assets
for impairment
whenever events
occur or
circumstances change
indicating that the carrying amount of the intangible asset may not be recoverable.
No
intangible assets have been impaired during the
years ended June
30, 2025, 2024
and 2023, respectively,
except for intangible
assets of $
1.8
million related to
Adumo Technologies
which were fully impaired
during the year ended
June 30, 2025. The
impairment was identified during
the Company’s annual goodwill
impairment testing. The method for determining fair
value is discussed above under Goodwill—Impairment loss. The
impairment loss
related to the
impairment of the
intangible assets is
included in the
caption Impairment loss
in the
consolidated statements of
operations.
Summarized below is the carrying value and accumulated amortization of the intangible assets as of June 30, 2025, and June 30,
2024:
As of June 30, 2025
As of June 30, 2024
Gross
carrying
value
Accumulated
amortization
and
impairment
Net
carrying
value
Gross
carrying
value
Accumulated
amortization
Net
carrying
value
Finite-lived intangible assets:
Software, integrated
platform and unpatented
technology
(1)
$
137,099
$
(41,925)
$
95,174
$
115,213
$
(25,763)
$
89,450
Customer relationships
(1)
53,369
(18,568)
34,801
25,880
(14,030)
11,850
FTS patent
2,158
(2,158)
-
2,107
(2,107)
-
Brands and trademarks
(1)
18,233
(8,993)
9,240
14,353
(4,300)
10,053
Total finite-lived
intangible assets
$
210,859
$
(71,644)
$
139,215
$
157,553
$
(46,200)
$
111,353
(1)
June 30,
2025 balances
include the
intangible
assets acquired
as part
of the
Adumo acquisition
in October
2024, and
the
Recharger and Genisus Risk acquisitions in March 2025.
Aggregate
amortization
expense on
the finite-lived
intangible assets
for
the
years
ended June
30,
2025,
2024
and
2023,
was
approximately $
22.0
million, $
14.4
million and $
15.0
million, respectively.
Future estimated annual amortization expense for the next five
fiscal years and thereafter, using the exchange rates that prevailed
on June
30, 2025, is
presented in the
table below.
Actual amortization
expense in future
periods could differ
from this estimate
as a
result of acquisitions, changes in useful lives, exchange rate fluctuations and other
relevant factors.
Fiscal 2026
$
30,204
Fiscal 2027
20,576
Fiscal 2028
20,080
Fiscal 2029
19,389
Fiscal 2030
17,986
Thereafter
30,980
Total future
estimated annual amortization expense
$
139,215
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-47
11.
ASSETS AND POLICYHOLDER LIABILITIES UNDER INSURANCE AND
INVESTMENT CONTRACTS
Reinsurance assets and policyholder liabilities under insurance contracts
Summarized below is the movement in reinsurance assets and policyholder liabilities under
insurance contracts during the years
ended June 30, 2025 and 2024:
Reinsurance
Assets
(1)
Insurance
contracts
(2)
Balance as of July 1, 2023
$
1,040
$
(1,600)
Increase in policy holder benefits under insurance contracts
844
(7,610)
Claims and policyholders’ benefits under insurance contracts
(464)
7,043
Foreign currency adjustment
(3)
49
(74)
Balance as of June 30, 2024
1,469
(2,241)
Increase in policy holder benefits under insurance contracts
461
(10,127)
Claims and policyholders’ benefits under insurance contracts
(131)
9,781
Foreign currency adjustment
(3)
38
(57)
Balance as of June 30, 2025
$
1,837
$
(2,644)
(1) Included in other long-term assets (refer to Note 9);
(2) Included in other long-term liabilities;
(3) Represents the effects of the fluctuations of the ZAR against the U.S. dollar.
The Company has agreements with reinsurance companies in order to limit its losses from large insurance contracts, however,
if
the reinsurer is unable to meet its obligations, the Company retains the liability.
The value of insurance contract liabilities is based on
the best
estimate assumptions
of future
experience plus
prescribed margins,
as required
in the
markets in
which these
products are
offered, namely
South Africa. The
process of deriving
the best estimates
assumptions plus
prescribed margins
includes assumptions
related to claim reporting delays (based on average industry experience).
Assets and policyholder liabilities under investment contracts
Summarized below is the movement in assets
and policyholder liabilities under investment contracts during the years
ended June
30, 2025 and 2024:
Assets
(1)
Investment
contracts
(2)
Balance as of July 1, 2023
$
257
$
(241)
Increase in policy holder benefits under investment contracts
4
(4)
Claims and decrease in policyholders’ benefits under investment contracts
(44)
44
Foreign currency adjustment
(3)
(1)
(15)
Balance as of June 30, 2024
216
(216)
Increase in policy holder benefits under investment contracts
5
(5)
Claims and decrease in policyholders’ benefits under investment contracts
(101)
101
Foreign currency adjustment
(3)
13
(5)
Balance as of June 30, 2025
$
133
$
(125)
(1) Included in other long-term assets (refer to Note 9);
(2) Included in other long-term liabilities;
(3) Represents the effects of the fluctuations of the ZAR against the U.S. dollar.
The Company does not offer any investment products with guarantees
related to capital or returns.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-48
12.
BORROWINGS
Reference rate reform
After the
transition
away from
certain
interbank
offered
rates in
foreign
jurisdictions
(“IBOR reform”),
the reforms
to South
Africa’s
reference interest
rate are now
accelerating rapidly.
The Johannesburg
Interbank Average
Rate (“JIBAR”)
will be replaced
by the new South African Overnight Index Average (“ZARONIA”). Certain of the Company’s
borrowings reference JIBAR as a base
interest rate. ZARONIA
reflects the
interest rate at
which rand-denominated
overnight wholesale
funds are
obtained by commercial
banks. There
is uncertainty
surrounding the
timing and
manner in
which the
transition would
occur and
how this
would affect
our
borrowings. The
Company is in
regular contact
with its lenders
and will update
existing borrowing
agreements to the
new base rate
when ZARONIA is adopted by the financial industry and lenders as the new
reference rate.
South Africa
The amounts
below have
been translated
at exchange
rates applicable
as of
the dates
specified.
The JIBAR,
an average
of 3-
month negotiable
certificates of
deposit (“NCD”)
rates, on
June 30,
2025, was
7.29
%. The
prime rate,
the benchmark
rate at
which
private
sector banks
lend
to the
public
in South
Africa,
on June
30,
2025,
was
10.75
%, and
reduced
to
10.50
% on
July 31,
2025,
following a
0.25
% reduction in the South African repo rate, the rate at which the SARB lends money to commercial
banks.
Facilities obtained in February 2025
Lesaka
SA has
obtained
four loan
facilities
from
FirstRand
Bank
Limited
(acting
through its
Rand
Merchant
Bank division)
(“RMB”),
FirstRand
Bank
Limited
(acting
through
its
WesBank
division)
(“WesBank”),
FirstRand
Bank
Limited
being
a
South
African corporate and investment bank, Investec Bank Limited (acting through its Investment Banking division: Corporate Solutions)
(“Investec”
and
together
with RMB
and
WesBank,
the
“Lenders”).
These comprise
a
term loan
of up
to
ZAR
2.2
billion
($
121.4
million) (“Facility
A”), an amortizing
loan of ZAR
1.0
billion ($
56.3
million) (“Facility B”)
and a senior
revolving credit facility
of
up to ZAR
2.2
billion ($
121.4
million) (“Senior RCF”), and a general
banking facility from RMB of up
to ZAR
700.9
million ($
39.5
million) (the “GBF”, and collectively with Facility A, Facility B and Senior RCF, the “Facilities”), which are described in more detail
below.
The Company,
Lesaka SA
and the
majority of
Lesaka SA’s
directly and
indirectly wholly-owned
subsidiaries have
agreed to
guarantee the obligations of Lesaka SA and of the other borrowers under the Facilities to the
Lenders.
The Common
Terms
Agreement (“CTA
”) governing
the above contains
customary covenants
which include
a requirement
for
Lesaka SA to
maintain specified
Net Debt to
EBITDA and
Interest Cover Ratios
(as defined
in the CTA)
and restricts the
ability of
Lesaka SA, and certain of its subsidiaries to make certain distributions with respect to their capital stock,
prepay other debt, encumber
their
assets,
incur
additional
indebtedness,
make
investments
above
specified
levels,
engage
in
certain
business
combinations
and
engage in other corporate
activities. The CTA
provides that if any
subsidiary of the Company receives
proceeds from the disposal of
shares in/claims against, or assets of MobiKwik, it would offer to prepay the certain specified loans/facilities and loan outstandings to
the Lenders (as contemplated in the CTA).
Lesaka SA paid non-refundable debt structuring fees of ZAR
10.0
million ($
0.5
million) to the Lenders on February 27, 2025.
Long-term borrowings – Facility A and Facility B Agreements
Lesaka SA may
borrow up to an
aggregate amount of
ZAR
2.2
billion for the sole
purpose of refinancing
the existing facilities
of Lesaka
SA and Cash
Connect Management
Solutions Proprietary
Limited’s
(“CCMS”) with RMB,
funding transaction
costs and
for general corporate purposes.
Lesaka SA utilized Facility
A in full on February
28, 2025, to settle a portion
of its existing facilities
with RMB and to settle all of CCMS’ existing facilities with RMB, as well as to pay certain transaction
costs.
Lesaka SA may
borrow up to
an aggregate of
ZAR
1.0
billion for the
sole purpose of
refinancing the Lesaka
SA existing facilities,
including
its
general
banking
facilities,
with
RMB,
and
for
general
corporate
purposes.
Lesaka
SA
utilized
Facility
B
in
full
on
February 28, 2025, to repay a portion of its existing facilities as well as to settle a portion
of its existing general banking facility.
Facility A is required to be repaid in full on February 28, 2029. Facility A is subject to customary mandatory prepayment
terms.
Lesaka
SA
is
permitted
to
make
voluntary
prepayments
of
Facility
A,
and
is
permitted
to
subsequently
utilize
any
voluntary
prepayments made under Facility A under the RCF Agreement. Amounts
utilized under the RCF Agreement are required to be repaid
in full on February 28, 2029.
Facility
B
is
required
to
be
repaid
in
four
annual
installments,
as
follows:
(i) ZAR
150
million
($
8.4
million)
on
February
28, 2026; (ii) ZAR
200
million ($
11.3
million) on February 28, 2027; (iii) ZAR
300
million ($
16.9
million) on February 28, 2028; and
(iv) R
350
million ($
19.7
million) on February 28,
2029. Facility B is
subject to customary
mandatory prepayment terms.
Lesaka SA
is permitted to make voluntary prepayments of Facility B, however it is unable
to subsequently utilize any amounts prepaid.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-49
12.
BORROWINGS (continued)
South Africa (continued)
Facilities obtained in February 2025 (continued)
Long-term borrowings – Facility A and Facility B Agreements
(continued)
Interest on Facility A
and Facility B as well
as any interest related
to utilization under
the RCF Agreement is
payable quarterly
in arrears at end of March, June, September and December,
with the first interest payment made on June 30, 2025.
Short-term facility - General Banking Facility
Lesaka SA and certain of
its subsidiaries may borrow up
to an aggregate of ZAR
700.9
million under a general banking facility
(“GBF”) from RMB for general corporate expenditure (including capital expenditure) and working capital purposes of the Lesaka SA
and certain of
its subsidiaries. Lesaka
SA utilized a
portion of the
GBF to refinance
its existing general
banking facility.
As of June
30, 2025, the Company had utilized ZAR
434.5
million ($
24.5
million) of this facility.
The GBF was available for utilization from February 28, 2025, and is subject to
annual review by RMB.
Interest on the GBF is payable monthly and is based on the South African prime rate
in effect from time to time less
0.50
%.
The GBF Agreement
also provides Lesaka SA
and certain of its
subsidiaries with other
facilities in an aggregate
of ZAR
100.7
million ($
5.7
million), which indirect,
short-term direct and
contingent facilities, including
bank guarantee, forward exchange
contract,
credit card
and settlement
facilities. As
of June
30,
2025,
the aggregate
amount of
the Company’s
short-term
South African
other
credit facility
with RMB
was ZAR
100.7
million ($
5.7
million). As
of June
30, 2025,
the Company
had utilized
ZAR
33.1
million
($
1.9
million) of
its other
facilities to
enable the
bank to
issue guarantees,
letters of
credit and
forward exchange
contracts (refer
to
Note 22).
Wesbank Facilities
The Company, through certain
of its
South African subsidiaries,
has an
asset-backed facility of
ZAR
227.0
million ($
11.3
million)
of which ZAR
127.5
million ($
7.2
million) has been utilized.
Refinanced CCC Loan Document,
comprising long-term borrowings
On November
29, 2022, the
Company,
through its indirect
South African subsidiary
Cash Connect Capital
(Pty) Ltd (“CCC”),
entered
into
a
Revolving
Credit
Facility
Agreement
(the
“Refinanced
CCC
Loan
Document”)
with
RMB
and
other
Company
subsidiaries within
the Connect Group
of companies
listed therein,
as guarantors. The
transaction closed on
December 1, 2022.
The
Refinanced CCC Loan Document was scheduled to be repaid in full on November 2024,
but this has been extended to September 30,
2025.
On September 5, 2025, the Company, through its indirect South African
subsidiaries CCC and K2020 Connect (Pty) Ltd,
entered
into a new Revolving Credit
Facility Agreement (“CCC Loan
Document”) which replaced
the Refinanced CCC Loan Document
and
increased the amount available from
ZAR
300
million to ZAR
400
million (of which ZAR
299.9
million has been utilized as of
June
30,
2025).
The
refinancing
closed
on
September
8,
2025.
The
utilized
portion
of
the
Refinanced
CCC
Loan
Document
has
been
presented in long-term borrowings in the consolidated balance sheet as of June 30, 2025, because the Company has demonstrated that
it has the intent and
ability to consummate the refinancing
prior to the issuance of
these consolidated financial statements.
The terms
of the CCC Loan Document are readily determinable, the agreement does not expire in the next 12 months and there is
no violation of
any provision to the CCC Loan Document.
Both the
Refinanced CCC
Loan Document
and the
CCC Loan
Document contain
customary covenants
that require
CCC and
K2020 to collectively
maintain a specified capital
adequacy ratio, restrict the
ability of the entities
to make certain distributions
with
respect
to
their
capital
stock,
encumber
their
assets,
incur
additional
indebtedness,
make
investments,
engage
in
certain
business
combinations and engage in other corporate activities.
Pursuant to the CCC Loan Document, CCC and K2020 collectively
may borrow up to an aggregate of ZAR
400.0
million for the
sole purposes
of funding
CCC’s
and K2020’s
lending business,
settling up
to ZAR
20.0
million related
to an
intercompany loan
to
CCC’s direct parent, and paying
structuring and execution fee and legal costs.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-50
12.
BORROWINGS (continued)
South Africa (continued)
Refinanced CCC Loan Document,
comprising long-term borrowings (continued)
Pursuant to
the Refinanced
CCC Loan Document,
CCC was
permitted to
borrow up
to an aggregate
of ZAR
300.0
million for
the sole
purposes of
funding CCC’s
lending business,
providing a
limited recourse
loan to
K2020, settling
up to
ZAR
35.0
million
related to an intercompany loan to CCC’s direct
parent, and paying the structuring and execution fee and legal
costs.
Interest on the Refinanced CCC Loan Document was, and under the CCC Loan Document is, payable on the
last business day of
each calendar month.
The Company
paid a
non-refundable structuring
and execution
fee of ZAR
1.7
million, or
$
0.1
million, including
value added
taxation, to RMB
on closing in
November 2022. The
Company paid a
non-refundable structuring and
execution fee
of ZAR
0.5
million,
excluding value added taxation, to the RMB on closing of the CCC Loan Document
in September 2025.
Certain merchant finance loans receivable have been pledged as security
for the revolving credit facility obtained from RMB.
Nedbank facility, comprising short-term facilities
As of
June 30,
2025 and
June 30,
2024, the
Company had
utilized ZAR
2.1
million ($
0.1
million) and
ZAR
2.1
million ($
0.1
million), respectively,
of its indirect and derivative
facilities of ZAR
156.6
million (June 30, 2024: ZAR
156.6
million) to enable the
bank to issue guarantees, letters of credit and forward exchange contracts (refer
to Note 22).
In terms of a commitment provided to the
lender under the CTA entered into on February 27, 2025, the Company has
undertaken
not to utilize more than ZAR
5.0
million ($
0.3
million) of the Nedbank Facility.
The Company
has entered
into cession
and pledge
agreements with
Nedbank related
to certain
of its
Nedbank credit
facilities
(the general banking
facility and a
portion of the
indirect facility) and
the Company has
ceded and pledged
certain bank accounts
to
Nedbank and also provided a cession of Lesaka SA’s
shareholding in Cell C. The funds included in these bank accounts are restricted
as they may not be withdrawn without the express permission of Nedbank.
RMB Bridge
Facilities,
comprising
a short-term
facility
obtained
in September
2024 and
amended
in December
2024
(all
repaid)
On September
30, 2024,
Lesaka SA
entered into
a Facility
Letter (the
“F2024 Facility
Letter”) with
RMB to
provided Lesaka
SA a ZAR
665.0
million funding facility
(the “Bridge Facility”).
The Bridge Facility
was used by
Lesaka SA to (i)
settle an amount
of ZAR
232.2
due
under the
Adumo
transaction (refer
to Note
3); (ii)
pay
Crossfin Holdings
(RF) Proprietary
Limited (“Crossfin
Holdings”) ZAR
207.2
million under a share purchase agreement concluded between Lesaka SA and Crossfin Holdings (refer to
Note
14); (iii) pay
an amount of
ZAR
147.5
million, which includes
interest, notified by
Investec to Adumo
and Lesaka SA
as a result
of
the transaction
described in
Note 3,
and (iv)
pay an
origination fee
of ZAR
7.6
million to
RMB. The
Facility also
provided Lesaka
with ZAR
70.0
million for transaction-related expenses.
On
December
10,
2024,
Lesaka
SA
and
RMB
entered
into
a
First
Addendum
to
the
Facility
Letter
(the
“F2024
Addendum
Letter”).
The F2024
Addendum
Letter provided
Lesaka SA
with an
additional ZAR
250.0
million general
banking facility
(“2024
GBF Facility”) which could be used for general corporate purposes. The Bridge Facility and 2024 GBF Facility were repaid in full on
February 28, 2025, utilizing funding obtained under the CTA
and the agreements were cancelled.
Interest on the
Bridge Facility and
the 2024 GBF Facility
was calculated at
the prime rate
plus
1.80
%. The Bridge
Facility and
the 2024
GBF Facility
were unsecured
and were
repaid in
full on
February 28,
2025, the
maturity date,
pursuant to
the refinancing
process.
Cancelled RMB Facilities,
as amended, comprising a
short-term facility (Facility E)
and long-term borrowings (all
repaid)
On July 21,
2017, Lesaka SA
entered into a
Common Terms
Agreement, Subordination
Agreement, Security
Cession & Pledge
and
certain
ancillary
loan
documents
(collectively,
the
“Original
Loan
Documents”)
with
RMB,
a
South
African
corporate
and
investment
bank, and
Nedbank Limited
(acting
through its
Corporate
and Investment
Banking division),
an African
corporate
and
investment bank (collectively, the “Lenders”).
Since 2017, these agreements have been amended to add
additional facilities, including
Facilities G and
H, which were obtained
to finance the acquisition
of Connect.
Facilities E, G and
H have been repaid
and cancelled
in February 2025 and there is
no
balance outstanding as of June 30, 2025.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-51
12.
BORROWINGS (continued)
South Africa (continued)
Cancelled RMB Facilities,
as amended, comprising a
short-term facility (Facility E)
and long-term borrowings (all
repaid)
(continued)
Short-term facility - Facility E
The available amount under Facility E was ZAR
0.9
billion ($
49.5
million, translated at exchange rates applicable as of
June 30,
2024). The Company cancelled
its Facility E facility agreement in
November 2024. The overdraft facility
could only be used to fund
ATMs
and therefore the overdraft utilized and converted to cash to fund the Company’s
ATMs
was considered restricted cash.
Interest on
the overdraft
facility was
payable on
the first
day of
the month
following utilization
of the
facility and
on the
final
maturity date based on the South African
prime rate. The overdraft facility amount utilized was
required to be repaid in full within
one
month of utilization and
at least
90
% of the amount
utilized was to be
repaid within
25 days
. The overdraft facility
was secured by a
pledge by
Lesaka SA
of, among
other things,
cash and
certain bank
accounts utilized
in the
Company’s
ATM
funding process,
the
cession
of
Lesaka
SA’s
shareholding
in
Cell
C,
the
cession
of
an
insurance
policy
with
Senate
Transit
Underwriters
Managers
Proprietary Limited, and any rights and claims Lesaka SA had against Grindrod Bank Limited.
As at June 30, 2024, the Company had
utilized approximately ZAR
0.1
billion ($
6.7
million) of this overdraft facility.
Long-term borrowings - Facility G and Facility H
On March
16, 2023,
the Company,
through Lesaka
SA, entered
into a
Fifth Amendment
and
Restatement Agreement,
which
included,
among
other
agreements,
an
Amended
and
Restated
Common
Terms
Agreement
(“Expired
CTA”),
an
Amended
and
Restated Senior Facility
G Agreement (“Facility G
Agreement”) and an
Amended and Restated
Senior Facility H
Agreement (“Facility
H Agreement”)
(collectively,
the “Loan
Documents”) with RMB.
Main Street 1692
(RF) Proprietary Limited
(“Debt Guarantor”),
a
South
African
company
incorporated
for
the
sole
purpose
of
holding
collateral
for
the
benefit
of
the
Lenders
and
acting
as
debt
guarantor is
also a party
to the Loan
Documents. Pursuant
to the
Facility G
Agreement, Lesaka
SA was
entitled to
borrow up
to an
aggregate of approximately
ZAR
708.6
million. Facility G included
a term loan of
ZAR
508.6
million and a revolving
credit facility
of up to
ZAR
200
million. Pursuant to
the Facility H
Agreement, Lesaka SA
was entitled to
borrow up to
an aggregate of
approximately
ZAR
357.4
million.
On February 28,
2025, the Company
used its new borrowings
to settle Facility
G and Facility
H in full, including
accumulated
interest of ZAR
201.7
million ($
10.9
million). These facilities, excluding
accrued interest, included (i)
Facility G of
ZAR
492.1
million
($
26.6
million);
(ii) Facility
H of
ZAR
350.0
million
($
18.9
million);
and
(iii) a
Facility G
revolver
of ZAR
200.0
million
($
10.8
million) (of
which ZAR
199
million ($
10.8
million) had
been utilized
at February
28, 2025).
These facilities
were repaid
in full
on
February 28, 2025,
utilizing funding
obtained under
the Expired CTA
and the Facility
G and Facility
H agreements
were cancelled.
Amounts translated at rates prevailing on the repayment date. The interest rate
on these facilities was JIBAR plus a margin of
4.75
%.
Lesaka SA paid a
quarterly commitment fee computed at
a rate of
35
% of the Applicable
Margin (as defined in the
Expired CTA)
on the amount
of the revolving
credit facility outstanding and
such commitment fee was
capitalized, subject to
the cap discussed
above.
The Company used cash proceeds of ZAR
64.2
million ($
3.5
million) received from the sale of Finbond shares (refer to Note 9)
during the year ended June 30, 2024, to repay capitalized interest under
Facility G and Facility H.
Cancelled Connect Facilities, comprising long-term borrowings and
a short-term facility (all repaid)
On March 22,
2023, the Company, through CCMS,
entered into a
First Amendment and
Restatement Agreement, which
included,
among other
agreements, an
Amended
and Restated
Facilities Agreement
(“CCMS Facilities
Agreement”)
with RMB.
The CCMS
Facilities Agreement was
amended to increase
the Facility B available
under the CCMS Facilities
Agreement by ZAR
200.0
million
to ZAR
550.0
million. The final
maturity date was
extended to December
31, 2027, and
scheduled principal repayments
were amended,
with
the
first
scheduled
repayment
commencing
from
March
31,
2026.
These
facilities
were
repaid
in
full
on
February
28,
2025,
utilizing funding
obtained under
the CTA
and the
agreements cancelled.
Prior to
settlement and
cancellation, the
Connect Facilities
included (i) an overdraft
facility (general banking
facility) of ZAR
170.0
million ($
9.2
million); (ii) CCMS Facility
A of ZAR
700.0
million ($
37.9
million); (iii) CCMS Facility B of ZAR
550.0
million ($
29.8
million) (both were fully utilized). Amounts translated at
rates prevailing on the repayment date.
On October
29, 2024, the
Company,
through CCMS, entered
into an addendum
to a facility
letter with RMB,
to obtain
a ZAR
100.0
million temporary increase in
its overdraft facility for
a period of approximately
four months to specifically
fund the purchase
of prepaid airtime vouchers.
This temporary increase was
repayable in equal daily
instalments which commenced at
the end of
October
2024 with the final repayment made on February 15, 2025.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-52
12.
BORROWINGS (continued)
South Africa (continued)
Cancelled Connect Facilities, comprising long-term borrowings and
a short-term facility (all repaid) (continued)
In February 2023, the Company,
through CCMS, obtained a ZAR
175.0
million temporary increase in its overdraft facility for a
period of
four months
to specifically
fund the
purchase of
prepaid airtime
vouchers. This
temporary increase
was repayable
in
four
equal monthly instalments of ZAR
43.8
million and which commenced
in March 2023. In May 2023,
the Company,
through CCMS,
obtained a ZAR
155.0
million temporary increase
in its overdraft facility
for a period of
one month
to specifically fund the
purchase
of prepaid airtime vouchers. This temporary increase was repaid in full in June 2023. Interest at the South Africa prime rate less
0.1
%
was payable on a monthly basis on both of these temporary facilities.
Interest on CCMS Facility A and CCMS Facility B was payable quarterly
in arrears based on JIBAR in effect from time to time
plus a margin.
RMB facility, comprising indirect facilities
The Company
had a
short-term South
African indirect
credit facility
with RMB
under its
cancelled lending
facilities of
ZAR
135.0
million ($
7.4
million), which included facilities for guarantees, letters of credit and forward
exchange contracts. As of June 30,
2024, the Company
had utilized ZAR
33.1
million ($
1.8
million), of these
facilities to enable
the bank to
issue guarantees, letters
of
credit and forward exchange contracts (refer to Note 22).
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-53
12.
BORROWINGS (continued)
Movement in short-term credit facilities
Summarized below are the Company’s short-term facilities as of June 30, 2025, and the movement in the Company’s
short-term
facilities from as of June 30, 2024 to as of June 30, 2025:
RMB
RMB
Nedbank
RMB
RMB
RMB
GBF
Other
Facilities
Connect
Bridge
Facility E
Total
Short-term facilities available as of
June 30, 2025
$
39,475
$
5,672
$
8,817
$
-
$
-
$
-
$
53,964
Overdraft
39,475
-
-
-
-
-
39,475
Indirect and derivative facilities
-
5,672
8,817
-
-
-
14,489
Movement in utilized overdraft
facilities:
Balance as of June 30, 2023
-
-
-
9,025
-
23,021
32,046
Utilized
-
-
-
2
-
182,988
182,990
Repaid
-
-
-
(2)
-
(199,640)
(199,642)
Foreign currency adjustment
(1)
-
-
-
326
-
368
694
Balance as of June 30, 2024
-
-
-
9,351
-
6,737
16,088
Restricted as to use for ATM
funding only
-
-
-
-
-
6,737
6,737
No restrictions as to use
-
-
-
9,351
-
-
9,351
Utilized
27,917
-
-
5,655
41,150
23,894
98,616
Repaid
(4,311)
-
-
(14,627)
(39,205)
(31,028)
(89,171)
Foreign currency
adjustment
(1)
863
-
-
(379)
(1,945)
397
(1,064)
Balance as of June 30, 2025
24,469
-
-
-
-
-
24,469
No restrictions as to use
24,469
-
-
-
-
-
24,469
Interest rate as of June 30, 2025
(%)
(2)
10.25
Interest rate as of June 30, 2024
(%)
(3)
11.65
11.75
Movement in utilized indirect and
derivative facilities:
Balance as of June 30, 2023
-
1,757
112
-
-
-
1,869
Foreign currency adjustment
(1)
-
64
4
-
-
-
68
Balance as of June 30, 2024
-
1,821
116
-
-
-
1,937
Foreign currency adjustment
(1)
-
43
3
-
-
-
46
Balance as of June 30, 2025
$
-
$
1,864
$
119
$
-
$
-
$
-
$
1,983
(1) Represents the effects of the fluctuations between the ZAR and the
U.S. dollar.
(2) RMB GBF interest is set at prime less
0.50
%.
(3) Facility E interest set at prime and the Connect facility at prime less
0.10
%.
Interest expense incurred under the Company’s South African long-term borrowings
and included in the caption
interest expense
on
the
consolidated
statement
of
operations
during
the
years
ended
June
30,
2025
and
2024,
was
$
4.2
million
and
$
4.1
million,
respectively.
The
Company
cancelled
Adumo’s
overdraft
arrangements
on
October
1,
2024,
and
settled
Adumo’s
outstanding
overdraft
balance of ZAR
20.0
million ($
1.1
million) on the
same day.
The repayment is
included in the
caption repayment
of bank overdraft
included on the Company’s
consolidated statements of cash flows for the year ended June 30, 2025.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-54
12.
BORROWINGS (continued)
Movement in long-term borrowings
Summarized below is the movement in the Company’s
long-term borrowing from as of June 30, 2024, to as of June 30, 2025:
Facilities
Lesaka A
Lesaka B
Asset
backed
CCC
(6)
Lesaka
G & H
Connect
A&B
Total
Opening balance as of June 30,
2023
$
-
$
-
$
7,915
$
11,802
$
48,965
$
64,436
$
133,118
Facilities utilized
-
-
4,368
2,915
16,445
-
23,728
Facilities repaid
-
-
(4,205)
(3,353)
(12,515)
-
(20,073)
Non-refundable fees paid
-
-
-
-
-
-
-
Non-refundable fees amortized
-
-
-
48
351
48
447
Capitalized interest
-
-
-
-
7,214
-
7,214
Capitalized interest repaid
-
-
-
-
(6,109)
-
(6,109)
Foreign currency adjustment
(1)
-
-
301
429
1,800
2,331
4,861
Included in current
-
-
3,878
11,841
-
-
15,719
Included in long-term
-
-
4,501
-
56,151
66,815
127,467
Opening balance as of June
30, 2024
-
-
8,379
11,841
56,151
66,815
143,186
Facilities utilized
116,652
54,112
3,184
5,091
11,022
-
190,061
Facilities repaid
-
-
(4,513)
(554)
(60,245)
(65,910)
(131,222)
Non-refundable fees paid
970
-
-
-
-
-
970
Non-refundable fees
amortized
248
-
-
21
116
32
417
Capitalized interest
-
-
-
-
5,033
-
5,033
Capitalized interest repaid
-
-
-
-
(11,077)
-
(11,077)
Foreign currency
adjustment
(1)
2,505
2,209
129
495
(1,000)
(937)
3,401
Closing balance as of
June 30, 2025
120,375
56,321
7,179
16,894
-
-
200,769
Included in current
-
8,448
3,508
-
-
-
11,956
Included in long-term
120,375
47,873
3,671
16,894
-
-
188,813
Unamortized fees
(1,038)
-
-
-
-
-
(1,038)
Due within 2 years
-
11,265
2,269
-
-
-
13,534
Due within 3 years
-
16,896
1,015
-
-
-
17,911
Due within 4 years
121,413
19,712
379
16,894
-
-
158,398
Due within 5 years
$
-
$
-
$
8
$
-
$
-
$
-
$
8
Interest rates as of June 30, 2025
(%):
10.54
10.44
11.50
11.70
-
-
Base rate (%)
7.29
7.29
10.75
10.75
-
-
Margin (%)
3.25
3.15
0.75
0.95
-
-
Footnote number
(2)
(3)
(4)
(5)
Interest rates as of June 30, 2024
(%):
-
-
12.50
12.70
13.10
12.10
Base rate (%)
-
-
11.75
11.75
8.35
8.35
Margin (%)
-
-
0.75
0.95
4.75
3.75
Footnote number
(4)
(5)
(7)(8)(9)
(10)
(1) Represents the effects of the fluctuations between the ZAR and the
U.S. dollar.
(2) Interest
on Facility
A and Facility
B is based
on the JIBAR
in effect
from time
to time
plus an
initial margin
of
3.25
% per
annum until June 30, 2025. From July 1,
2025, the margin on Facility A will
be determined with reference to the Net Debt
to EBITDA
Ratio, and the
margin will be either
(i)
3.25
%, if the Net
Debt to EBITDA Ratio
is greater than or
equal to 2.5 times;
or (ii)
2.5
%, if
the Net Debt to EBITDA Ratio is less than 2.5 times.
(3) Interest on
Facility B is calculated
based on JIBAR from
time to time plus
an initial margin
of
3.15
% per annum
until June
30, 2025. From
July 1, 2025,
the margin
on Facility B
will be determined
with reference to
the Net Debt
to EBITDA Ratio,
and the
margin will be either (i)
3.15
%, if the Net Debt to EBITDA Ratio is greater than or equal to
2.5 times; or (ii)
2.4
%, if the Net Debt to
EBITDA Ratio is less than 2.5 times.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-55
12.
BORROWINGS (continued)
Movement in long-term borrowings (continued)
(4) Interest is charged at prime plus
0.75
% per annum on the utilized balance.
(5) Interest is charged at prime plus
0.95
% per annum on the utilized balance.
(6) Amounts presented as of June 30, 2024, have been revised, refer to Note 1 for additional information. The amount as of June
30, 2024, was incorrectly classified as long-term borrowings, instead of as current
portion of long-term borrowings.
(7) Prior to the amendment in
March 2023, interest on Facility G was
calculated based on the 3-month JIBAR
in effect from time
to time plus a margin of (i)
3.00
% per annum until January 13, 2023; and then (ii) from January 14, 2023, (x)
2.50
% per annum if the
Facility G balance outstanding is less than or equal
to ZAR
250.0
million, or (y)
3.00
% per annum if the Facility G
balance is between
ZAR
250.0
million to ZAR
450.0
million, or (z)
3.50
% per annum
if the Facility
G balance is
greater than
ZAR
450.0
million. The
interest rate shall increase by a further
2.00
% per annum in the event of default (as defined in the Loan Documents).
(8) Prior to the
amendment in March 2023,
interest on Facility H
is calculated based on
JIBAR in effect from
time to time plus
a margin of
2.00
% per
annum which increases
by a
further
2.00
% per
annum in the
event of
default (as defined
in the
Loan Documents).
(9) Interest on
Facility G and
Facility H was calculated
based on the
3-month JIBAR in
effect from
time to time plus
a margin
of, from
January 1,
2023 to
September 30,
2023: (i)
5.50
% for
as long
as the
aggregate balance
under the
Facilities is
greater than
ZAR
800
million; (ii)
4.25
% if the
aggregate balance
under the
Facilities is equal
to or
less than ZAR
800
million, but
greater than
ZAR
350
million; or
(iii)
2.50
% if
the aggregate
balance under
the Facilities
is less
than ZAR
350
million. From
October 1,
2023,
interest is calculated as described above.
(10) Interest on Facility A and Facility B is calculated based on JIBAR plus a margin,
of
3.75
%, in effect from time to time.
Interest expense incurred under the Company’s South African long-term borrowings and included in the
caption interest expense
on the consolidated
statement of operations
during the years
ended June 30,
2025, 2024
and 2023, was
$
16.9
million, $
16.1
million
and $
13.1
million, respectively.
Prepaid facility
fees amortized
included
in interest
expense during
the years
ended June
30, 2025,
2024 and
2023, was
$
0.4
million, $
0.4
million and
$
0.8
million, respectively.
Interest expense
incurred under
the Company’s
CCC
facility relates
to borrowings
utilized to
fund a portion
of the
Company’s
merchant finance
loans receivable
and interest expense
of
$
2.9
million, $
1.4
million, and $
1.4
million is included in the
caption cost of goods
sold, IT processing, servicing
and support on the
consolidated statement of operations for the years ended June 30,
2025, 2024 and 2023, respectively.
The Company
cancelled
Adumo’s
long-term
borrowings arrangements
on October
1, 2024,
and settled
Adumo’s
outstanding
balances
of ZAR
126.7
million
($
7.2
million) on
the same
day.
The repayment
is included
in the
caption
repayment of
long-term
borrowings included on the Company’s
consolidated statements of cash flows for the year ended June 30, 2025.
13.
OTHER PAYABLES
Summarized below is the breakdown of other payables as of June 30,
2025 and 2024:
June 30,
June 30,
2025
2024
Vendor
wallet balances
$
19,529
$
14,635
Clearing accounts
6,766
17,124
Accruals
8,469
7,173
Provisions
8,497
7,442
Payroll-related payables
1,931
922
Value
-added tax payable
2,391
1,191
Deferred consideration due to seller of Recharger
(Note 3)
13,837
-
Other
10,659
7,563
$
72,079
$
56,051
Clearing accounts and vendor wallet
balances may fluctuate due to the
day (weekend or public holiday)
on which the Company’s
quarter or year
end falls
because certain elements
of transactions
within these accounts
are not
settled over weekends
or public
holidays.
Other includes deferred income, client deposits and other payables.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-56
14.
COMMON STOCK
Common stock
Holders of shares of Lesaka’s common stock are entitled to receive dividends and other distributions when declared by Lesaka’s
board of
directors out
of legally
available funds.
Payment of
dividends and
distributions is
subject to
certain restrictions
under the
Florida Business Corporation Act, including
the requirement that after making
any distribution Lesaka must be
able to meet its debts
as they become due in
the usual course of
its business. Upon voluntary or
involuntary liquidation, dissolution or winding up
of Lesaka,
holders of
common stock
share ratably
in the
assets remaining
after payments
to creditors
and provision
for the
preference of
any
preferred
stock
according
to
its
terms.
There
are
no
pre-emptive
or
other
subscription
rights,
conversion
rights
or
redemption
or
scheduled installment payment provisions relating to shares
of common stock. All of
the outstanding shares of common stock
are fully
paid and non-assessable.
Each holder of
common stock is
entitled to one
vote per share
for the election
of directors and
for all other
matters to be
voted
on by shareholders. Holders
of common stock may
not cumulate their
votes in the
election of directors, and
are entitled to
share equally
and ratably in the dividends that may be declared by the board of directors, but only after payment of dividends required to be paid on
outstanding shares of preferred stock according to its terms. The shares of
Lesaka common stock are not subject to redemption.
Issue of shares to Connect sellers pursuant to April 2022 transaction
The total purchase consideration pursuant to the Connect
acquisition in April 2022 includes
3,185,079
shares of the Company’s
common stock. These shares of common stock were issued in
three
equal tranches on each of the first, second and third anniversaries
of the April 14,
2022 closing. The
Company legally issued
1,061,693
shares of its common
stock, representing the
third, second and
first tranche, to the
Connect sellers in each
of April 2025, 2024
and 2023, respectively, and this had no
impact on the number
of shares,
net of
treasury,
presented in
the consolidated
statement of
changes
in equity
during the
year ended
June 30,
2025, 2024
and 2023,
respectively because the
3,185,079
shares are included in the number of shares, net of treasury,
as of June 30, 2025, 2024 and 2023.
Impact of non-vested equity shares on number of shares,
net of treasury
The Company’s
number of
shares, net
of treasury,
presented in
the consolidated
balance sheets
and consolidated
statement of
changes in
equity includes
participating non-vested
equity shares (specifically
contingently returnable
shares) as described
below in
Note
17
“—
Amended
and
Restated
Stock
Incentive
Plan—Restricted
Stock—General
Terms
of
Awards”.
The
following
table
presents a reconciliation
between the number
of shares, net of
treasury,
presented in the
consolidated statement of
changes in equity
and the
number
of shares,
net of
treasury,
excluding non-vested
equity shares
that have
not vested
during the
years ended
June 30,
2025, 2024 and 2023:
2025
2024
2023
Number of shares, net of treasury:
Statement of changes in equity – common stock
81,249,097
64,272,243
63,640,246
Less: Non-vested equity shares that have not vested as of end of year (Note 17)
2,169,900
2,084,946
2,614,419
Number of shares, net of treasury excluding non-vested equity shares that have
not vested
79,079,197
62,187,297
61,025,827
Redeemable common stock issued pursuant to transaction with the IFC Investors
Holders of redeemable common
stock have all the rights enjoyed by
holders of common stock, however,
holders of redeemable
common
stock
have
additional
contractual
rights.
On
April
11,
2016,
the
Company
entered
into
a
Subscription
Agreement
(the
“Subscription Agreement”)
with International
Finance Corporation
(“IFC”), IFC
African, Latin
American and
Caribbean Fund,
LP,
IFC
Financial
Institutions
Growth
Fund,
LP,
and
Africa
Capitalization
Fund,
Ltd.
(collectively,
the
“IFC
Investors”).
Under
the
Subscription Agreement,
the IFC Investors purchased,
and the Company
sold in the
aggregate, approximately
9.98
million shares of
the
Company’s
common
stock,
par
value
$
0.001
per
share,
at
a
price
of
$
10.79
per
share,
for
gross
proceeds
to
the
Company
of
approximately $
107.7
million. The Company
accounted for these
9.98
million shares as
redeemable common stock
as a result of
the
put option discussed below.
On May
19, 2020,
the Africa
Capitalization Fund,
Ltd sold
its entire
holding of
2,103,169
shares of
the Company’s
common
stock and
therefore the
additional contractual
rights, including
the put
option rights
related to
these
2,103,169
shares, expired.
The
Company reclassified $
22.7
million related to
these
2,103,169
shares sold from
redeemable common stock
to additional paid-in-capital
during the year ended June 30, 2020.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-57
14.
COMMON STOCK (continued)
Redeemable common stock issued pursuant to transaction with the IFC Investors (continued)
On August 19, 202
2, the IFC Investors
filed an amended Form
13D/A, amendment no. 2,
with the United
States Securities and
Exchange
Commission
reporting
that
in
October
2017
and
February
2018,
the
IFC
sold
an
aggregate
of
514,376
shares
of
the
Company’s
common
stock
and therefore
the
additional
contractual
rights,
including
the put
option
rights
related
to
these
514,376
shares,
expired.
The
Company
reclassified
$
5.6
million
related
to
these
514,376
shares
sold
from
redeemable
common
stock
to
additional paid-in-capital during the year ended June 30, 2022.
The Company has entered
into a Policy Agreement with
the IFC Investors (the
“Policy Agreement”). The
material terms of the
Policy Agreement are described below.
Certain
IFC
Investors
were
investors
in
Adumo
and
the
Company
issued
an
aggregate
of
1,989,162
additional
shares
of
its
common stock at a price of $
4.79
to these IFC Investors pursuant to the Purchase Agreement (refer to Note 3). The Company
and the
IFC Investors amended
and restated the
Policy Agreement
(“Amended and
Restated Policy Agreement”)
to include these
additional
shares issued to
the IFC Investors
to also be
covered by the
put right included
in the Amended
and Restated Policy
Agreement. The
Company also accounted for these
1,989,162
shares as redeemable common stock as a result of the put option.
Board Rights
For so long as the IFC Investors in aggregate beneficially own shares representing at least
5
% of the Company’s common stock,
the IFC Investors will have the right to nominate one director to the Company’s board of directors. For so long as the IFC Investors in
aggregate beneficially
own shares representing
at least
2.5
% of the
Company’s
common stock, the
IFC Investors will
have the right
to appoint
an observer
to the
Company’s
board of
directors at
any time
when they
have not
designated, or
do not
have the
right to
designate, a director.
Put Option
Each IFC Investor will have
the right, upon the occurrence of specified
triggering events, to require the Company
to repurchase
all of the shares
of its common stock purchased by
the IFC Investors pursuant to
the Subscription Agreement (or upon exercise
of their
preemptive rights
discussed below).
Events triggering
this put
right relate
to (1)
the Company
being the
subject of
a governmental
complaint alleging, a court judgment finding or an indictment alleging that the Company (a) engaged in specified corrupt,
fraudulent,
coercive, collusive or obstructive practices; (b) entered into transactions with targets of economic sanctions; or (c) failed to operate its
business in compliance with anti-money laundering and anti-terrorism laws; or (2) the Company rejecting a bona fide offer to acquire
all of its outstanding Common Stock at a time when it has in place or implements a shareholder rights plan, or adopting a shareholder
rights plan triggered by a beneficial ownership
threshold of less than
twenty
percent. The put price per share will
be the higher of the
price per
share paid
by the
IFC Investors
pursuant to
the Subscription
Agreement (or
paid when
exercising their
preemptive rights)
and the
volume weighted
average price
per share
prevailing for
the
60
trading days
preceding the
triggering event,
except that
with
respect to a put right triggered by rejection of a bona fide offer, the put price per share will be the highest price offered
by the offeror.
The Company believes that the
put option has no
value and, accordingly, has not recognized the put
option in its consolidated
financial
statements.
Registration Rights
The Company has agreed
to grant certain registration
rights to the IFC Investors
for the resale of their
shares of the Company’s
common stock, including filing a resale shelf registration statement and
taking certain actions to facilitate resales thereunder.
Preemptive Rights
For so long as the IFC Investors hold in
aggregate
5
% of the outstanding shares of common stock of
the Company, each Investor
will have the right to purchase its pro-rata share of new issuances of securities by the Company,
subject to certain exceptions.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-58
14.
COMMON STOCK (continued)
Common stock repurchases
October 2024 repurchase of common stock and issue of shares in Recharger transaction
On October
1, 2024,
the Company,
through Lesaka
SA, and
Crossfin Holdings
entered into
a share
purchase agreement
under
which Lesaka SA purchased
2,601,410
of the
3,587,332
Consideration Shares for ZAR
207.2
million ($
12.0
million). The transaction
was settled in early October 2024, and the shares of the Company’s common stock repurchased have been included in the Company’s
treasury
shares
included
in
its
consolidated
statement
of
changes
in
equity
for
the
year
ended
June
30,
2025,
respectively.
The
repurchase was made outside of the Company’s
$
100
million share repurchase authorization.
The Company, through Lesaka SA, issued
1,092,361
of the
2,601,410
shares of the Company’s common stock to
the Seller under
the terms of Recharger Purchase Agreement described in Note 2. The Company recognized
a gain of $
0.4
million on issuance of these
which is included
in the caption additional
paid-in-capital in the
consolidated statement of changes
in equity for the
year ended June
30, 2025.
Executed under share repurchase authorizations
On
February 2, 2025,
the
Company’s
Board
of
Directors
approved
a
share
repurchase
authorization
to
repurchase
up
to
an
aggregate of $
15
million of common stock. The authorization has no expiration date. This share repurchase authorization replaces our
$
100
million
share repurchase
authorization
which
was approved
on February
5, 2020. The
share repurchase
authorization
will be
used at management’s discretion, subject to limitations imposed by
SEC Rule 10b-18 and other
legal requirements and subject to
price
and
other
internal
limitations
established
by
the
Board.
Repurchases
will
be
funded
from
the
Company’s
available
cash.
Share
repurchases may be
made through open-market
purchases, privately negotiated
transactions, or both.
There can be
no assurance that
the Company will
purchase any shares
or any
particular number of
shares. The authorization
may be suspended,
terminated or modified
at any time for
any reason, including market
conditions, the cost of
repurchasing shares, liquidity
and other factors that
management
deems
appropriate.
The
Company
did
no
t
repurchase
any
of
its
shares
during
the
years
ended
June
30,
2025,
2024,
and
2023,
respectively,
under the
$
100
million authorization,
however,
it did
repurchase
371,187
,
319,522
and
352,994
shares of
its common
stock
from
its
employees
during
the
years
ended
June
30,
2025,
2024,
and
2023,
respectively,
refer
to
Note
17
for
additional
information regarding these repurchases.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-59
15.
ACCUMULATED OTHER
COMPREHENSIVE (LOSS) INCOME
The table below
presents the change
in accumulated other
comprehensive (loss) income
per component during
the years ended
June 30, 2025, 2024 and 2023:
Accumulated
foreign
currency
translation
reserve
Total
Balance as of July 1, 2022
$
(168,840)
$
(168,840)
Release of foreign currency translation reserve: disposal of Finbond
equity securities
(Note 9)
362
362
Movement in foreign currency translation reserve related to equity-accounted
investment
3,935
3,935
Movement in foreign currency translation reserve
(31,183)
(31,183)
Balance as of June 30, 2023
(195,726)
(195,726)
Release of foreign currency translation reserve: disposal of Finbond
equity securities
(Note 9)
1,543
1,543
Release of foreign currency translation reserve: liquidation of subsidiaries
(952)
(952)
Movement in foreign currency translation reserve related to equity-accounted
investment
489
489
Movement in foreign currency translation reserve
6,291
6,291
Balance as of June 30, 2024
(188,355)
(188,355)
Release of foreign currency translation reserve: liquidation of subsidiaries
6
6
Movement in foreign currency translation reserve related to equity-accounted
investment
-
-
Movement in foreign currency translation reserve
2,685
2,685
Balance as of June 30, 2025
$
(185,664)
$
(185,664)
The movement in the
foreign currency translation reserve represents
the impact of translation
of consolidated entities which have
a functional currency (which is primarily ZAR) to the Company’s
reporting currency, which is USD.
During the year ended June 30, 2025, the Company reclassified a loss of $
0.006
million from accumulated other comprehensive
loss (accumulated foreign currency translation reserve) to
net loss related to
the liquidation of subsidiaries.
During the year ended June
30, 2024, the
Company reclassified $
1.5
million from
accumulated other comprehensive
loss (accumulated foreign
currency translation
reserve) to net loss related to the disposal of shares in Finbond (refer to Note 9). The Company also reclassified a gain of $
1.0
million
from accumulated other comprehensive loss (accumulated foreign currency translation reserve) to net loss related to the liquidation of
subsidiaries during the
year ended June
30, 2024. During
the year ended
June 30, 2023,
the Company reclassified
$
0.4
million from
accumulated other comprehensive loss
(accumulated foreign currency
translation reserve) to net
loss related to the disposal of
shares
in Finbond (refer to Note 9).
16.
REVENUE
The Company
is a
provider of
digitized cash
management solutions
and merchant
acquiring services,
including an
integrated
platform for
the distribution
of ADP
(including value-added
services such
as prepaid
airtime, prepaid
electricity and
bill payment);
software
solutions,
transaction processing
services; financial
inclusion products
and services,
and
secure payment
technology.
The
Company
operates
as
a
payment
processor
in South
Africa.
The
Company
offers
debit,
credit
and
prepaid
processing
and
issuing
services for
all major
payment networks.
In South
Africa, the
Company provides
innovative low-cost
financial inclusion
products,
including banking, lending and insurance.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-60
16.
REVENUE
Disaggregation of revenue
The
following
table
represents
our
revenue
disaggregated
by
major
revenue
streams,
including
reconciliation
to
operating
segments for the year ended June 30, 2025:
Merchant
Consumer
Enterprise
Total
Processing fees
$
125,292
$
31,685
$
28,070
$
185,047
South Africa
117,892
31,685
28,070
177,647
Rest of world
7,400
-
-
7,400
Technology
products
22,192
137
4,818
27,147
South Africa
21,929
137
4,818
26,884
Rest of world
263
-
-
263
Prepaid airtime sold
365,162
96
6,359
371,617
South Africa
338,197
96
6,359
344,652
Rest of world
26,965
-
-
26,965
Lending revenue
-
28,534
-
28,534
Interest from customers
7,231
5,038
-
12,269
Insurance revenue
-
20,052
-
20,052
Account holder fees
-
7,307
-
7,307
Other
4,373
3,159
196
7,728
South Africa
4,146
3,159
196
7,501
Rest of world
227
-
-
227
Total revenue, derived
from the following geographic
locations
524,250
96,008
39,443
659,701
South Africa
489,395
96,008
39,443
624,846
Rest of world
$
34,855
$
-
$
-
$
34,855
The
following
table
represents
our
revenue
disaggregated
by
major
revenue
streams,
including
reconciliation
to
operating
segments for the year ended June 30, 2024:
Merchant
Consumer
Enterprise
Total
Processing fees
$
90,889
$
24,979
$
26,484
$
142,352
South Africa
84,892
24,979
26,484
136,355
Rest of world
5,997
-
-
5,997
Technology
products
3,036
45
6,816
9,897
South Africa
2,829
45
6,816
9,690
Rest of world
207
-
-
207
Prepaid airtime sold
352,611
233
5,332
358,176
South Africa
332,391
233
5,332
337,956
Rest of world
20,220
-
-
20,220
Lending revenue
-
23,849
-
23,849
Interest from customers
6,096
-
-
6,096
Insurance revenue
-
12,117
-
12,117
Account holder fees
-
6,048
-
6,048
Other
3,437
1,940
310
5,687
South Africa
3,233
1,940
310
5,483
Rest of world
204
-
-
204
Total revenue, derived
from the following geographic
locations
456,069
69,211
38,942
564,222
South Africa
429,441
69,211
38,942
537,594
Rest of world
$
26,628
$
-
$
-
$
26,628
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-61
16.
REVENUE (continued)
The
following
table
represents
our
revenue
disaggregated
by
major
revenue
streams,
including
reconciliation
to
operating
segments for the year ended June 30, 2023:
Merchant
Consumer
Enterprise
Unallocated
Total
Processing fees
$
84,542
$
26,159
$
26,739
$
1,469
$
138,909
South Africa
79,218
26,159
26,739
1,469
133,585
Rest of world
5,324
-
-
-
5,324
Technology
products
4,691
1,253
14,326
-
20,270
South Africa
4,454
1,253
14,326
-
20,033
Rest of world
237
-
-
-
237
Prepaid airtime sold
317,429
45
5,327
-
322,801
South Africa
300,766
45
5,327
-
306,138
Rest of world
16,663
-
-
-
16,663
Lending revenue
-
19,504
-
-
19,504
Interest from customers
5,778
-
-
-
5,778
Insurance revenue
-
9,677
-
-
9,677
Account holder fees
-
5,610
-
-
5,610
Other
4,122
553
747
-
5,422
South Africa
3,933
553
747
-
5,233
Rest of world
189
-
-
-
189
Total revenue, derived
from the
following geographic locations
416,562
62,801
47,139
1,469
527,971
South Africa
394,149
62,801
47,139
1,469
505,558
Rest of world
$
22,413
$
-
$
-
$
-
$
22,413
17.
STOCK-BASED COMPENSATION
Amended and Restated Stock Incentive Plan
The Company’s
Amended and
Restated 2022
Stock Incentive
Plan (“2022
Plan”) was
most recently
amended and
restated on
November 16, 2022. On April 11,
2024, the Company’s
Board amended the 2022 Plan to increase
the number of shares available for
issuance by
3,000,000
. On June 3, 2024, the Company’s shareholders
approved the amendment.
No evergreen provisions are included in the 2022 Plan. This means that the maximum number of
shares issuable under the 2022
Plan is fixed and
cannot be increased without
shareholder approval, the
2022 Plan expires by
its terms upon a
specified date, and
no
new stock options
are awarded automatically
upon exercise of
an outstanding
stock option. Shareholder
approval is required
for the
repricing of awards or the implementation of any award exchange progra
m.
The Plan permits Lesaka to grant to its employees, directors and consultants incentive stock options, nonqualified stock options,
stock appreciation rights, restricted stock, performance-based awards
and other awards based on its
common stock. The Remuneration
Committee of the Company’s Board
of Directors (“Remuneration Committee”) administers the 2022 Plan.
The total
number of
shares of
common stock
issuable under
the 2022
Plan is
16,552,580
. The
maximum number
of shares
for
which stock
options, stock
appreciation rights
(other than
performance-based awards
that are
not options)
may be
granted during
a
calendar year to any
participant is
600,000
shares. Shares covered by
awards that expire, terminate
or lapse without payment
will again
be available
for the grant
of awards under
the 2022 Plan,
as well as
shares that are
delivered to
us by the
holder to
pay withholding
taxes
or
as
payment
for
the
exercise
price
of
an
award,
if
permitted
by
the
Remuneration
Committee.
The
shares
deliverable
in
connection with
awards granted
under the
2022 Plan
may consist, in
whole or
in part,
of authorized
but unissued
shares or
treasury
shares. To
account for
stock splits,
stock dividends,
reorganizations,
recapitalizations,
mergers,
consolidations,
spin-offs
and
other
corporate events, the 2022
Plan requires the Remuneration
Committee to equitably
adjust the number and
kind of shares of
common
stock issued or reserved pursuant to the
2022 Plan or outstanding awards, the maximum
number of shares issuable pursuant to awards,
the exercise price for awards, and other affected terms of awards to reflect such event. No awards may be
granted under the 2022 Plan
after September 7, 2032, but awards granted on or before such date
may extend to later dates.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-62
17.
STOCK-BASED COMPENSATION
(continued)
Amended and Restated Stock Incentive Plan (continued)
Options
General Terms of
Awards
Option awards are generally granted with an exercise price equal to the market price of the Company's stock at the date of grant,
with vesting conditioned upon the recipient’s continuous service through the applicable vesting date and expire
10
years after the date
of grant. The options generally become exercisable in accordance with a
vesting schedule ratably over a period of
three years
from the
date of grant. The Company issues new shares to satisfy stock option award exercises but may
also use treasury shares.
Valuation
Assumptions
The
fair
value
of
each
option
is
estimated
on
the
date
of
grant
using the
Cox
Ross
Rubinstein
binomial
model
that
uses the
assumptions noted
in the
table below.
The estimated
expected volatility
is calculated
based on
the Company’s
730
,
1095
and
1460
-
day volatility (as applicable).
The estimated expected life of the option was determined based on the historical behavior of employees
who were
granted options
with similar
terms.
No
stock options
were granted
during the
year ended
June 30,
2023. The
table below
presents the range of assumptions used to value options granted during the years
ended June 30, 2025 and 2024:
2025
2024
Expected volatility
43
%
56
%
Expected dividends
0
%
0
%
Expected life (in years)
2.0
5.0
Risk-free rate
4.32
%
2.09
%
Restricted Stock
General Terms of
Awards
Shares of restricted stock are
considered to be participating non-vested equity shares
(specifically contingently returnable shares)
for the
purposes of
calculating earnings per
share (refer
to Note
19) because, as
discussed in
more detail
below, the recipient is
obligated
to transfer any unvested
restricted stock back to
the Company for no
consideration and these shares
of restricted stock are
eligible to
receive non-forfeitable
dividend equivalents
at the
same rate as
common stock.
Restricted stock
generally vests
ratably over
a
three
year
period, with
vesting conditioned
upon the
recipient’s
continuous service
through the
applicable vesting
date and
under certain
circumstances, the achievement of certain performance targets,
as described below.
Recipients
are
entitled
to
all
rights
of
a
shareholder
of
the
Company
except
as
otherwise
provided
in
the
restricted
stock
agreements. These
rights include the
right to vote
and receive dividends
and/or other
distributions,
however, any
or all dividends
or
other
distributions
paid
related
to
restricted
stock
during
the period
of
such
restrictions
shall
be
accumulated
(without
interest)
or
reinvested in additional shares of common stock, which in either case shall be subject to the same restrictions as the underlying award
or such other restrictions as the Remuneration
Committee may determine.
The restricted stock agreements generally
prohibit transfer
of any
nonvested and
forfeitable restricted
stock. If a
recipient ceases
to be
a member
of the
Board of
Directors or
an employee
for
any reason, all
shares of restricted
stock that are
not then vested
and non-forfeitable
will be immediately
forfeited and transferred
to
the Company
for no consideration
,
except as otherwise
agreed between
the parties.
Forfeited shares
of restricted
stock are
available
for future issuances by the Remuneration Committee.
The Company issues new shares to satisfy restricted stock awards.
Valuation
Assumptions
The fair value
of restricted stock
is generally based
on the closing
price of the
Company’s stock
quoted on The
Nasdaq Global
Select Market on the date of grant.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-63
17.
STOCK-BASED COMPENSATION
(continued)
Amended and Restated Stock Incentive Plan (continued)
Restricted Stock (continued)
Market Conditions - Restricted Stock Granted in November 2024
In
November
2024,
the
Company
awarded
1,198,310
shares
of
restricted
stock
to
a
group
comprising
employees
and
three
executive officers and which
are subject to a time-based
vesting condition and a market
condition and vest in full only
on the date, if
any,
that the following
conditions are
satisfied: (1) a
compounded annual
15
% appreciation in
the Company’s
stock price off
a base
price of $
5.00
over the measurement period commencing on September 30, 2024 through September 30, 2027, and (2) the recipient is
employed by the Company on a full-time basis through to September 30, 2027. If either of these conditions is not satisfied, then
none
of the shares of restricted stock will vest and they will be forfeited. The Company’s
closing price on September 30, 2024, was $
5.00
.
The appreciation levels (times and price) and
annual target percentages to earn the
awards as of each period
ended are as follows:
●
Prior to the first anniversary of the grant date:
0
%;
●
Fiscal
2026,
the
Company’s
30-day
volume
weighted-average
stock
price
(“VWAP”)
before
September
30,
2025
is
approximately
1.15
times higher (i.e. $
5.75
or higher) than $
5.00
:
33
%;
●
Fiscal 2027, the Company’s
VWAP before
September 30, 2026 is
1.32
times higher (i.e. $
6.61
or higher) than $
5.00
:
67
%;
●
Fiscal 2028, the Company’s
VWAP before
September 30, 2027 is
1.52
times higher (i.e. $
7.60
) than $
5.00
:
100
%.
The fair value
of these shares
of restricted
stock was calculated
using a Monte
Carlo simulation. In
scenarios where
the shares
do not vest, the final vested value at maturity is zero. In scenarios where vesting occurs, the final vested value on maturity is the share
price on
vesting date.
In its calculation
of the
fair value
of the
restricted stock,
the Company
used an
equally weighted
volatility of
47.7
% for
the closing
price (of
$
5.50
), a
discounting based
on U.S.
dollar overnight
indexed swap
rates for
the grant
date, and
no
future dividends. The equally weighted volatility was extracted from the time series for closing prices as the standard deviation of log
prices for the three years preceding the grant date.
Restricted Stock Units
The Remuneration Committee
may approve the
grant of other
stock-based awards. In
April 2022, the
Company granted
1,250,486
shares
of
restricted
stock
to
employees
of
Connect
pursuant
to
the
terms
of
the
acquisition.
The
award
included
an
equalization
mechanism to
maintain a
return of
$
7.50
per share
of restricted
stock upon
vesting through
the issue
of restricted
stock units.
The
conversion of restricted stock units to shares cannot exceed
50
% under the terms of the award and therefore no more than
625,243
(or
1,250,486
divided by two) would
be issued upon vesting.
During the years ended
June 30, 2025, 2024
and 2023, respectively,
380,775
,
388,908
and
412,487
shares of restricted stock vested, and
190,378
,
194,454
and
206,239
restricted stock units vested, the
maximum
amount possible,
and were
converted to
shares of
common stock.
Employees elected
for
173,354
,
166,087
and
72,081
shares to
be
withheld
from
173,468
,
166,167
and
164,687
restricted
stock units
which
vested,
and
which were
converted
to shares,
in order
to
satisfy
the
withholding
tax
liability
on
the
vesting
of
these
and
other
shares.
The
173,354
,
166,087
and
72,081
shares
have
been
included in the Company’s
treasury shares.
Stock Appreciation Rights
The Remuneration Committee may also grant stock appreciation rights, either
singly or in tandem with underlying stock
options.
Stock appreciation rights entitle the holder upon exercise to receive an amount in any combination of cash or shares of common stock
(as determined by the Remuneration Committee)
equal in value to the
excess of the fair
market value of the shares
covered by the right
over the grant price.
No
stock appreciation rights have been granted.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-64
17.
STOCK-BASED COMPENSATION
(continued)
Stock option and restricted stock activity
Options
The following table summarizes stock option activity for the years ended
June 30, 2025, 2024 and 2023:
Number of
shares
Weighted
average
exercise
price
($)
Weighted
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
($'000)
Weighted
average
grant date
fair value
($)
Outstanding - July 1, 2022
926,225
4.14
6.60
1,249
1.60
Exercised
(158,659)
3.04
-
200
-
Forfeited
(94,292)
3.99
-
1.81
Outstanding - June 30, 2023
673,274
4.37
5.14
239
1.67
Granted – June 2024
500,000
3.50
5.17
880
1.76
Granted – June 2024
1,000,000
6.00
4.60
1,690
1.69
Granted – June 2024
1,000,000
8.00
4.60
1,300
1.30
Granted – June 2024
1,000,000
11.00
4.60
920
0.92
Granted – June 2024
1,000,000
14.00
4.60
685
0.69
Exercised
(54,287)
2.25
-
71
-
Forfeited
(200,739)
3.96
-
1.42
Outstanding - June 30, 2024
4,918,248
8.70
4.51
889
1.77
Granted – December 2024
350,000
6.00
2.00
433
1.24
Granted – December 2024
250,000
8.00
2.00
177
0.71
Granted – January 2025
100,000
8.00
2.00
71
0.71
Granted – January 2025
150,000
11.00
2.00
107
0.71
Granted – January 2025
150,000
14.00
2.00
123
0.82
Exercised
(38,011)
3.02
-
72
-
Forfeited
(13,333)
11.23
-
8.83
Outstanding - June 30, 2025
5,866,904
8.71
3.55
703
1.20
These options have an exercise price range of $
3.01
to $
14.00
.
The Company
awarded
1,000,000
and
4,500,000
stock options
to employees
during the
years ended
June 30,
2025 and
2024,
respectively.
No
stock options were awarded during the year ended June 30, 2023.
The Company awarded
1,000,000
stock options during the
year ended June 30, 2025
with strike prices ranging
from $
6
to $
14
.
These stock options
will vest on December
31, 2026, and vesting
is subject to the
executive officers continued
employment with the
Company through to the vesting date. The
1,000,000
stock options expire on January 31, 2029.
The
4,500,000
stock options awarded
during the year
ended June 30,
2024, were awarded
to Mr.
Mazanderani, the Company’s
Executive Chairman, and
500,000
of these stock options were granted pursuant to the 2022 Plan and
4,000,000
were granted pursuant
to shareholder approval which was
obtained on June 3, 2024. The
500,000
options vested on December 3, 2024,
the first anniversary
of the grant date, and were subject to Mr. Mazandarani’s continued services as Executive Chair through the vesting date. The
500,000
options were scheduled
to vest immediately
if Mr.
Mazanderani’s employment
was terminated by
the Company without cause
on or
before the first anniversary of the grant date. In March 2025, the Company’s Remuneration Committee amended the exercise terms of
the
500,000
stock options from
being exercisable during
a period commencing
from January 31,
2028 to January
31, 2029, to
being
exercisable from March 2025, however,
any stock options exercised may only be sold during a period
commencing from January 31,
2028 to January 31, 2029.
The
4,000,000
options will vest on January
31, 2026, subject to Mr. Mazanderani’s ongoing service through
to this date.
The
4,000,000
stock options
may only be
exercised during
a period commencing
from January
31, 2028 to
January 31,
2029.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-65
17.
STOCK-BASED COMPENSATION
(continued)
Stock option and restricted stock activity (continued)
Options (continued)
During
the
years
ended
June 30,
2025,
2024
and
2023,
an additional
26,982
(which
excludes
the
500,000
options
discussed
earlier),
116,063
and
327,965
stock
options
became
exercisable,
respectively.
During
the year
ended
June 30,
2023,
an
employee
delivered
23,934
shares
of
the
Company’s
common
stock
to
exercise
37,500
stock
options
with
an
aggregate
strike
price
of
$
0.1
million. These
23,934
shares of
common stock
have been
included in
the Company’s
treasury stock.
The employee
also elected
to
deliver
6,105
shares of
the Company’s
common
stock to
settle income
taxes arising
upon
exercise
of the
stock options,
and
these
shares have also been included in the Company’s treasury stock. During the years ended
June 30, 2025, 2024 and 2023, the Company
received approximately
$
0.1
million, $
0.2
million and
$
0.5
million from
the exercise
of
38,011
,
54,287
and
158,659
stock options,
respectively.
During
the
years
ended
June
30,
2025,
2024
and
2023,
employees
forfeited
13,333
,
200,739
,
and
94,292
stock
options,
respectively. The
stock options forfeited had strike prices ranging from $
3.01
to $
11.23
.
The following table presents stock options vested and expected to vest as of
June 30, 2025:
Number of
shares
Weighted
average
exercise
price
($)
Weighted
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
($’000)
Vested
and expecting to vest - June 30, 2025
5,866,904
8.71
3.55
703
These options have an exercise price range of $
3.01
to $
14.00
, and include the
4,000,000
options awarded in June 2024.
The following table presents stock options that are exercisable as of June
30, 2025:
Number of
shares
Weighted
average
exercise
price
($)
Weighted
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
($’000)
Exercisable - June 30, 2025
869,570
3.98
3.95
707
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-66
17.
STOCK-BASED COMPENSATION
(continued)
Stock option and restricted stock activity
(continued)
Restricted stock
The following table summarizes restricted stock activity for the years
ended June 30, 2024 and 2023:
Number of shares of
restricted stock
Weighted average grant
date fair value
($’000)
Non-vested – June 30, 2022
2,385,267
11,879
Total granted
1,085,981
4,411
Granted – July 2022
32,582
172
Granted – August 2022
179,498
995
Granted - November 2022
150,000
605
Granted - December 2022
430,399
1,862
Granted - January 2023
11,806
57
Granted - June 2023
23,828
124
Granted - December 2022 - performance awards
257,868
596
Total vested
(742,464)
3,171
Vested
– July 2022
(78,801)
410
Vested
– November 2022
(59,833)
250
Vested
– December 2022
(7,060)
29
Vested
– February 2023
(19,179)
83
Vested
– March 2023
(69,286)
326
Vested
– April 2023
(418,502)
1,721
Vested
– May 2023
(61,861)
217
Vested
– June 2023
(27,942)
135
Granted - December 2022
300,000
1,365
Vested
- December 2022
(300,000)
1,365
Total forfeitures
(114,365)
554
Forfeitures - employee terminations
(34,365)
138
Forfeitures – February 2020 award with market conditions
(80,000)
416
Non-vested – June 30, 2023
2,614,419
11,869
Total granted
1,002,241
3,942
Granted – October 2023
333,080
1,456
Granted – October 2023, with performance conditions
310,916
955
Granted – October 2023
225,000
983
Granted – January 2024
56,330
197
Granted – February 2024
9,195
31
Granted - June 2024
67,720
320
Total vested
(1,232,251)
5,208
Vested
– July 2023
(78,800)
302
Vested
– November 2023
(109,833)
429
Vested
– December 2023
(67,073)
234
Vested
– February 2024
(14,811)
53
Vested
– March 2024
(69,286)
256
Vested
– April 2024
(394,932)
1,630
Vested
– May 2024
(88,617)
391
Vested
– June 2024
(350,247)
1,639
Vested
– June 2024, with performance conditions
(58,652)
274
Total forfeitures
(299,463)
1,315
Forfeitures - employee terminations
(82,077)
298
Forfeitures – May and July 2021 awards with market condition
(217,386)
1,017
Non-vested – June 30, 2024
2,084,946
8,736
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-67
17.
STOCK-BASED COMPENSATION
(continued)
Stock option and restricted stock activity
(continued)
Restricted stock (continued)
The following table summarizes restricted stock activity for the year
ended June 30, 2025:
Number of shares of
restricted stock
Weighted average grant
date fair value
($’000)
Non-vested – June 30, 2024
2,084,946
8,736
Total granted
1,433,610
5,381
Granted – August 2024
32,800
154
Granted – October 2024
100,000
490
Granted – November 2024, with performance conditions
1,198,310
4,206
Granted – January 2025
65,000
354
Granted - April 2025
37,500
177
Total vested
(1,197,944)
5,742
Vested
– July 2024
(78,801)
394
Vested
– November 2024, with performance conditions
(213,687)
1,134
Vested
– November 2024
(103,638)
524
Vested
– December 2024
(77,306)
417
Vested
– February 2025
(13,922)
68
Vested
– March 2025
(69,287)
328
Vested
– April 2025
(385,787)
1,737
Vested
– June 2024
(255,516)
1,140
Total forfeitures
(150,712)
728
Forfeitures - employee terminations
(121,591)
571
Forfeitures – December 2021 awards with market condition
(29,121)
157
Non-vested – June 30, 2025
2,169,900
7,833
Awards granted
In August
2024, October
2024, January
2025 and April
2025, respectively,
the Company granted
32,800
,
100,000
,
65,000
and
37,500
shares of
restricted
stock to
employees which
have time-based
vesting
conditions and
which
are subject
to the
employee’s
continued employment with the Company through the applicable
vesting dates. In November 2024, the Company awarded
1,198,310
shares of restricted stock to executive
officers and employees which contained time and
performance-based (market conditions related
to share price performance) vesting conditions.
In October 2023, the Company
awarded
333,080
shares of restricted stock with time-based
vesting conditions to approximately
150
employees, which are subject to the employees continued employment with the Company through the applicable vesting dates. In
October 2023, the Company awarded
310,916
shares of restricted stock to executive officers
which contained time and performance-
based
(market
conditions
related
to
share
price
performance)
vesting
conditions.
The
Company
also
awarded
225,000
shares
of
restricted stock to an executive officer in
October 2023, which vest on June 30, 2025, except if the executive
officer is terminated for
cause, in which case the award will be forfeited. In January 2024, February 2024 and June 2024, the Company awarded
56,330
,
9,195
and
67,720
shares of restricted stock with time-based vesting conditions to employees.
In July 2022,
December 2022, January
2023 and June
2023, the Company
awarded
32,582
,
430,399
,
11,806
and
23,828
shares
of restricted stock, respectively, to employees
and an executive officer which have time-based vesting conditions. In December
2022,
the Company awarded
257,868
shares of restricted
stock to executive
officers which contained
time and performance-based
(market
conditions related to
share price performance) vesting
conditions. The Company
also agreed to match,
on a
one
-for-one basis, (1)
an
employee’s purchase of up to $
1.0
million worth of the Company’s shares of common stock in open market purchases, and in August
2022, the Company granted
179,498
shares of restricted stock to the employee, and (2) another employee’s purchase of up to
150,000
shares
of
the
Company’s
common
stock,
and
in
November
2022,
the
Company
granted
150,000
shares
of
restricted
stock
to
the
employee.
These
shares
of
restricted
stock
contain
time-based
vesting
conditions.
The
Company
awarded
300,000
shares
to
an
executive officer on December 31, 2022, which vested on the date
of the award.
The Company has agreed
to grant an advisor
5,500
shares per month in
lieu of cash for services
provided to the Company.
The
Company and
the advisor have
agreed that the
Company will issue
the shares to
the advisor,
in arrears, on
a quarterly basis.
During
the year ended June 30, 2025, the Company recorded a stock-based compensation charge of $
0.4
million and included the issuance of
66,000
shares of common stock in its issued and outstanding share count.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-68
17.
STOCK-BASED COMPENSATION
(continued)
Stock option and restricted stock activity (continued)
Restricted stock (continued)
Awards granted
(continued)
Effective January 1,
2022, the Company agreed
to grant an advisor
shares in lieu of
cash for services provided
to the Company
during a contract
term that was scheduled
to expire on
December 31, 2022.
The contract could
have been terminated
early if certain
agreed events
occur,
and the contract
was mutually
terminated in
November 2022
as no further
services were required.
The advisor
agreed to
receive
6,481
shares of
the Company’s
common stock
per month
as payment
for services
rendered and
is not
entitled to
receive additional
shares if the
contract is terminated
early due to
the occurrence of
the agreed events.
The
6,481
shares granted per
month was calculated using an agreed monthly fee of $
35,000
divided by the Company’s closing market price on
January 3, 2022, on
the Nasdaq Global Select Market. The Company and the advisor have agreed that the Company will issue the shares to the advisor, in
arrears, on a quarterly basis and that the shares may not be transferred until the earlier of December 31, 2022, or the occurrence of the
agreed event.
During the
year ended
June 30,
2023, the
Company recorded
a stock-based
compensation charge
of $
0.2
million and
included the issuance of
32,405
shares of common stock in its issued and outstanding share count.
Awards vested
During the years ended June 30, 2025, 2024 and 2023, respectively,
1,197,944
,
1,002,241
and
742,464
shares of restricted stock
with time-based and performance-based vesting conditions vested. The June 30, 2025, shares include
78,801
shares of restricted stock
granted to
Mr.
Meyer, our
former Group
CEO, which
vested in
July 2024,
and
103,638
shares of
restricted stock
with performance
conditions (share price targets) which vested in November 2024, following the achievement of the agreed performance condition. The
June 30,
2024, shares
of stock vesting
includes
58,652
shares with
a performance-based
condition related
to the
achievement of
the
2021 to 2024 financial
services plan. The fair
value of restricted stock
which vested during the
years ended June 30,
2025, 2024
and
2023, was $
5.9
million, $
5.2
million and $
3.2
million, respectively.
In November 2024,
27,546
shares of restricted stock granted to Mr.
Mali vested and he elected for
12,396
shares to be withheld
to satisfy
the withholding
tax liability
on the
vesting of
these shares.
In addition,
in November
and December
2024 and
February,
April, May and June
2025, an aggregate of
556,889
shares of restricted stock
granted to employees vested
and they elected for
185,437
shares to be withheld to satisfy the withholding tax liability on the vesting of
these shares.
In May
2024,
55,598
shares of
restricted stock
granted to
Mr.
Mali vested
and he
elected for
25,020
shares to
be withheld
to
satisfy the withholding tax liability on the vesting of these shares. In addition, in November and December
2023
and February, April,
May and June
2024, an aggregate
of
556,889
shares of restricted
stock granted to employees
vested and they elected
for
128,415
shares
to be withheld to satisfy the withholding tax liability on the vesting of these
shares.
In July
2022,
78,801
shares of restricted
stock granted
to Mr.
Meyer vested
and he elected
for
35,460
shares to
be withheld
to
satisfy the withholding tax liability on the vesting of
these shares. In May 2023,
55,599
shares of restricted stock granted to Mr.
Mali
vested and he elected for
25,020
shares to be withheld to
satisfy the withholding tax liability
on the vesting of these
shares. In addition,
in November and December 2022 and February, April, May and June 2023, an aggregate of
434,279
shares of restricted stock granted
to employees vested and
they elected for
190,394
shares to be withheld to satisfy
the withholding tax liability on
the vesting of these
shares.
These
197,833
(
12,396
plus
185,437
),
153,435
(
25,020
plus
128,415
) and
250,874
(
35,460
plus
25,020
plus
190,394
) shares have
been included in our treasury shares for the year ended June 30,
2025, 2024 and 2023, respectively.
Awards forfeited
During the
year ended
June 30,
2025,
29,121
shares of
restricted stock
were forfeited
by an
employee as
the market
condition
(related to share price
performance) were not achieved.
During the year ended
June 30, 2025, employees
forfeited
121,591
shares of
restricted stock following their termination of employment with the Company.
During the year
ended June 30,
2024,
217,386
shares of restricted
stock were forfeited
by executive officers
(including former
executive officers)
as the
market condition
(related to
share price
performance)
were not
achieved.
During the
year ended
June 30,
2024, employees forfeited
82,077
shares of restricted stock following their termination of employment with the Company.
During the year ended June 30, 2023,
80,000
shares of restricted stock were forfeited by an executive officer as the performance
condition (related to net asset
value targets) was not achieved.
During the year ended
June 30, 2023, employees
forfeited
34,365
shares
of restricted stock following their termination of employment with the Company.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-69
17.
STOCK-BASED COMPENSATION
(continued)
Lesaka ESOP Trust
On November 14, 2024, the Company announced that its shareholders voted on and approved
the funding and issuance of shares
to the Lesaka ESOP Trust at its annual general meeting. The Lesaka Employee Share Ownership Plan (“ESOP”)
is designed to create
alignment
with
the
Company's
long-term
growth
objectives.
The
Lesaka
ESOP
Trust
is
also
expected
to
advance
the Company’s
transformation
initiatives
and
plays
an
important
role
in
improving
the
company’s
Broad-Based
Black
Economic
Empowerment
(“BBBEE”) rating.
As of
November 2024,
when shareholders
approved the
plan, the
Company’s
employee base
was comprised
of
approximately
87
%
designated
groups
for
BBBEE
purposes.
Through
the
creation
of
a
broader
base
of
employee
ownership,
the
Company
is
helping
to
promote
economic
inclusion
and
contribute
to
transformation
in the
broader
South
African
economy.
The
Lesaka ESOP Trust
is structured as
an evergreen
trust, ensuring
the permanence of
the plan and
allowing for the
inclusion of future
employees as the Company continues to grow.
The
Lesaka
ESOP
Trust
was
required
to
have
an
effective
holding
of
3
%
of
the
Company’s
issued
shares
at
the
date
of
implementation,
and in
February 2025,
the Company
issued
2,490,000
shares of
its common
stock to
the Lesaka
ESOP Trust.
The
subscription price
payable by
the Lesaka
ESOP Trust
for the
shares was
vendor funded
by the
Company through
a notional
vendor
funding (“NVF”)
structure whereby
the Company
provided a
notional loan
to the
Lesaka ESOP
Trust representing
the fair value
of
the shares, facilitating
the acquisition by
the Lesaka ESOP
Trust of
the shares without
requiring any upfront
payment by the
Lesaka
ESOP Trust except for the payment of a nominal value of $
0.001
per share. The NVF structure will achieve the
same economic effect
as a traditional
loan structure from
the Company to the
Lesaka ESOP Trust
to enable the Lesaka
ESOP Trust to
subscribe for shares
in the Company, but without
any actual flow of funds from the Company to the Trust.
A notional amount on the date
of issue was ascribed to each share
that the Lesaka ESOP Trust
subscribed for, which
is equal to
the fair market value
of one of the
Company shares of common
stock (which is the
amount the Lesaka ESOP
Trust would have
paid
for one of the Company’s shares in an ordinary course cash transaction with the Company) less a
10
% discount. The principal amount
on the NVF loan will
accrue interest at a fixed
rate of
3
% per annum. The NVF
will have a
five-year
term. The notional amount was
not recognized in the Company’s financial statements because
it represents a formula to
calculate the number of the
Company’s shares
of common stock to be returned by the Lesaka ESOP Trust
to the Company after
five years
.
On or about the 5
th
anniversary of the implementation date of the ESOP (“Maturity Date”), the Company will have the option to
repurchase
a
portion
of
the
shares
held
by
the
Lesaka
ESOP
Trust
at
the
nominal
aggregate
amount
to
settle
the
total
NVF
loan
outstanding. The number of
shares to be repurchased will be
determined by using a formula
set out in the transaction
documents that
considers the total
NVF loan outstanding on
the Maturity Date
and the market
value of one
of the Company’s shares held
by the Lesaka
ESOP Trust. The purchase
consideration that would have been
payable for the shares the Company
will repurchase (which is the fair
market value the Company
would have paid for the shares
in an ordinary course cash transaction
with the Lesaka ESOP Trust
on the
Maturity Date) will be set off
against the total NVF loan outstanding.
After settlement of the NVF loan,
50
% of the remaining shares
held by the Lesaka ESOP Trust, if any,
will be distributed to eligible employees.
The Lesaka ESOP Trust will hold shares of
the Company’s common stock. The
Lesaka ESOP Trust will therefore be entitled to
receive its proportionate share of any
dividends and other distributions declared by the
Company to its shareholders and vote
its shares
held on matters requiring shareholder approval.
The Lesaka ESOP Trust
is administered by the
board of trustees made up
of
five
members nominated by the Company’s
Board
and the participants in the ESOP.
The Company’s Board has the right
to nominate
two
members to the board of trustees. The balance
of the trustees,
one
of which must be an independent trustee,
are nominated by the participants. The nominees
appointed to the board
of trustees may not be members of the Company’s Board or an officer as contemplated in Rule 16a-(f) of the Securities and Exchange
Act of 1934. The nominees of
the participants need to meet an election
criteria to be eligible for nomination which
requires participant
nominees to have been employed by the Group for a continuous and uninterrupted period of at least
three years
. The trustees have the
discretion to determine how
the Lesaka ESOP Trust
should vote shares of the
Company common stock held on
matters requiring the
Company’s shareholders
approval. The decisions by the trustees are decided by a majority vote.
The Company
is responsible
for all
reasonable
operating expenses
incurred
by the
Lesaka ESOP
Trust
until such
time as
the
Lesaka ESOP Trust has sufficient
cash resources of its own to settle its operating expenses.
The Company controls the Lesaka
ESOP
Trust because
the Lesaka ESOP
Trust is
considered to
be a variable
interest entity (“VIE”)
in which the
Company has a
controlling
financial interest.
Accordingly,
the Lesaka ESOP
Trust is
consolidated by
the Company.
As the Lesaka
ESOP Trust
is consolidated
by the
Company,
the
2,490,000
shares of
the Company’s
common stock
held by
Lesaka ESOP
Trust
are accounted
for as
treasury
shares at the
nominal amount
of $
0.001
per share. Purchases
and sales of
the Company’s
common stock
between the
Company and
the Lesaka ESOP Trust will be recognized within equity with no profit or loss
being recognized in the statement of operations on such
acquisition or disposal.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-70
17.
STOCK-BASED COMPENSATION
(continued)
Lesaka ESOP Trust (continued)
Qualifying employees
were allocated A
and B units.
An A unit
represents an option
for the employees
to acquire shares
of the
Company’s common stock in future. The A
unit represents an equity-settled share-based
payment, requiring the recognition of
a stock-
based compensation
charge over
a
five year
service period.
The A
units were
measured at
their grant
date fair
value using
a Black
Scholes valuation model.
A B unit represent
s
an employees’ entitlement
to cash payments
based on dividends
paid by the Company
to
the
Lesaka
ESOP
Trust,
and
consequently
distributions
that
the
Lesaka
ESOP
Trust
makes
to
qualifying
employees
who
are
beneficiaries of the Lesaka
ESOP Trust. These
payments represent an
employee benefit, requiring
that the Company to
recognize an
expense to the value of the payment made when each payment is made.
Initial
qualifying
employees
are
required
to
have
a
minimum
of
two year
’s
service
with
the
Company,
with
criteria
being
determined on December 31, 2024. Initial qualifying employees received invitation and allocation notices on or around April 1, 2025.
As
employees
complete
two years
’
service
to
any
subsidiary
of
the
Company
they
will
become
eligible
for
consideration
as
a
beneficiary of the Lesaka ESOP Trust. Qualifying
employees include employees of recent acquisitions, including Adumo.
On April 1,
2025, the Lesaka
ESOP Trust
awarded
2,030
qualifying employees
1,989,400
A units and
2,030
B units. Lesaka’s
closing price on the Nasdaq on April 1, 2025 was $
5.00
per share and each A unit was issued with an initial strike price
of $
4.50
(the
closing price
less a
10
% discount)
and is
expected to
grow by
3
% per
annum through
to April
1, 2030.
The Company
estimated a
forfeiture rate of
8
% per annum. The
fair value of
each A unit is
estimated on the
date of grant
using Black-Scholes model
that uses
the assumptions noted in the table below. The estimated expected volatility is generally calculated based on the Company’s
1,251
-day
volatility.
The
estimated
expected
life
of
the
option
was
determined
as
the
period
from
grant
date
through
to
the
vesting
date
in
February 2030. The table below
presents the range of assumptions used
to value options granted during the
years ended June 30, 2025:
2025
Expected volatility
46
%
Expected dividends
0
%
Expected life (in years)
4.9
Risk-free rate
4.17
%
Stock-based compensation charge and unrecognized compensation
cost
The Company has
recorded a net stock
compensation charge
of $
9.5
million, $
7.9
million and $
7.3
million for the
years ended
June 30, 2025, 2024 and 2023, respectively,
which comprised:
Total
charge
Allocated to IT
processing,
servicing and
support
Allocated to
selling, general
and
administration
Year
ended June 30, 2025
Stock-based compensation charge
$
9,482
$
-
$
9,482
Stock-based compensation charge related to ESOP
157
-
157
Reversal of stock compensation charge related to stock
options and restricted stock forfeited
(89)
-
(89)
Total - year ended June
30, 2025
$
9,550
$
-
$
9,550
Year
ended June 30, 2024
Stock-based compensation charge
$
8,045
$
-
$
8,045
Reversal of stock compensation charge related to stock
options and restricted stock forfeited
(134)
-
(134)
Total - year ended June
30, 2024
$
7,911
$
-
$
7,911
Year
ended June 30, 2023
Stock-based compensation charge
$
7,673
$
-
$
7,673
Reversal of stock compensation charge related to stock
options and restricted stock forfeited
(364)
-
(364)
Total - year ended June
30, 2023
$
7,309
$
-
$
7,309
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-71
17.
STOCK-BASED COMPENSATION
(continued)
Stock-based compensation charge and unrecognized compensation
cost (continued)
The
stock-based
compensation
charges
and
reversal
have
been
allocated
to
selling,
general
and
administration
based
on
the
allocation of the cash compensation paid to the relevant employees.
As of June
30, 2025, the
total unrecognized
compensation cost related
to stock options
was approximately
$
5.3
million, which
the
Company
expects
to
recognize
over
approximately
two years
.
As of
June
30,
2025,
the
total
unrecognized
compensation
cost
related to restricted stock awards was approximately $
5.0
million, which the Company expects to recognize over approximately
three
years
.
Income tax consequences
During the years ended June 30, 2025, 2024 and 2023, the
Company recorded a deferred tax benefit of $
1.0
million, $
0.7
million
and
$
0.6
million, respectively,
related
to the
stock-based
compensation
charge
recognized related
to employees
of Lesaka.
During
these periods the
Company recorded a
valuation allowance related
to the
full deferred tax
benefit recognized because
it does not
believe
that the
stock-based compensation
deduction would
be utilized
as it
does not
anticipate generating
sufficient taxable
income in
the
United States. The
Company deducts the
difference between the
market value on the
date of exercise by
the option recipient
and the
exercise price from income subject to taxation in the United States.
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.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-72
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.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-73
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.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-74
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.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-75
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.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-76
19.
(LOSS) EARNINGS PER SHARE
The Company has
issued redeemable common
stock (refer to Note
14) which is redeemable
at an amount other
than fair value.
Redemption of a class of common stock
at other than fair value
increases or decreases the carrying amount
of the redeemable common
stock
and
is
reflected
in
basic
earnings
per
share
using
the
two-class
method.
There
were
no
redemptions
of
common
stock,
or
adjustments to the
carrying value of the
redeemable common stock during
the years ended
June 30, 2025,
2024 and 2023.
Accordingly,
the two-class method presented below does not include the impact of
any redemption.
Basic (loss) earnings per share
includes shares of restricted stock that
meet the definition of a
participating security because these
shares are eligible
to receive non
-forfeitable dividend
equivalents at the
same rate as
common stock.
Basic (loss) earnings
per share
has been calculated using the two-class method and basic (loss) earnings per share for the years ended June 30,
2025, 2024 and 2023,
reflects only
undistributed
earnings. The
computation below
of basic
(loss) earnings
per share
excludes the
net loss
attributable
to
shares of unvested restricted
stock (participating non-vested
restricted stock) from
the numerator and excludes
the dilutive impact of
these unvested shares of restricted stock from the denominator.
Diluted (loss)
earnings per
share have
been calculated
to give
effect to
the number
of shares
of additional
common stock
that
would have
been outstanding
if the
potential dilutive
instruments had
been issued
in each
period. Stock
options are
included in
the
calculation of diluted (loss) earnings per share utilizing the treasury
stock method and are not considered to be
participating securities,
as the
stock options
do not
contain non-forfeitable
dividend rights.
The calculation
of diluted
(loss) earnings
per share
includes the
dilutive effect
of a portion of
the restricted stock
granted to employees
during the current
and previous fiscal
periods as these
shares
of restricted
stock are
considered contingently
returnable shares
for the
purposes of
the diluted
(loss) earnings
per share
calculation
and the
vesting conditions
in respect
of a
portion of
the restricted
stock had
been satisfied.
The vesting
conditions are
discussed in
Note 17. The Company has excluded employee stock options to purchase
188,632
,
46,777
and
112,783
shares of common stock from
the calculation of diluted
loss per share during
the years ended June 30,
2025, 2024 and 2023, respectively,
because the effect would
be antidilutive.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-77
19.
(LOSS) EARNINGS PER SHARE (continued)
The following
table presents net
loss attributable
to Lesaka
and the share
data used in
the basic and
diluted (loss)
earnings per
share computations using the two-class method for the years ended
June 30, 2025, 2024 and 2023:
2025
2024
2023
(in thousands except percent and per share data)
Numerator:
Net loss attributable to Lesaka
$
(87,504)
$
(17,440)
$
(35,074)
Undistributed loss
(87,504)
(17,440)
(35,074)
Percent allocated to common shareholders
(Calculation 1)
97%
95%
95%
Numerator for loss per share: basic and diluted
$
(84,557)
$
(16,651)
$
(33,407)
Denominator
Denominator for basic loss per share:
weighted-average common shares outstanding
73,891
61,276
60,134
Effect of dilutive securities:
Denominator for diluted loss per share: adjusted weighted average
common shares outstanding and assumed conversion
73,891
61,276
60,134
Loss per share:
Basic
$
(1.14)
$
(0.27)
$
(0.56)
Diluted
$
(1.14)
$
(0.27)
$
(0.56)
(Calculation 1)
Basic weighted-average common shares outstanding (A)
73,891
61,276
60,134
Basic weighted-average common shares outstanding and unvested
restricted shares expected to vest (B)
76,466
64,179
63,134
Percent allocated to common shareholders
(A) / (B)
97%
95%
95%
Options to purchase
6,493,683
,
4,737,543
and
276,616
shares of the Company’s
common stock at prices ranging
from $
4.87
to
$
14.00
(2025 and 2024) and $
4.87
to $
11.23
(2023) per share were outstanding during the year ended
June 30, 2025, 2024 and 2023,
respectively,
but were not
included in the
computation of diluted
(loss) earnings per
share because the
options’ exercise prices
were
greater than the average market price of the Company’s common shares. The options, which expire
at various dates through February
3, 2032, were still outstanding as of June 30, 2025.
20.
SUPPLEMENTAL CASH
FLOW INFORMATION
The following table presents supplemental cash flow disclosures for
the years ended June 30, 2025, 2024 and 2023:
2025
2024
2023
Cash received from interest
$
2,576
$
2,277
$
1,841
Cash paid for interest
$
18,077
$
17,381
$
13,278
Cash paid for income taxes, net of refunds received
$
6,481
$
6,506
$
7,200
As discussed in Note
17, during the year
ended June 30, 2023,
an employee exercised stock
options through the delivery
of
23,934
shares of
the Company’s
common stock
at the
closing price
on March
7, 2023
of $
4.76
under the
terms of
their option
agreements.
These shares are included in
the Company’s total share count and the
amount is reflected as
treasury shares on the consolidated balance
sheet as of June 30, 2023 and consolidated statement of changes in equity for
the year ended June 30, 2023.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-78
20.
SUPPLEMENTAL CASH
FLOW INFORMATION
(continued)
Disaggregation of cash, cash equivalents and restricted cash
Cash, cash equivalents
and restricted cash
included on
the Company’s
consolidated statement
of cash flows
includes restricted
cash related
to cash
withdrawn from
one of
the Company’s
debt facilities
to fund
ATMs.
This facility
was cancelled
in November
2024. The Company was only permitted to use this cash to fund ATMs
and this cash was considered restricted as to use and therefore
was classified as restricted
cash. Cash, cash equivalents
and restricted cash also
includes cash in certain
bank accounts that has
been
ceded to Nedbank. As this cash has been pledged and ceded it may not be drawn and is considered restricted as to use and therefore is
classified as
restricted cash
as well.
Refer to
Note 12
for additional
information regarding
the Company’s
facilities. The
following
table presents the disaggregation of cash, cash equivalents and restricted
cash as of June 30, 2025, 2024 and 2023:
2025
2024
2023
Cash and cash equivalents
$
76,520
$
59,065
$
35,499
Restricted cash
119
6,853
23,133
Cash, cash equivalents and restricted cash
$
76,639
$
65,918
$
58,632
Leases
The following
table presents
supplemental
cash flow
disclosure related
to leases
for the
years ended
June 30,
2025, 2024
and
2023:
2025
2024
2023
Cash paid related to lease liabilities
Operating cash flows from operating leases
$
4,834
$
3,238
$
2,866
Right-of-use assets obtained in exchange for lease obligations
Operating leases
$
5,707
$
4,800
$
983
21.
OPERATING SEGMENTS
Operating segments
The Company discloses segment information as reflected in the management
information systems reports that its chief operating
decision maker (“CODM”) uses in making decisions and to report certain entity-wide disclosures about products and services, and the
countries in which the entity holds material assets or reports material revenues.
Change to internal reporting structure and recast
of previously reported information
The
Company
currently
has
three
reportable
segments:
Merchant,
Consumer
and
Enterprise.
The
Company’s
CODM
is
the
Company’s Executive Chairman. During the second quarter of fiscal 2025, he changed
the Company’s operating and internal reporting
structures to present a new segment, Enterprise, separately. The
CODM has decided to analyze the Company’s operating performance
primarily based on these three operational lines, namely,
(i) Merchant, which focuses on
both formal and informal sector
merchants. Formal sector merchants are generally in
urban areas,
have higher
revenues and
have access
to multiple
service providers.
Informal sector
merchants, which
are often
sole proprietors
and
usually
have lower
revenues compared
with formal
section merchants,
operate in
rural areas
or in
informal urban
areas and
do not
always have access to a full-suite of traditional banking products;
(ii) Consumer,
which primarily
focuses on
individuals who
have historically
been excluded
from traditional
financial services
and to whom we offer
transactional accounts (banking), insurance,
lending (short-term loans), payments solutions
(digital wallet) and
various value-added services; and
(iii) Enterprise, which comprises large-scale corporate
and government organizations, including but not
limited to banks, mobile
network operators (“MNOs”) and municipalities, and,
through Recharger, landlords
utilizing Recharger’s prepaid electricity
metering
solution.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-79
21.
OPERATING SEGMENTS
(continued)
Reallocation of certain activities among operating segments in Q2
2025
The
change
in
our
operating
segments
during
the
second
quarter
of
fiscal
2025
included
the
separation
of
Enterprise
out
of
Merchant.
The
Company
has also
allocated
the
majority
of Adumo’s
operations
to
Merchant,
with
a
smaller
part
of
its operations
focusing on the provision
of physical and digital
prepaid and secure payout
solutions for South African
businesses with large individual
end-users being allocated to Consumer.
Previously reported information has been recast.
The Merchant
segment includes
revenue generated
from the
sale of
ADP (select
prepaid solutions,
supplier-enabled payments,
international money
transfer and other)
and card-acquiring services
to informal sector
merchants. It also
includes activities related
to
the provision of goods and
services provided to corporate and
other juristic entities. The Company earns
fees from processing activities
performed (including
card acquiring
and the
provision of
a payment
gateway services)
for its
customers, and
rental and
license fees
from
the
provision
of
point
of
sales
(“POS”)
hardware
and
software
to
the
hospitality
industry.
The
Company
also
provides
cash
management
and
payment
services
to
merchant
customers
through
a
digital
vault
which
is
located
at
the
customer’s
premises
and
through which
the Company
is able
to provide
the services
which generate
processing fee
revenue. From
July 1,
2023, the
segment
includes fees earned from transactions performed by customers utilizing its ATM
infrastructure.
The Consumer segment
includes activities related
to the provision
of financial services
to customers, including
a bank account,
loans and
insurance products.
The Company
charges monthly
administration fees
for all
bank accounts.
Customers that
have a
bank
account managed by the Company are issued cards that can be utilized to withdraw funds at an ATM or to transact at a merchant POS.
The Company
earns processing
fees from
transactions processed
for these
customers. The
Company also
earns fees
on transactions
performed
by
other
banks’
customers
utilizing
its
ATM
(until
June
30,
2023)
or
POS. The
Company
provides
short-term
loans
to
customers in South Africa for which it earns initiation and monthly service fees, and interest revenue from the second quarter of fiscal
2025. The Company writes life insurance contracts, primarily funeral-benefit policies, and policy holders pay the Company a monthly
insurance premium.
The Company
also earns fees
from the provision
of physical and
digital prepaid
and secure payout
solutions for
South African businesses.
The Enterprise segment provides its business and
government-related customers with transaction processing services that involve
the
collection,
transmittal
and
retrieval
of
transaction
data.
Through
Recharger,
Enterprise
offers
landlords
access
to
Recharger’s
prepaid
electricity
metering
solution
through which
Enterprise
earns
commission
revenue
from
prepaid
electricity
voucher
sales
to
tenants recharging prepaid meters. This segment also includes sales of hardware and licenses to customers. Hardware includes the sale
of
POS
devices,
SIM
cards
and
other
consumables
which
can
occur
on
an
ad
hoc
basis.
Licenses
include
the
right
to
use
certain
technology developed by the Company.
The
Company
evaluates
segment
performance
based
on
segment
earnings
before
interest, tax,
depreciation
and
amortization
(“EBITDA”),
adjusted
for
items
mentioned
in
the
sentences
below
(“Segment
Adjusted
EBITDA”),
the
Company’s
reportable
segments’ measure of profit or loss.
The
Company
obtained
a
general
lending
facility
in
February
2025,
which
has
been
partially
used
to
fund
a
portion
of
its
Consumer
lending
during
the
four
months
ended
June
30,
2025,
and
interest
related
to
these
borrowings
have
been
allocated
to
Consumer.
The Company also
included an
intercompany interest expense
in its Consumer
Segment Adjusted
EBITDA for
the eight
months ended February 28, 2025.
The Company
does not allocate
once-off items,
stock-based compensation
charges, depreciation
and amortization,
impairment
of
goodwill
or other
intangible assets,
other
items
(including
gains or
losses on
disposal of
investments,
fair
value
adjustments
to
equity
securities),
interest
income,
certain
interest
expense,
income
tax
expense
or
loss
from
equity-accounted
investments
to
its
reportable segments. Group costs generally include: employee related costs in relation to employees specifically hired for group roles
and related directly to
managing the US-listed entity;
expenditures related to compliance
with the Sarbanes-Oxley Act
of 2002; non-
employee directors’ fees; legal fees; group and US-listed related audit
fees; and directors and officer’s insurance premiums. Once-off
items represent
non-recurring expense
items, including
costs related to
acquisitions and
transactions consummated
or ultimately not
pursued.
Unrealized
(loss)
gain
for
currency
adjustments
represents
foreign
currency
mark-to-market
adjustments
on
certain
intercompany accounts. Interest adjustment represents the
intercompany interest expense included in the Consumer
Segment Adjusted
EBITDA. The Stock-based
compensation adjustments reflect
stock-based compensation expense and
are excluded from
the calculation
of Segment Adjusted EBITDA and are
therefore reported as reconciling items
to reconcile the reportable segments’ Segment
Adjusted
EBITDA to the Company’s
loss before income tax expense.
Effective
from
fiscal
2025,
all
lease
charges
are
allocated
to
the
Company’s
operating
segments,
whereas
in
fiscal
2024
the
Company presented
certain lease charges
on a
separate line outside
of its operating
segments. Prior period
information has
been re-
presented to include
the lease charges
which were previously
reported on a
separate line in
the Company’s
Consumer and Merchant
(now Merchant, Enterprise and Consumer) operating segments.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-80
21.
OPERATING SEGMENTS
(continued)
Reallocation of certain activities among operating segments in Q2
2025 (continued)
Our
CODM
does
not
review
the
components
of
segment
selling,
general
and
administration
expenses
and
is
presented
with
reports which include revenue, net revenue (a non-GAAP measure)
and segment adjusted EBITDA.
The table below presents
the reconciliation of revenue from
external customers to the
reportable segment’s
revenue, significant
expenditures, the Company’s reportable segment’s measure of profit or
loss, and certain other
segment information for the
years ended
June 30, 2025, 2024 and 2023, respectively,
is as follows:
Year
ended June 30, 2025
Merchant
Consumer
Enterprise
Unallocated
Total
Revenue from external customers
$
524,250
$
96,008
$
39,443
$
-
$
659,701
Intersegment revenues
2,348
-
3,113
-
5,461
Segment revenue
526,598
96,008
42,556
-
665,162
Less segment-related expenses:
Cost of goods sold, IT processing, servicing and
support
425,787
35,603
32,549
-
493,939
Selling, general and administration
(1)(2)
64,616
36,456
8,720
-
109,792
Segment adjusted EBITDA
$
36,195
$
23,949
$
1,287
$
-
$
61,431
Merchant
Consumer
Enterprise
Group costs
Total
Depreciation and amortization
$
10,997
$
968
$
371
$
21,385
$
33,721
Expenditures for long-lived assets
$
18,117
$
1,500
$
1,482
$
-
$
21,099
Year
ended June 30, 2024
Merchant
Consumer
Enterprise
Unallocated
Total
Revenue from external customers
$
456,069
$
69,211
$
38,942
$
-
$
564,222
Intersegment revenues
3,721
-
7,955
-
11,676
Segment revenue
459,790
69,211
46,897
-
575,898
Less segment-related expenses:
Cost of goods sold, IT processing, servicing and
support
393,618
23,165
37,424
-
454,207
Selling, general and administration
(1)(3)
37,002
33,367
6,542
-
76,911
Segment adjusted EBITDA
$
29,170
$
12,679
$
2,931
$
-
$
44,780
Merchant
Consumer
Enterprise
Group costs
Total
Depreciation and amortization
$
8,141
$
734
$
402
$
14,388
$
23,665
Expenditures for long-lived assets
$
11,202
$
1,317
$
146
$
-
$
12,665
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-81
21.
OPERATING SEGMENTS
(continued)
The table below presents
the reconciliation of revenue from
external customers to the
reportable segment’s
revenue, significant
expenditures, the Company’s reportable segment’s
measure of profit or loss, and certain other segment information for the year ended
June 30, 2023, is as follows:
Year
ended June 30, 2023
Merchant
Consumer
Enterprise
Unallocated
Total
Revenue from external customers
$
416,562
$
62,801
$
47,139
$
1,469
$
527,971
Intersegment revenues
-
-
3,317
-
3,317
Revenue not allocated to segment
-
-
-
(1,469)
(1,469)
Segment revenue
416,562
62,801
50,456
-
529,819
Less segment-related expenses:
Cost of goods sold, IT processing, servicing and
support
351,754
29,465
39,176
-
420,395
Selling, general and administration
(1)
35,800
31,661
8,024
-
75,485
Segment adjusted EBITDA
$
29,008
$
1,675
$
3,256
$
-
$
33,939
Merchant
Consumer
Enterprise
Group costs
Total
Depreciation and amortization
$
6,749
$
1,114
$
673
$
15,149
$
23,685
Expenditures for long-lived assets
$
12,812
$
3,170
$
174
$
-
$
16,156
(1)
Selling,
general
and
administration
includes
human
capital-related
expenses
(including
base
salary
and
bonus),
IT-related
expenses
(including
software
licenses,
hardware
maintenance,
hosting,
and
communication
expenses),
professional
fees
(including
audit, legal,
consulting and
other fees),
lease and
utilities expenses,
the allowance
for credit
losses and
other operating
and support
expenses.
(2) Segment Adjusted
EBITDA for the
year ended June
30, 2025, includes
retrenchment and reorganization
costs for Merchant
of $
0.8
million (ZAR
15.7
million), Consumer of
$
0.1
million (ZAR
1.5
million) and Enterprise
of $
0.8
million (ZAR
13.6
million);
and
(3) Segment Adjusted EBITDA for the year
ended June 30, 2024, includes retrenchment costs
for Merchant of $
0.3
million (ZAR
4.9
million) and Consumer of $
0.2
million (
3.5
million).
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-82
21.
OPERATING SEGMENTS
(continued)
The reconciliation of the reportable segments’ measures of profit or loss to
loss before income taxes for the years ended June 30, 2025,
2024 and 2023, respectively,
is as follows:
2025
2024
2023
Reportable segments measure of profit or loss
$
61,431
$
44,780
$
33,939
Operating loss: Group costs
(10,743)
(7,844)
(9,109)
Once-off costs
(17,826)
(1,853)
(1,922)
Interest adjustment
2,195
-
-
Unrealized (Loss) Gain for currency adjustments
(23)
83
(222)
Stock-based compensation charge adjustments
(9,550)
(7,911)
(7,309)
Depreciation and amortization
(33,721)
(23,665)
(23,685)
Loss on disposal of equity-accounted investment (Note 9)
(161)
-
(205)
Impairment loss
(18,863)
-
(7,039)
Reversal of allowance for doubtful EMI debt receivable (Note 9)
-
250
-
Change in fair value of equity securities (Note 3)
(59,828)
-
-
Interest income
2,596
2,294
1,853
Interest expense
(21,453)
(18,932)
(18,567)
Loss before income taxes
$
(105,946)
$
(12,798)
$
(32,266)
The segment
information as
reviewed by
the chief
operating decision
maker does
not include
a measure
of segment
assets per
segment as all of
the significant assets are
used in the operations
of all, rather than
any one, of the
segments. The Company does
not
have dedicated assets
assigned to a
particular operating segment.
Accordingly,
it is not meaningful
to attempt an arbitrary
allocation
and segment asset allocation is therefore not presented.
Long-lived assets based on their geographic location as of June 30, 2025,
2024 and 2023, are presented in the table below:
Long-lived assets
2025
2024
2023
South Africa
$
392,098
$
286,700
$
300,104
India - Investment in MobiKwik (Note 9)
-
76,297
76,297
Rest of world
3,055
2,548
2,197
Total
$
395,153
$
365,545
$
378,598
22.
COMMITMENTS AND CONTINGENCIES
Capital commitments
As
of
June
30,
2025
and
2024,
the
Company
had
outstanding
capital
commitments
of
approximately
$
0.2
million
and
$
0.3
million, respectively.
Purchase obligations
As of June 30,
2025 and 2024, the
Company had purchase
obligations totaling $
2.9
million and $
2.5
million, respectively.
The
purchase
obligations
as
of
June
30,
2025,
primarily
relate
to
POS
devices,
components
for
safe
assets
and
inventory
that
will
be
delivered to the Company and sold to customers in fiscal 2025.
Guarantees
The South African
Revenue Service and
certain of the
Company’s customers,
suppliers and other
business partners have
asked
the Company
to provide
them with
guarantees, including
standby letters
of credit,
issued by
South African
banks. The
Company is
required to procure these guarantees for these third parties to operate
its business.
Nedbank has
issued guarantees
to these
third parties
amounting to
ZAR
2.1
million ($
0.1
million, translated
at exchange
rates
applicable as of June 30, 2025) thereby utilizing part of the Company’s
short-term facilities. The Company pays commission of
between
0.47
% per annum to
1.84
% per annum of the face
value of these guarantees and does not
recover any of the commission
from third parties.
LESAKA TECHNOLOGIES, INC.
Notes to the consolidated financial statements
for the years ended June 30, 2025 and 2024 and 2023
(All amounts stated in thousands of United States Dollars, unless otherwise stated)
F-83
22.
COMMITMENTS AND CONTINGENCIES (continued)
RMB has
issued
guarantees
to
these
third
parties
amounting
to
ZAR
33.1
million
($
1.9
million,
translated
at
exchange
rates
applicable as of June 30, 2025) thereby utilizing part of the Company’s
short-term facilities.
The Company has not recognized any obligation related to
these guarantees in its consolidated balance sheet as of
June 30, 2025.
The maximum potential
amount that the Company
could pay under
these guarantees is ZAR
35.2
million ($
2.0
million, translated at
exchange rates applicable
as of June 30, 2025).
As discussed in Note
12, the Company
has ceded and pledged
certain bank accounts
to Nedbank
as security
for these
guarantees
with an
aggregate value
of ZAR
2.1
million ($
0.1
million translated
at exchange
rates
applicable as
of June
30, 2025).
The guarantees
have reduced
the amount
available under
its indirect
and derivative
facilities in
the
Company’s short-term credit facility described
in Note 12.
Contingencies
The
Company
is
subject
to
a
variety
of
insignificant
claims
and
suits
that
arise
from
time
to
time
in
the
ordinary
course
of
business. Management
currently believes
that the
resolution of
these other
matters, individually
or in
the aggregate,
will not
have a
material adverse impact on the Company’s
financial position, results of operations or cash flows.
23.
RELATED PARTY
TRANSACTIONS
VCP Agreement
On March
22, 2022, Lesaka
and Lesaka SA
entered into
a Securities Purchase
Agreement (the
“VCP Agreement”)
with Value
Capital Partners Proprietary
Limited (“VCP”) , a significant
shareholder, whereby
VCP undertook to procure
that one or more funds
under its
management (the
“Purchasing Funds”)
would subscribe
for,
and Lesaka
would have
the obligation
to issue
and sell
to the
Purchasing Funds,
ZAR
350.0
million of common
stock of Lesaka
if (i) an
event of default
occurred under
Facility G or
Facility H,
(ii) Lesaka SA
failed to pay
all outstanding amounts
in respect of
Facility H on
the maturity date
of such facility,
or (iii) the
market
capitalization of
Lesaka on
the Nasdaq
Capital Market
(based on
the closing
price on
such exchange)
falls and
remained below
the
U.S.
dollar
equivalent
of
ZAR
2.6
billion
on
more
than
one
day.
The
VCP
Agreement
contained
customary
representations
and
warranties from
Lesaka and
VCP and
covenants from
Lesaka and
Lesaka SA.
In connection
with the
VCP Agreement,
Lesaka SA
agreed to pay VCP a commitment fee in an amount equal to ZAR
5.25
million.
On March 16, 2023, VCP,
Lesaka and Lesaka SA, entered into an agreement (the “VCP Amendment Agreement”) to amend the
maturity date under
the agreement with
VCP to December
31, 2025, in
order to align
such date with the
maturity date of
Facility H.
In connection with the VCP Amendment Agreement, Lesaka
SA agreed to pay VCP
an additional commitment fee in an
amount equal
to ZAR
8.9
million, which was calculated as
1
% per annum of the support provided over the period of the extension, as a result of the
amendment to the maturity date.
Additionally,
Lesaka, Lesaka SA and
VCP entered into
a Step-In Rights
Letter on March
22, 2022 with
RMB, which provided
RMB with step
in rights to
perform the obligations
or enforce the
rights of Lesaka
and Lesaka SA
under the VCP
Agreement to the
extent that Lesaka and Lesaka SA failed to do so and did not remedy
such failure within two business days of notice of such failure.
These agreements were all cancelled following the conclusion of
the CTA in February 2025 (refer
to Note 12).
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