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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
☒
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended
March 31, 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, 4
th
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
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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
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 is
a shell
company (as
defined in
Rule 12b-2
of the
Exchange
Act). YES
☐
NO
☒
As of May 5,
2025 (the latest
practicable date),
81,249,400
shares of the registrant’s
common stock, par value
$0.001 per share, net of treasury shares, were outstanding.
1
Form 10-Q
LESAKA TECHNOLOGIES, INC.
Table
of Contents
Page No.
PART
I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2025 and June 30,
2024
2
Unaudited Condensed Consolidated Statements of Operations for the three and nine
months ended March 31, 2025 and 2024
3
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the
three and nine months ended March 31, 2025 and 2024
4
Unaudited Condensed Consolidated Statement of Changes in Equity for the three and
nine months ended March 31, 2025 and 2024
5
Unaudited Condensed Consolidated Statements of Cash Flows for the three and nine
months ended March 31, 2025 and 2024
9
Notes to Unaudited Condensed Consolidated Financial Statements
10
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
53
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
75
Item 4.
Controls and Procedures
76
Part II. OTHER INFORMATION
Item 1A.
Risk Factors
77
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
79
Item 5.
Other Information
79
Item 6.
Exhibits
80
Signatures
82
EXHIBIT 46
EXHIBIT 47
EXHIBIT 48
EXHIBIT 49
EXHIBIT 50
EXHIBIT 51
EXHIBIT 52
EXHIBIT 53
EXHIBIT 54
EXHIBIT 55
EXHIBIT 56
2
Part I. Financial information
Item 1. Financial Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets
March 31,
June 30,
2025
2024
(A)
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
71,008
$
59,065
Restricted cash related to ATM funding
and credit facilities (Note 9)
115
6,853
Accounts receivable, net and other receivables (Note 3)
36,127
36,667
Finance loans receivable, net (Note 3)
61,261
44,058
Inventory (Note 4)
18,838
18,226
Total current assets before settlement assets
187,349
164,869
Settlement assets
25,093
22,827
Total current assets
212,442
187,696
PROPERTY,
PLANT AND EQUIPMENT, net of accumulated depreciation of - March: $
46,056
June:
$
49,762
42,554
31,936
OPERATING LEASE RIGHT-OF-USE (Note 17)
9,447
7,280
EQUITY-ACCOUNTED INVESTMENTS
(Note 6)
199
206
GOODWILL (Note 7)
209,836
138,551
INTANGIBLE ASSETS, NET (Note 7)
142,158
111,353
DEFERRED INCOME TAXES
6,788
3,446
OTHER LONG-TERM ASSETS, including equity securities (Note 6 and 8)
25,774
77,982
TOTAL ASSETS
649,198
558,450
LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities for ATM funding (Note 9)
-
6,737
Short-term credit facilities (Note 9)
23,550
9,351
Accounts payable
15,149
16,674
Other payables (Note 10)
57,649
56,051
Operating lease liability - current (Note 17)
3,814
2,343
Current portion of long-term borrowings (Note 9)
28,088
15,719
Income taxes payable
2,438
654
Total current liabilities before settlement obligations
130,688
107,529
Settlement obligations
24,327
22,358
Total current liabilities
155,015
129,887
DEFERRED INCOME TAXES
37,367
38,128
OPERATING LEASE LIABILITY - LONG TERM (Note 17)
6,133
5,087
LONG-TERM BORROWINGS (Note 9)
166,612
127,467
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 8)
3,093
2,595
TOTAL LIABILITIES
368,220
303,164
REDEEMABLE COMMON STOCK
88,957
79,429
EQUITY
COMMON STOCK (Note 11)
Authorized:
200,000,000
with $
0.001
par value;
Issued and outstanding shares, net of treasury - March:
81,278,900
June:
64,272,243
103
83
PREFERRED STOCK
Authorized shares:
50,000,000
with $
0.001
par value;
Issued and outstanding shares, net of treasury:
March:
-
June:
-
-
-
ADDITIONAL PAID-IN-CAPITAL
424,912
343,639
TREASURY SHARES, AT
COST: March:
29,700,666
June:
25,563,808
(297,476)
(289,733)
ACCUMULATED OTHER
COMPREHENSIVE LOSS (Note 12)
(193,799)
(188,355)
RETAINED EARNINGS
251,489
310,223
TOTAL LESAKA EQUITY
185,229
175,857
NON-CONTROLLING INTEREST
6,792
-
TOTAL EQUITY
192,021
175,857
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY
$
649,198
$
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 Notes to Unaudited Condensed Consolidated Financial Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
3
Three months ended
Nine months ended
March 31,
March 31,
2025
2024
2025
2024
(In thousands, except per share
data)
(In thousands, except per share
data)
REVENUE (Note 16)
$
135,670
$
138,194
$
428,034
$
418,176
EXPENSE
Cost of goods sold, IT processing, servicing and support
91,233
107,854
303,418
329,610
Selling, general and administration
34,217
23,124
97,213
67,146
Depreciation and amortization
8,429
5,791
22,928
17,460
Transaction costs related to Adumo and Recharger acquisitions and
certain compensation costs (Note 2)
1,222
631
3,174
665
OPERATING INCOME
569
794
1,301
3,295
CHANGE IN FAIR VALUE
OF EQUITY SECURITIES (Note 5 and 6)
(20,421)
-
(54,152)
-
LOSS ON DISPOSAL OF EQUITY-ACCOUNTED INVESTMENT
(Note 6)
-
-
161
-
REVERSAL OF ALLOWANCE FOR
DOUBTFUL EMI DEBT
RECEIVABLE
-
-
-
250
INTEREST INCOME
645
628
1,952
1,562
INTEREST EXPENSE
5,777
4,581
16,983
14,312
LOSS BEFORE INCOME TAX (BENEFIT) EXPENSE
(24,984)
(3,159)
(68,043)
(9,205)
INCOME TAX (BENEFIT) EXPENSE (Note 19)
(2,934)
931
(9,268)
1,881
NET LOSS BEFORE EARNINGS (LOSS) FROM EQUITY-
ACCOUNTED INVESTMENTS
(22,050)
(4,090)
(58,775)
(11,086)
EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS
(Note 6)
12
43
89
(1,319)
NET LOSS
(22,038)
(4,047)
(58,686)
(12,405)
LESS NET INCOME ATTRIBUTABLE
TO NON-CONTROLLING
INTEREST
20
-
48
-
NET LOSS ATTRIBUTABLE
TO LESAKA
$
(22,058)
$
(4,047)
$
(58,734)
$
(12,405)
Net loss per share, in United States dollars
(Note 14):
Basic loss attributable to Lesaka shareholders
$
(0.27)
$
(0.06)
$
(0.81)
$
(0.20)
Diluted loss attributable to Lesaka shareholders
$
(0.27)
$
(0.06)
$
(0.81)
$
(0.20)
See Notes to Unaudited Condensed Consolidated Financial Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income
4
Three months ended
Nine months ended
March 31,
March 31,
2025
2024
2025
2024
(In thousands)
(In thousands)
Net loss
$
(22,038)
$
(4,047)
$
(58,686)
$
(12,405)
Other comprehensive income (loss), net of taxes
Movement in foreign currency translation reserve
6,346
(5,718)
(5,860)
(450)
Release of foreign currency translation reserve related to
liquidation of subsidiaries (Note 12)
-
-
6
(952)
Release of foreign currency translation reserve related to
disposal of Finbond equity securities (Note 12)
-
-
-
1,543
Movement in foreign currency translation reserve related
to equity-accounted investments
-
-
-
489
Total other comprehensive
income (loss), net of
taxes
6,346
(5,718)
(5,854)
630
Comprehensive loss
(15,692)
(9,765)
(64,540)
(11,775)
Less comprehensive loss attributable to non-
controlling interest
(196)
-
362
-
Comprehensive loss attributable to Lesaka
$
(15,888)
$
(9,765)
$
(64,178)
$
(11,775)
See Notes to Unaudited Condensed Consolidated Financial Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Changes in Equity
5
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
For the three months ended March 31, 2024 (dollar amounts in thousands)
Balance – January 1, 2024
89,738,784
$
83
(25,295,261)
$
(288,436)
64,443,523
$
339,149
$
319,305
$
(189,378)
$
180,723
$
-
$
180,723
$
79,429
Shares repurchased (Note 13)
(2,511)
(9)
(2,511)
-
(9)
(9)
Restricted stock granted (Note 13)
65,525
65,525
-
-
Exercise of stock options (Note 13)
15,832
-
15,832
48
48
48
Stock-based compensation charge
(Note 13)
-
2,202
2,202
2,202
Reversal of stock-based compensation
charge (Note 13)
(55,539)
(55,539)
(112)
(112)
(112)
Stock-based compensation charge
related to equity-accounted investment
(Note 6)
-
-
-
-
Net loss
-
(4,047)
(4,047)
-
(4,047)
Other comprehensive loss (Note 12)
(5,718)
(5,718)
-
(5,718)
Balance – March 31, 2024
89,764,602
$
83
(25,297,772)
$
(288,445)
64,466,830
$
341,287
$
315,258
$
(195,096)
$
173,087
$
-
$
173,087
$
79,429
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Changes in Equity
6
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
For the nine months ended March 31, 2024 (dollar amounts in
thousands)
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
Shares repurchased (Note 13)
-
(53,486)
(207)
(53,486)
(207)
(207)
Restricted stock granted (Note 13)
934,521
934,521
-
-
Exercise of stock options (Note 13)
23,217
-
23,217
71
71
71
Stock-based compensation charge
(Note 13)
5,782
5,782
5,782
Reversal of stock-based compensation
charge (Note 13)
(77,668)
(77,668)
(129)
(129)
(129)
Stock-based compensation charge
related to equity-accounted investment
(133)
(133)
(133)
Net loss
(12,405)
(12,405)
-
(12,405)
Other comprehensive loss (Note 12)
630
630
-
630
Balance – March 31, 2024
89,764,602
$
83
(25,297,772)
$
(288,445)
64,466,830
$
341,287
$
315,258
$
(195,096)
$
173,087
$
-
$
173,087
$
79,429
See Notes to Unaudited Condensed Consolidated Financial
Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Changes in Equity
7
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
For the three months ended March 31, 2025 (dollar amounts in thousands)
Balance – January 1, 2025
108,456,657
$
101
(28,297,365)
$
(302,319)
80,159,292
$
421,950
$
273,547
$
(199,969)
$
193,310
$
6,727
$
200,037
$
88,957
Shares issued (Note 2 and Note 11)
2,490,000
2
-
-
2,490,000
(2)
-
-
-
Shares repurchased (Note 13)
-
(2,495,662)
(27)
(2,495,662)
(27)
(27)
Gain recognized related to issue of
shares included in treasury shares
(Note 2)
1,092,361
4,870
1,092,361
408
5,278
5,278
-
Restricted stock granted (Note 13)
81,500
81,500
-
-
Exercise of stock options (Note 13)
19,331
-
19,331
59
59
59
Stock-based compensation charge
(Note 13)
-
-
2,531
2,531
2,531
Reversal of stock-based compensation
charge (Note 13)
(67,922)
(67,922)
(34)
(34)
(34)
Net loss
(22,058)
(22,058)
20
(22,038)
Dividends paid to non-controlling
interest
-
(131)
(131)
Other comprehensive loss (Note 12)
6,170
6,170
176
6,346
Balance – March 31, 2025
110,979,566
$
103
(29,700,666)
$
(297,476)
81,278,900
$
424,912
$
251,489
$
(193,799)
$
185,229
$
6,792
$
192,021
$
88,957
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Changes in Equity
8
Lesaka Technologies, Inc. Shareholders
Number of
Shares
Amount
Number of
Treasury
Shares
Treasury
Shares
Number of
shares, net
of treasury
Addition
al Paid-
In
Capital
Retained
Earnings
Accumulated
other
comprehensiv
e loss
Total
Lesaka
Equity
Non-
controllin
g Interest
Total
Redeemda
ble
common
stock
For the nine months ended March 31, 2025 (dollar amounts in
thousands)
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
Shares issued (Note 2 and Note 11)
19,769,803
19
-
-
19,769,803
73,237
73,256
73,256
9,528
Shares repurchased (Note 13)
(5,229,219)
(12,613)
(5,229,219)
(12,613)
(12,613)
Gain recognized related to issue of
shares included in treasury shares
(Note 2)
1,092,361
4,870
1,092,361
408
5,278
5,278
Restricted stock granted
1,445,610
1,445,610
-
-
-
Exercise of stock options (Note 13)
36,345
1
36,345
110
111
111
Stock-based compensation charge
(Note 13)
-
-
7,563
7,563
7,563
Reversal of stock-based compensation
charge (Note 13)
(108,243)
(108,243)
(45)
(45)
(45)
Adumo non-controlling interest
acquired (Note 2)
-
-
7,586
7,586
Net loss
(58,734)
(58,734)
48
(58,686)
Dividends paid to non-controlling
interest
-
-
(432)
(432)
Other comprehensive loss (Note 12)
(5,444)
(5,444)
(410)
(5,854)
Balance – March 31, 2025
110,979,566
$
103
(29,700,666)
$
(297,476)
81,278,900
$
424,912
$
251,489
$
(193,799)
$
185,229
$
6,792
$
192,021
$
88,957
See Notes to Unaudited Condensed Consolidated Financial
Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
9
Three months ended
Nine months ended
March 31,
March 31,
2025
2024
2025
2024
(In thousands)
(In thousands)
Cash flows from operating activities
Net loss
$
(22,038)
$
(4,047)
$
(58,686)
$
(12,405)
Depreciation and amortization
8,429
5,791
22,928
17,460
Movement in allowance for doubtful accounts receivable
1,679
843
5,699
3,532
Fair value adjustment related to financial liabilities
105
(49)
(159)
(919)
Loss on disposal of equity-accounted investments (Note 6)
-
-
161
-
(Earnings) Loss from equity-accounted investments
(12)
(43)
(89)
1,319
Movement in allowance for doubtful loans to equity-accounted investments
-
-
-
(250)
Change in fair value of equity securities (Note 5 and 6)
20,421
-
54,152
-
Profit on disposal of property, plant and equipment
(12)
(89)
(53)
(288)
Movement in interest payable
2,886
1,054
6,443
1,245
Facility fee amortized
83
65
220
381
Stock-based compensation charge (Note 13)
2,497
2,090
7,518
5,653
Dividends received from equity-accounted investments
-
41
65
95
Decrease (Increase) in accounts receivable
10,820
5,687
6,525
(9,815)
Increase in finance loans receivable
(11,819)
(3,720)
(21,734)
(7,097)
Decrease (Increase) in inventory
9,415
5,000
3,966
5,506
(Decrease) Increase in accounts payable and other payables
(9,503)
6,463
(18,545)
20,566
Deferred consideration due to seller of Recharger included in accounts payable
and other payables (Note 2 and Note 10)
1,130
-
1,130
-
Increase in taxes payable
1,012
904
1,624
558
Decrease in deferred taxes
(4,430)
(810)
(13,804)
(2,404)
Net cash provided by (used in) operating activities
10,663
19,180
(2,639)
23,137
Cash flows from investing activities
Capital expenditures
(2,817)
(2,943)
(13,100)
(7,950)
Proceeds from disposal of property, plant and equipment
395
395
1,720
1,115
Acquisition of intangible assets
(1,673)
(54)
(2,274)
(236)
Acquisitions, net of cash acquired
(8,997)
-
(12,954)
-
Proceeds from disposal of equity-accounted investment (Note 6)
-
-
-
3,508
Repayment of loans by equity-accounted investments
-
-
-
250
Net change in settlement assets
3,085
(3,088)
5,389
(14,368)
Net cash used in by investing activities
(10,007)
(5,690)
(21,219)
(17,681)
Cash flows from financing activities
Proceeds from bank overdraft (Note 9)
21,440
24,893
94,188
153,479
Repayment of bank overdraft (Note 9)
(50,458)
(43,380)
(85,998)
(172,221)
Long-term borrowings utilized (Note 9)
175,819
3,398
189,496
14,426
Repayment of long-term borrowings (Note 9)
(134,503)
(7,238)
(148,297)
(13,051)
Acquisition of treasury stock (Note 13)
(27)
(9)
(12,613)
(207)
Proceeds from exercise of stock options
59
48
110
71
Guarantee fee
(539)
-
(970)
-
Dividends paid to non-controlling interest
(131)
-
(432)
-
Net change in settlement obligations
(3,152)
2,469
(5,591)
13,362
Net cash provided by (used in) financing activities
8,508
(19,819)
29,893
(4,141)
Effect of exchange rate changes on cash and cash equivalents
1,222
(1,903)
(830)
(341)
Net increase (decrease) in cash, cash equivalents and restricted cash
10,386
(8,232)
5,205
974
Cash, cash equivalents and restricted cash – beginning of period
60,737
67,838
65,918
58,632
Cash, cash equivalents and restricted cash – end of period (Note 15)
$
71,123
$
59,606
$
71,123
$
59,606
See Notes to Unaudited Condensed Consolidated Financial Statements
10
LESAKA TECHNOLOGIES, INC
Notes to the Unaudited Condensed Consolidated Financial Statements
for the three and nine months ended March 31, 2025 and 2024
(All amounts in tables stated in thousands or thousands of U.S. dollars, unless otherwise stated)
1.
Basis of Presentation and Summary of Significant Accounting
Policies
Unaudited Interim Financial Information
The accompanying
unaudited condensed
consolidated financial
statements include
all majority-owned
subsidiaries over
which
the Company exercises
control and have been
prepared in accordance with
U.S. generally accepted accounting
principles (“GAAP”)
and
the rules
and
regulations
of
the United
States Securities
and
Exchange
Commission
for
Quarterly Reports
on Form
10-Q
and
include all of the information and
disclosures required for interim financial reporting.
The results of operations for the
three and nine
months ended March 31, 2025 and
2024, are not necessarily indicative of
the results for the full year.
The Company believes that the
disclosures are adequate to make the information presented not misleading.
These
unaudited
condensed
consolidated
financial
statements
should
be
read
in
conjunction
with
the
financial
statements,
accounting policies and financial notes thereto included in the
Company’s Annual Report on Form 10-K for the fiscal year ended June
30,
2024.
In
the
opinion
of
management,
the
accompanying
unaudited
condensed
consolidated
financial
statements
reflect
all
adjustments (consisting only of normal recurring adjustments), which are necessary for a fair
representation of financial results for the
interim periods presented.
References to “Lesaka” are references
solely to Lesaka Technologies,
Inc. References to the “Company” refer
to Lesaka and its
consolidated subsidiaries, collectively,
unless the context otherwise requires.
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, but
this has
been extended
to June
30, 2025.
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:
Condensed consolidated balance sheet
June 30, 2024
As previously
reported
Correction
Revised
(in thousands)
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.
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 is 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).
Recent accounting pronouncements not yet adopted
as of March 31, 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.
11
1.
Basis of Presentation and Summary of Significant Accounting
Policies (continued)
Recent accounting pronouncements not yet adopted
as of March 31, 2025 (continued)
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.
2.
Acquisitions
The Company did not make
any acquisition during the nine
months ended March 31, 2024.
The cash paid, net of
cash received
related to the Company’s acquisitions during
the nine months ended March 31, 2025, is summarized in the table below:
Total
Total cash paid
$
24,161
Less: cash acquired
11,207
Total cash paid, net
of cash received
$
12,954
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,
and
at
acquisition,
it
served
approximately
23,000
active
merchants
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;
●
The Adumo ISV
business, known as
GAAP,
has operations in
South Africa, Botswana
and Kenya, and
clients in a further
21
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; 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.
The acquisition
continues the
Company’s
consolidation in
the Southern
African fintech
sector.
At acquisition,
the Company’s
ecosystem served approximately
1.7
million active consumers,
120,200
merchants, and processes over ZAR
270
billion in throughput
(cash,
card
and
VAS)
per
year.
The
acquisition
of
Adumo
enhances
the
Company’s
strength
in
both
the
consumer
and
merchant
markets in which it operates.
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).
12
2.
Acquisitions (continued)
2025
Acquisitions (continued)
October 2024 acquisition of Adumo (continued)
The
closing
of
the
transaction
was
subject
to
customary
closing
conditions,
including
(i)
approval
from
the
competition
authorities of South
Africa and
Namibia; (ii) exchange
control approval from
the financial surveillance
department of the
South African
Reserve
Bank;
(iii)
approval
from
all necessary
regulatory
bodies
and
from
shareholders
to
issue
the
Consideration
Shares
to
the
Sellers; (iv) obtaining
certain third-party
consents; (v) the
Company obtained confirmation
from RMB that
it has sufficient
funds to
settle the
cash portion
of the purchase
consideration; (vi)
approval of
Adumo shareholders
(including preference
shareholders) with
respect to entering into and implementation of the Purchase Agreement, and
all other agreements and transactions contemplated in the
Purchase Agreement;
(vii) obtained
the consent
of Adumo’s
lender regarding
Adumo entering
into and
implementing the
Purchase
Agreement, and
all other
agreements and
transactions contemplated
in the
Purchase Agreement;
(viii) the
release of
certain Seller’s
shares held
as security
by such
bank; (ix)
consent of
the lender
of one
of Adumo’s
shareholders regarding
Adumo entering
into the
transaction;
(x)
the
Company
signing
a
written
addendum
to
the
Policy
Agreement
with
International
Finance
Corporation
that
provides for the inclusion
of the Consideration
Shares attributable to certain
Seller shareholders
in the definition of
“Put Shares” under
the
Policy
Agreement,
and
related
change;
and
(xi)
a
Seller
(or
their
nominee),
which
ultimately
was
Crossfin,
concluding
share
purchase agreements to dispose
of an amount of Consideration
Shares (which ultimately was determined
as
3,587,332
Consideration
Shares).
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 $
1.7
million during the
nine months ended
March 31, 2025,
related
to the acquisition of
Adumo. The Company’s
accruals presented in Note
10 of as March 31,
2025, includes an
accrual of transaction
related
expenditures
of
$
0.4
million
and
the
Company
does
not
expect
to
incur
any
further
significant
transaction
costs over
the
remainder of the 2025 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 requires
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
will be
reported as
part of
the Company’s
Enterprise Division
and demonstrates
positive advancement
of the
Company’s
strategy
in its
Enterprise
Division.
The
Company
expects
the
acquisition
to act
as an
entry
point
for
it into
the
South
African private utilities space while augmenting the Enterprise division’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.
13
2.
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 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
is
contingent
on
Recharger’s
former
chief
executive officer
’s
ongoing service
under the
independent contractor
agreement until
March 3,
2026. If
the future
services are
not
provided, then the second
tranche will not be paid,
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 is also a director of the Seller, and signed
the Recharger
Purchaser Agreement
on behalf
of himself,
Recharger
and
the Seller.
He has
also signed
an independent
contractor
agreement
under which
he is
required
to provide
post-combination
service to
Recharger.
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
U.S. GAAP,
represents compensation for post-combination services.
The post-combination services for
the three and nine
months ended March 31,
2025, of $
1.1
million was calculated as the
sum
of one twelfth of
the future cash payment and
one twelfth of 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 March 31, 2025, divided
by twelve and at
the applicable exchange rate.
The post-combination compensation
charge is included
in the caption transaction
costs related to Adumo
and Recharger acquisitions
and certain compensation costs included on the unaudited condensed
consolidated statement of operations.
Refer to Note 13 for additional information. The liability for the future payments is included in the caption Other payables in the
unaudited condensed consolidated balance sheet as of March 31, 2025, refer to
Note 10.
The Company incurred
transaction-related expenditures of $
0.3
million during the nine
months ended March 31,
2025, related
to the acquisition of Recharger.
The Company does not expect to incur any further significant transaction
costs over the remainder of
the 2025 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 (Pty) Ltd 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 (Pty) Ltd (“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.
14
2.
Acquisitions (continued)
2025
Acquisitions (continued)
The preliminary purchase price allocation of acquisitions during
the nine months ended March 31,
2025, translated at the foreign
exchange rates applicable on the date of acquisition, in provided is the table below:
Acquisitions during fiscal 2025 through March
31, 2025
Adumo
Recharger
Other
Total
Cash and cash equivalents
$
9,227
$
1,720
$
260
$
11,207
Accounts receivable
6,799
17
706
7,522
Inventory
5,122
194
3
5,319
Property, plant and equipment
9,170
39
15
9,224
Operating lease right of use asset
1,025
401
-
1,426
Equity-accounted investment
477
-
-
477
Goodwill
73,173
2,878
539
76,590
Intangible assets
27,187
17,179
69
44,435
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)
(428)
(3,843)
Other payables
(28,044)
(1,439)
(252)
(29,735)
Operating lease liability - current
(1,019)
(185)
-
(1,204)
Income taxes payable
(150)
(4)
(42)
(196)
Deferred income taxes liabilities
(6,670)
(4,638)
(19)
(11,327)
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 allocation of the
purchase price related
to the various
acquisitions is preliminary
and
not yet finalized.
The preliminary allocation of the purchase price is based upon preliminary
estimates which used information that was available
to
management
at
the
time
the
unaudited
condensed
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 and, for Adumo, the valuation of the
non-controlling interest.
15
2.
Acquisitions (continued)
2025 Acquisitions (continued)
Intangible assets acquired
No
intangible assets were identified related
to the acquisition
of IVAS Nam. Summarized below is the fair value
of the intangible
assets acquired 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 nine months ended March 31, 2025:
Adumo – technology assets
$
13,997
3
-
7
Adumo – customer relationships
9,567
5
-
10
Adumo – brands
3,623
10
-
15
Recharger – technology assets
1,074
4
Recharger – customer relationships
16,105
5
Genisus Risk – technology assets
68
0.1
On acquisition of
these businesses, the
Company recognized an
aggregate deferred
tax liability of approximately
$
12.0
million
related to the acquisition of intangible assets during the nine months
ended March 31, 2025.
Transaction costs and certain compensation
costs
The table below
presents transaction costs
incurred related to
the acquisition of
Adumo and Recharger,
as well as
certain post-
combination compensation costs expensed during the three and
nine months ended March 31, 2025 and 2024:
Three months ended
March 31,
Nine months ended March
31,
2025
2024
2025
2024
Adumo transaction costs
$
-
$
631
$
1,702
$
665
Recharger transaction costs
(1)
92
-
342
-
Recharger post-combination services expensed
1,130
-
1,130
-
Total
$
1,222
$
631
$
3,174
$
665
(1) Recharger
transactions costs
for the
six months
ended March
31, 2025,
of $
0.25
million have
been allocated
from Selling,
general
and
administration
to Transaction
costs related
to
Adumo
and
Recharger
and
certain
compensation
costs in
the
unaudited
condensed consolidated statement operations for the nine months ended March 31,
2025.
16
2.
Acquisitions
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
$
0.2
million
and
$
0.1
million,
respectively,
for
the
nine
months
ended
March 31, 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 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:
Three months ended
March 31,
Nine months ended
March 31,
2025
2024
2025
2024
Revenue
$
137,713
$
153,890
$
449,891
$
466,873
Net loss
$
(21,810)
$
(3,292)
$
(56,292)
$
(23,846)
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 $
32.2
million and net income
attributable to the Company, including intangible assets amortization related to assets
acquired, net of deferred taxes, of
$
0.68
million.
17
3.
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 March 31, 2025, and June 30, 2024, are presented in the
table below:
March 31,
June 30,
2025
2024
Accounts receivable, trade, net
$
18,037
$
13,262
Accounts receivable, trade, gross
19,881
14,503
Less: Allowance for doubtful accounts receivable, end of period
1,844
1,241
Beginning of period
1,241
509
Reversed to statement of operations
(85)
(511)
Charged to statement of operations
1,444
1,305
Utilized
(732)
(67)
Foreign currency adjustment
(24)
5
Current portion of amount outstanding related to sale of interest in Carbon,
net of
allowance: March 2025: $
750
; June 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
18,090
23,405
Total accounts receivable,
net and other receivables
$
36,127
$
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 an
amount due
related to
the sale
of the
loan in Carbon Tech
Limited (“Carbon”), 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. 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 March 31, 2025, and June
30, 2024, respectively was $
0
(zero).
Other receivables include prepayments, deposits, income taxes receivable and
other receivables.
18
3.
Accounts receivable, net and other receivables and
finance loans receivable, net (continued)
Finance loans receivable, net
The Company’s finance
loans receivable, net, as of March 31, 2025, and June 30, 2024, is presented in the table below:
March 31,
June 30,
2025
2024
Microlending finance loans receivable, net
$
41,188
$
28,184
Microlending finance loans receivable, gross
44,050
30,131
Less: Allowance for doubtful finance loans receivable, end of period
2,862
1,947
Beginning of period
1,947
1,432
Reversed to statement of operations
(160)
(210)
Charged to statement of operations
2,772
2,454
Utilized
(1,663)
(1,795)
Foreign currency adjustment
(34)
66
Merchant finance loans receivable, net
20,073
15,874
Merchant finance loans receivable, gross
23,731
18,571
Less: Allowance for doubtful finance loans receivable, end of period
3,658
2,697
Beginning of period
2,697
2,150
Reversed to statement of operations
(22)
(359)
Charged to statement of operations
1,750
2,479
Utilized
(725)
(1,672)
Foreign currency adjustment
(42)
99
Total finance
loans receivable, net
$
61,261
$
44,058
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 $
19.2
million as
of March
31, 2025
have been
pledged
as
security for the Company’s
revolving credit facility (refer to Note 9).
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 5 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, 2024 and March 31, 2025,
was
6.50
%. The performing component (that
is, outstanding loan payments not
in arrears) of the book exceeds more than
98
%, of the outstanding lending book as of each of June 30, 2024 and March 31, 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 5 related to the Company risk management
process related to these receivables.
19
3.
Accounts receivable, net and other receivables and
finance loans receivable, net (continued)
Finance loans receivable, net (continued)
Allowance for credit losses (continued)
Merchant finance loans receivable (continued)
The Company 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 each of June 30, 2024 and March 31, 2025, was approximately
1.18
%. 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
88
%,
11
%
and
1
%, respectively, of the outstanding lending book as of June 30, 2024.
The performing component, under-performing component
and
non-performing
component
of the
book represents
approximately
88
%,
11
% and
1
%,
respectively,
of
the outstanding
lending
book as of March 31, 2025.
4.
Inventory
The Company’s inventory
comprised the following categories as of March 31, 2025, and June 30, 2024:
March 31,
June 30,
2025
2024
Raw materials
$
2,772
$
2,791
Work-in-progress
455
71
Finished goods
15,611
15,364
$
18,838
$
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 nine months ended March
31, 2025.
5.
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
safe
assets,
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.
20
5.
Fair value of financial instruments (continued)
Risk management (continued)
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
remained
unchanged
for
the
majority
of
calendar 2024 however the South African Reserve Bank announced a 25-basis point reduction in the South African repurchase rate in
each of
September 2024,
November
2024,
and
January 2025,
with further
reductions
expected thereafter.
Therefore,
ignoring the
impact of
changes to
the margin
on its
borrowings (refer
to Note
9) 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
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.
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.
21
5.
Fair value of financial instruments (continued)
Financial instruments (continued)
The following
section describes
the valuation
methodologies the
Company uses
to measure
its significant
financial assets
and
liabilities at fair value.
In general, and where applicable, the Company uses quoted prices in
active markets for identical assets or liabilities
to determine
fair value.
This pricing
methodology would
apply to
Level 1
investments. If quoted
prices in
active markets
for identical
assets or
liabilities are
not available
to determine
fair value,
then the
Company uses
quoted
prices for
similar assets
and
liabilities or
inputs
other
than
the
quoted
prices
that
are
observable
either
directly
or
indirectly. These
investments
would
be included
in
Level
2
investments. In
circumstances
in
which
inputs
are
generally
unobservable,
values
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. Investments
valued using
such techniques are included in Level 3 investments.
Asset measured at fair value using significant observable inputs – investment in MobiKwik
The Company’s
owns
6,215,620
equity shares of
One MobiKwik Systems Limited
(“MobiKwik”). 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 has
used MobiKwik’s
closing price reported
on the NSE
on the last
trading day related
to last day
of the Company’s
reporting period to
determine the fair
value of the equity securities
owned by the Company.
The Company has determined
a fair value per MobiKwik
share of $
3.56
(INR
304.05
per share on the last trading
day of the quarter at the
USD: INR exchange rates applicable as of March
31, 2025). Refer to Note
6 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 March 31,
2025 and June 30, 2024,
respectively,
and valued Cell C at $
0.0
(zero) and $
0.0
(zero) as of
March 31,
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
20
% and a
minority discount
of
24
%. The Company
utilized the latest
business plan provided
by Cell C
management for the period ending December 31,
2027, for the March 31, 2025,
and June 30, 2024, valuations. 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 March 31, 2025
and June 30, 2024:
Weighted Average
Cost of Capital ("WACC"):
Between
21
% and
26
% over the period of the forecast
Long term growth rate:
4.5
% (
4.5
% as of June 30, 2024)
Marketability discount:
20
% (
20
% as of June 30, 2024)
Minority discount:
24
% (
24
% as of June 30, 2024)
Net adjusted external debt - March 31, 2025:
(1)
ZAR
7.8
billion ($
0.4
billion), no lease liabilities included
Net adjusted external debt - June 30, 2024:
(2)
ZAR
7.9
billion ($
0.4
billion), no lease liabilities included
(1) translated from ZAR to U.S. dollars at exchange rates applicable as of
March 31, 2025.
(2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30,
2024.
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
respectively
used
in
the
Cell
C
valuation
on
March
31,
2025,
all
amounts
translated at exchange rates applicable as of March 31, 2025:
Sensitivity for fair value of Cell C investment
1.0% increase
1.0% decrease
WACC
rate
$
-
$
863
EBITDA margin
$
1,570
$
-
The aggregate fair
value of the MobiKwik
and Cell C’s
shares as of
March 31, 2025,
represented
3.4
% 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,
and with respect to Cell C specifically,
particularly given that Cell C remains in a turnaround process.
22
5.
Fair value of financial instruments
The following table presents
the Company’s
assets measured at fair value
on a recurring basis as
of March 31, 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
$
-
$
-
$
-
$
-
Investment in MobiKwik
22,113
-
-
22,113
Related to insurance
business:
Cash, cash equivalents and
restricted cash (included
in other long-term assets)
137
-
-
137
Fixed maturity
investments (included in
cash and cash equivalents)
4,424
-
-
4,424
Total assets at fair value
$
26,674
$
-
$
-
$
26,674
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
There have been
no
transfers in or out of Level 3 during the nine months ended March 31, 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 nine months ended March 31, 2025 and 2024.
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 nine months ended March 31, 2025:
Carrying value
Assets
Balance as of June 30, 2024
$
-
Foreign currency adjustment
(1)
-
Balance as of March 31, 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.
23
5.
Fair value of financial instruments
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 nine months ended March 31, 2024:
Carrying value
Assets
Balance as of June 30, 2023
$
-
Foreign currency adjustment
(1)
-
Balance as of March 31, 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.
Assets 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
6
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.
6.
Equity-accounted investments and other long-term assets
Refer to Note 9 to the Company’s audited consolidated
financial statements included in its Annual Report on Form 10-K for the
year ended June 30, 2024, for additional information regarding its equity-accounted
investments and other long-term assets.
Equity-accounted investments
The
Company’s
ownership
percentage
in its
equity-accounted
investments
as of
March 31,
2025,
and
June 30,
2024, was
as
follows:
March 31,
June 30,
2025
2024
Sandulela Technology
(Pty) Ltd ("Sandulela")
49.0
%
49.0
%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)
50.0
%
50.0
%
Sale and impairment of Finbond shares during
the nine months ended March 31, 2024
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 was subject to certain conditions, including regulatory and shareholder approvals, which were
finalized in
December 2023.
The cash
proceeds received
of ZAR
64.2
million ($
3.5
million) were
used to
repay capitalized
interest
under the Company’s borrowing
facilities.
As noted
above, the
Company
entered into
an agreement
to exit
its position
in Finbond
and
the Company
considered this
an
impairment indicator. The
Company is required to include any foreign currency translation reserve
and other equity account amounts
in its impairment assessment if it considers exiting an equity method investment. 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.
24
6.
Equity-accounted investments and other long-term assets (continued)
Equity-accounted investments (continued)
Sale and impairment of Finbond shares during
the nine months ended March 31, 2024 (continued)
The
Company
sold
7,379,656
shares
in
Finbond
for
cash
during
the
nine
months
ended
March
31,
2024,
respectively.
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 following table
presents the calculation of the disposal
of Finbond shares during the nine months ended March 31, 2024:
2024
Loss on disposal of Finbond shares:
Consideration received in cash
$
3,508
Less: carrying value of Finbond shares sold
(2,112)
Less: release of foreign currency translation reserve from
accumulated other comprehensive loss
(1,543)
Add: release of stock-based compensation charge related
to
equity-accounted investment
147
Loss on sale of Finbond shares
$
-
Carbon
In September
2022, the
Company,
through its
wholly-owned subsidiary,
Net1 Applied
Technologies
Netherlands B.V.
(“Net1
BV”),
entered
into
a binding
term
sheet
with the
Etobicoke
Limited
(“Etobicoke”)
to sell
its entire
interest, or
25
%,
in Carbon
to
Etobicoke for
$
0.5
million and
a loan
due from
Carbon, with
a face
value of
$
3.0
million, to
Etobicoke for
$
0.75
million. Both
the
equity interest
and the loan
had a carrying
value of $
0
(zero) at June
30, 2022.
The parties agreed
that Etobicoke pledge
the Carbon
shares purchased as
security for the
amounts outstanding under
the binding term
sheet. 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 March 31, 2025 (refer to Note 3)).
Summarized below is the
movement in equity-accounted investments and
loans provided to equity-accounted
investments during
the nine months ended March 31, 2025:
Total
(1)
Investment in equity
Balance as of June 30, 2024
$
206
Comprehensive income:
89
Other comprehensive income
-
Equity accounted (loss) earnings
89
Share of net (loss) earnings
89
Impairment
-
Dividends received
(65)
Equity-accounted investment acquired in business combination (Note
2)
477
Disposal of equity accounted investment (Note 2)
(507)
Foreign currency adjustment
(2)
(1)
Balance as of March 31, 2025
$
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.
25
6.
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 March
31, 2025, and June 30, 2024:
March 31,
June 30,
2025
2024
Total equity investments
$
22,113
$
76,297
Investment in
5
% of Cell C (June 30, 2024:
5
%) at fair value (Note 5)
-
-
Investment in
8
% of MobiKwik (June 30, 2024:
10
%)
(1)
22,113
76,297
Investment in
87.5
% of CPS (June 30, 2024:
87.5
%) at fair value
(1)(2)
-
-
Policy holder assets under investment contracts (Note 8)
137
216
Reinsurance assets under insurance contracts (Note 8)
1,750
1,469
Other long-term assets
1,774
-
Total other long-term
assets
$
25,774
$
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.
(2) On October 16, 2020,
the High Court of
South Africa, Gauteng Division, Pretoria
ordered that CPS be
placed into liquidation.
Refer to Note 5 for additional information regarding
the determination of the fair value of Company’s
investment in MobiKwik
as of March 31, 2025. The Company used this valuation as the basis for its adjustment to decrease the carrying value of its
investment
in MobiKwik by $
54.2
million from $
76.3
million as of June 30, 2024, to
$
22.1
million as of March 31, 2025.
The change in the fair
value of MobiKwik for the three and nine months ended March 31, 2025, of $
20.4
million and $
54.2
million, respectively, is included
in the
caption “Change
in fair
value of
equity securities”
in the
consolidated statement
of operations
for the
three and
nine months
ended March 31, 2025.
Summarized below
are the components
of the Company’s
equity securities without
readily determinable
fair value and
held to
maturity investments as of March 31, 2025:
Cost basis
Unrealized
holding
Unrealized
holding
Carrying
gains
losses
value
Equity securities:
Investment in CPS
$
-
$
-
$
-
$
-
Held to maturity:
Investment in Cedar Cellular notes (Note 3)
-
-
-
-
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
Unrealized
holding
Carrying
gains
losses
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
26
7.
Goodwill and intangible assets, net
Goodwill
Summarized below is the movement in the carrying value of goodwill
for the nine months ended March 31, 2025:
Gross value
Accumulated
impairment
Carrying
value
Balance as of June 30, 2024
$
157,899
$
(19,348)
$
138,551
Acquisitions (Note 2)
(1)
76,590
-
76,590
Foreign currency adjustment
(2)
(5,430)
125
(5,305)
Balance as of March 31, 2025
$
229,059
$
(19,223)
$
209,836
(1) – 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.
(2) – The foreign currency adjustment represents the effects of the fluctuations
of the South African rand against the U.S. dollar
on the carrying value.
Goodwill associated with
the acquisitions
represents the excess
of cost over
the fair value
of acquired net assets.
Goodwill arising
from
these
acquisitions
is not
deductible
for
tax
purposes.
See
Note
2
for
the
allocation
of
the
purchase
price
to
the fair
value
of
acquired net assets.
Goodwill has been allocated to the Company’s
reportable segments as follows:
Merchant
Consumer
Enterprise
Carrying
value
Balance as of June 30, 2024
$
123,396
$
-
$
15,155
$
138,551
Acquisitions (Note 2)
64,795
8,703
3,092
76,590
Foreign currency adjustment
(1)
(4,513)
(481)
(311)
(5,305)
Balance as of March 31, 2025
$
183,678
$
8,222
$
17,936
$
209,836
(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.
Intangible assets, net
Carrying value and amortization of intangible assets
Summarized below is
the carrying value
and accumulated amortization
of intangible assets as
of March 31,
2025, and June
30,
2024:
As of March 31, 2025
As of June 30, 2024
Gross
carrying
value
Accumulated
amortization
Net
carrying
value
Gross
carrying
value
Accumulated
amortization
Net
carrying
value
Finite-lived intangible assets:
Customer relationships
(1)
$
51,221
$
(16,445)
$
34,776
$
25,880
$
(14,030)
$
11,850
Software, integrated
platform and unpatented
technology
(1)
130,581
(35,449)
95,132
115,213
(25,763)
89,450
FTS patent
2,088
(2,088)
-
2,107
(2,107)
-
Brands and trademarks
(1)
17,641
(5,391)
12,250
14,353
(4,300)
10,053
Total finite-lived
intangible
assets
$
201,531
$
(59,373)
$
142,158
$
157,553
$
(46,200)
$
111,353
(1) March
31, 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.
27
7.
Goodwill and intangible assets, net (continued)
Intangible assets, net (continued)
Aggregate amortization
expense on the finite-lived
intangible assets for the
three months ended March
31, 2025 and 2024,
was
$
5.1
million and $
3.6
million, respectively.
Aggregate amortization
expense on the
finite-lived intangible assets
for the nine
months
ended March 31, 2025 and 2024, was $
13.9
million and $
10.8
million, respectively. Future estimated annual amortization expense for
the next five
fiscal years and
thereafter,
assuming exchange
rates that prevailed
on March
31, 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 2025 (excluding nine months ended March 31, 2025)
$
5,721
Fiscal 2026
22,916
Fiscal 2027
22,679
Fiscal 2028
22,254
Fiscal 2029
21,690
Thereafter
46,898
Total future
estimated annual amortization expense
$
142,158
8.
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
nine
months ended March 31, 2025:
Reinsurance
Assets
(1)
Insurance
contracts
(2)
Balance as of June 30, 2024
$
1,469
$
(2,241)
Increase in policy holder benefits under insurance contracts
526
(7,480)
Claims and decrease in policyholders’ benefits under insurance
contracts
(227)
6,970
Foreign currency adjustment
(3)
(18)
29
Balance as of March 31, 2025
$
1,750
$
(2,722)
(1) Included in other long-term assets (refer to Note 6);
(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 various 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 estimate
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
nine months
ended March 31, 2025:
Assets
(1)
Investment
contracts
(2)
Balance as of June 30, 2024
$
216
$
(216)
Increase in policy holder benefits under investment contracts
11
(11)
Claims and decrease in policyholders’ benefits under investment contracts
(89)
89
Foreign currency adjustment
(3)
(1)
1
Balance as of March 31, 2025
$
137
$
(137)
(1) Included in other long-term assets (refer to Note 6);
(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.
28
9.
Borrowings
Refer to
Note 12
to the
Company’s
audited consolidated
financial statements
included in
its Annual
Report on
Form 10-K
for
the year ended June 30, 2024, for additional information regarding
its 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
negotiate changes to the existing
borrowing agreements once there
is greater clarity on the implementation of ZARONIA.
South Africa
The amounts below have been translated at exchange rates applicable as of
the dates specified.
On February 27, 2025, the Company,
Lesaka SA and a number of
other subsidiaries of Lesaka SA entered into
a Common Terms
Agreement (the
“CTA”)
with 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”), a South
African corporate and
investment bank, and
Bowwood and Main
No 408 (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,
and certain other parties.
Lesaka SA has obtained
three
loan facilities from
the Lenders, a
term loan of
up to ZAR
2.2
billion ($
117.5
million) (“Facility
A”), an amortizing loan of up to ZAR
1.0
billion ($
54.5
million) (“Facility B”) and a senior revolving credit facility of up to ZAR
2.2
billion ($
117.5
million) (“Senior
RCF”), and
a general
banking facility
from RMB of
up to ZAR
700.9
million ($
38.2
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 CTA contains
customary covenants which includes 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
investment 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 to the Lenders on February 27, 2025.
The JIBAR, an average of
3 month negotiable certificates of deposit
(“NCD”) rates, on March 31, 2025,
was
7.56
%. The prime
rate, the benchmark rate at which private sector banks lend to the public in South Africa,
on March 31, 2025, was
11.00
%.
Facilities obtained in February 2025
Long-term borrowings – Senior Facility A Agreement
Concurrent
with the
execution
of the
CTA,
Lesaka SA,
the Lenders
and
RMB (as
facility
agent)
entered
into a
Senior Term
Facility
A
Agreement
(“Facility
A
Agreement”)
and
a
Senior
RCF
Agreement
(“RCF
Agreement”).
Pursuant
to
the
Facility
A
Agreement, 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.
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.
Amount utilized under the RCF
Agreement are required to
be repaid
in full on February 28, 2029.
29
9.
Borrowings (borrowings)
South Africa (continued)
Facilities obtained in February 2025 (continued)
Long-term borrowings – Senior Facility A Agreement
(continued)
Interest on Facility A and utilization under the RCF Agreement is payable quarterly in arrears at end of
March, June, September
and December,
with the first interest
payment due on
June 30, 2025.
Interest on Facility
A is based on
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.
Long-term borrowings – Senior Facility B Agreement
Concurrent
with the
execution
of the
CTA,
Lesaka SA,
the Lenders
and
RMB (as
facility
agent)
entered
into a
Senior Term
Facility B Agreement (“Facility B Agreement”). Pursuant
to the Facility B Agreement, 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
B
is
required
to
be
repaid
in
four
annual
installments,
as
follows:
(i) ZAR
150
million
($
8.2
million)
on
February
28, 2026; (ii) ZAR
200
million ($
10.9
million) on February 28, 2027; (iii) ZAR
300
million ($
16.3
million) on February 28, 2028; and
(iv) R
350
million ($
19.1
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.
Interest
on
Facility
B is
payable
quarterly
in
arrears
at
end
of
March,
June,
September
and
December,
with
the
first
interest
payment due on
June 30, 2025.
Interest on Facility
B is based
on JIBAR in
effect 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.
Short-term facility - General Banking Facility
Concurrent
with the
execution of
the CTA,
Lesaka SA
and RMB
entered
into a
General Banking
Facility Agreement
(“GBF
Agreement”)
which replaced
it existing
general banking
facility maturing
on February
28, 2025.
Pursuant to
the GBF
Agreement,
Lesaka SA
and
certain
of its
subsidiaries
may
borrow
up to
an aggregate
of ZAR
700.9
million
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
March 31,
2025, the
Company had
utilized ZAR
432.2
million ($
23.6
million) of this facility.
The GBF is 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 ($
5.5
million), which indirect,
short-term direct and
contingent facilities, including
bank guarantee, forward exchange
contract,
credit card and settlement facilities. As of March 31, 2025, the aggregate amount of the Company’s
short-term South African indirect
credit facility with
RMB was ZAR
100.7
million ($
5.5
million). As of March
31, 2025, the Company
had utilized ZAR
33.1
million
($
1.8
million) of
its other
facilities to
enable the
bank to
issue guarantees,
letters of
credit and
forward exchange
contracts (refer
to
Note 20).
Wesbank Facilities
The
Company,
through
certain
of
its
South
African
subsidiaries,
has
an
asset-backed
facility
of
ZAR
227.0
million
($
10.9
million)] (of which ZAR
139.3
million ($
7.6
million) has been utilized).
CCC Revolving Credit Facility, comprising
long-term borrowings
As of March 31, 2025,
the amount of the CCC Revolving
Credit Facility was ZAR
300.0
million (of which ZAR
299.9
million
has been utilized).
The CCC
Revolving Credit Facility
was scheduled to
be repaid in
full on
November 2024, but
this has
been extended
to June 30,
2025. The Company
is currently renegotiating
terms with RMB.
The CCC Revolving
Credit Facility has
been presented
in current portion
of long-term borrowings
in the unaudited
condensed consolidated
balance sheet as
of March 31,
2025. Interest
on
the Revolving Credit Facility is payable on the last business day of each calendar month and is based on the South African
prime rate
in effect from time to time plus a margin of
0.95
% per annum.
30
9.
Borrowings (borrowings)
South Africa (continued)
Nedbank facility, comprising short-term facilities
As of March
31, 2025, the
aggregate amount of
the Company’s
short-term South African
credit facility
with Nedbank Limited
was ZAR
156.6
million ($
8.5
million). The credit facility represents indirect and derivative facilities
of up to ZAR
156.6
million ($
8.5
million), which include guarantees, letters of credit and forward exchange
contracts.
As of March 31,
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 20).
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.
RMB Facilities, as amended, comprising a short-term facility (Facility E) and long-term
borrowings
Long-term borrowings - Facility G and Facility H – all
repaid and cancelled
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 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
%.
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 20).
Short-term facility - Facility E – cancelled in November 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.
The
interest rate on this facility was equal to the prime rate.
RMB Bridge Facilities, comprising a short-term facility obtained
in October 2024 and amended in December 2024
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
2); (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
11); (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 2,
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 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.
31
9.
Borrowings (borrowings)
South Africa (continued)
Connect Facilities, comprising long-term borrowings and a short-term facility
The
Connect
Facilities
included
(i)
an
overdraft
facility
(general
banking
facility)
of
ZAR
170.0
million
($
9.2
million);
(ii)
Facility A of ZAR
700.0
million ($
37.9
million); (iii) Facility B
of ZAR
550.0
million ($
29.8
million) (both were fully utilized).
These
facilities were repaid in full on February 28, 2025,
utilizing funding obtained under the CTA
and the agreements cancelled. 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.
Movement in short-term credit facilities
Summarized below
are the
Company’s
short-term facilities
as of
March 31,
2025, and
the movement
in the
Company’s
short-
term facilities from as of June 30, 2024 to as of March 31, 2025:
RMB
RMB
Nedbank
RMB
RMB
RMB
GBF
Other
Facilities
Connect
Bridge
Facility E
Total
Short-term facilities available as of
March 31, 2025
$
38,195
$
5,487
$
8,531
$
-
$
-
$
-
$
52,213
Overdraft
38,195
-
-
-
-
-
38,195
Indirect and derivative facilities
-
5,487
8,531
-
-
-
14,018
Movement in utilized overdraft
facilities:
Restricted as to use for ATM
funding only
-
-
-
-
-
6,737
6,737
No restrictions as to use
-
-
-
9,351
-
-
9,351
Balance as of June 30, 2024
-
-
-
9,351
-
6,737
16,088
Utilized
23,489
-
-
5,655
41,150
23,894
94,188
Repaid
-
-
-
(14,627)
(39,205)
(31,028)
(84,860)
Foreign currency
adjustment
(1)
61
-
-
(379)
(1,945)
397
(1,866)
Balance as of March 31, 2025
23,550
-
-
-
-
-
23,550
No restrictions as to use
$
23,550
$
-
$
-
$
-
$
-
$
-
$
23,550
Interest rate as of March 31, 2025
(%)
(2)
10.50
N/A
N/A
N/A
-
N/A
Movement in utilized indirect and
derivative facilities:
Balance as of June 30, 2024
$
-
$
1,821
$
116
$
-
$
-
$
-
$
1,937
Foreign currency adjustment
(1)
-
(17)
(1)
-
-
-
(18)
Balance as of March 31, 2025
$
-
$
1,804
$
115
$
-
$
-
$
-
$
1,919
(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
%.
Interest expense incurred under
the Company’s South African short-term borrowings
and included in
the caption interest
expense
on the condensed consolidated statement of operations during the three months ended March 31,
2025 and 2024, was $
1.8
million and
$
0.6
million, respectively.
Interest expense
incurred under
the Company’s
South African
long-term borrowings
and included
in the
caption interest
expense on
the condensed
consolidated statement
of operations
during the
nine months
ended March
31, 2025
and
2024, was $
3.6
million and $
1.3
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 unaudited
condensed consolidated statements of cash flows for the nine months ended
March 31, 2025.
32
9.
Borrowings (continued)
Movement in long-term borrowings
Summarized below is
the movement in
the Company’s
long-term borrowing from
as of as of
June 30, 2024
to as of March
31,
2025:
Facilities
Lesaka A
Lesaka B
Connect
Asset
backed
CCC
(6)
Lesaka
G & H
Connect
A&B
Total
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
2,619
5,091
11,022
-
189,496
Facilities repaid
-
-
(3,299)
(554)
(60,245)
(65,910)
(130,008)
Non-refundable fees paid
970
-
-
-
-
-
970
Non-refundable fees
amortized
39
-
-
21
116
32
208
Capitalized interest
-
-
-
-
5,033
-
5,033
Capitalized interest repaid
-
-
-
-
(11,077)
-
(11,077)
Foreign currency
adjustment
(1)
(1,393)
382
(106)
(54)
(1,000)
(937)
(3,108)
Closing balance as of
March 31, 2025
116,268
54,494
7,593
16,345
-
-
194,700
Included in current
-
8,174
3,569
16,345
-
-
28,088
Included in long-term
116,268
46,320
4,024
-
-
-
166,612
Unamortized fees
(1,206)
-
-
-
-
-
(1,206)
Due within 2 years
-
10,899
2,665
-
-
-
13,564
Due within 3 years
-
16,348
1,047
-
-
-
17,395
Due within 4 years
117,474
19,073
301
-
-
-
136,848
Due within 5 years
$
-
$
-
$
11
$
-
$
-
$
-
$
11
Interest rates as of March 31,
2025 (%):
10.81
10.71
11.75
11.95
-
-
Base rate (%)
7.56
7.56
11.00
11.00
-
-
Margin (%)
3.25
3.15
0.75
0.95
-
-
Footnote number
(2)
(3)
(4)
(5)
(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.
(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.
Interest expense incurred under the Company’s South African long-term borrowings and included in the
caption interest expense
on the condensed consolidated statement of operations during the three months ended March 31,
2025 and 2024, was $
4.4
million and
$
4.0
million, respectively. Prepaid facility fees amortized
included in interest expense during the three months ended March 31, 2025
and 2024, respectively,
were $
0.1
million and $
0.1
million, respectively.
Interest expense incurred
under the Company’s
K2020 and
CCC facilities
relates to
borrowings utilized
to fund
a portion of
the Company’s
merchant finance
loans receivable
and this
interest
expense
of $
0.4
million
and $
0.4
million,
respectively,
is included
in the
caption
cost of
goods
sold, IT
processing,
servicing
and
support on the condensed consolidated statement of operations for the
three months ended March 31, 2025 and 2024.
33
9.
Borrowings (continued)
Movement in long-term borrowings (continued)
Interest expense incurred under the Company’s South African long-term borrowings and included in the
caption interest expense
on the
condensed consolidated
statement of
operations during
the nine
months ended
March 31,
2025 and
2024, was
$
12.9
million
and $
12.1
million, respectively.
Prepaid facility fees amortized
included in interest expense during
the nine months ended March
31,
2025 and 2024,
respectively,
were $
0.2
million and $
0.3
million, respectively.
Interest expense incurred
under the Company’s
CCC
facilities relates to borrowings utilized to fund a portion of
the Company’s merchant finance loans receivable and this interest expense
of $
1.2
million and $
1.1
million, respectively,
is included
in the caption
cost of goods
sold, IT processing,
servicing and support
on
the condensed consolidated statement of operations for the nine months
ended March 31, 2025 and 2024.
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 unaudited
condensed consolidated statements of cash flows for the nine months ended March
31, 2025.
10.
Other payables
Summarized below is the breakdown of other payables as of March
31, 2025, and June 30, 2024:
March 31,
June 30,
2025
2024
Vendor
wallet balances
$
15,897
$
14,635
Accruals
11,139
7,173
Provisions
6,572
7,442
Clearing accounts
6,347
17,124
Income received in advance
3,468
1
Value
-added tax payable
3,394
1,191
Deferred consideration due to seller of Recharger
(Note 2)
1,127
-
Interest payable (Note 9)
1,679
151
Payroll-related payables
1,604
922
Participating merchants' settlement obligation
2
1
Other
6,420
7,411
$
57,649
$
56,051
Income received in
advance and
interest payable as
of June
30, 2024, were
previously included in
Other and
have been reclassified
to separate captions to conform with presentation as of March 31, 2025.
Other includes deferred income, client deposits and other payables.
11.
Capital structure
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 will be 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
tranche, to
the Connect sellers
in April 2025,
and this had
no impact on
the number of
shares, net of
treasury, presented in the unaudited
condensed
consolidated statement of changes
in equity during the nine months ended March 31, 2025 because the
3,185,079
shares are included
in the number of shares, net of treasury,
as of June 30, 2024, and March 31, 2025.
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 unaudited condensed
consolidated statement of
changes in equity
for the three and
nine months ended
March 31, 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 unaudited condensed consolidated statement of changes
in equity for
the three and nine months ended March 31, 2025, respectively.
34
11.
Capital structure (continued)
Redeemable common stock issued pursuant to transaction with the IFC Investors
Put Option
Refer to
Note 14
to the
Company’s
audited consolidated
financial statements
included in
its Annual
Report on
Form 10-K
for
the year ended
June 30, 2024, for
additional information regarding
its redeemable common
stock issued pursuant to
transaction with
the IFC Investors.
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. 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 accounted
for these
1,989,162
shares as redeemable
common stock as
a result of
the put option.
The Company believes
that the put
option has
no value and, accordingly,
has not recognized the put option in its consolidated financial statements.
Impact of non-vested equity shares on number of shares,
net of treasury
The following table presents a
reconciliation between the number of
shares, net of treasury, presented in the
unaudited condensed
consolidated statement of changes in equity during the nine months
ended March 31, 2025 and 2024, respectively,
and the number of
shares, net of treasury,
excluding non-vested equity shares that have not vested as of March 31, 2025 and 2024,
respectively:
March 31,
March 31,
2025
2024
Number of shares, net of treasury:
Statement of changes in equity
81,278,900
64,466,830
Less: Non-vested equity shares that have not vested as of end of period
2,816,172
3,131,469
Number of shares, net of treasury,
excluding non-vested equity shares that have not
vested
78,462,728
61,335,361
12.
Accumulated other comprehensive loss
The table
below presents
the change
in accumulated
other comprehensive
loss per
component
during the
three months
ended
March 31, 2025:
Three months ended
March 31, 2025
Accumulated
foreign
currency
translation
reserve
Total
Balance as of January 1, 2025
$
(199,969)
$
(199,969)
Movement in foreign currency translation reserve
6,170
6,170
Balance as of March 31, 2025
$
(193,799)
$
(193,799)
The table
below presents
the change
in accumulated
other comprehensive
loss per
component during
the three
months ended
March 31, 2024:
Three months ended
March 31, 2024
Accumulated
foreign
currency
translation
reserve
Total
Balance as of January 1, 2024
$
(189,378)
$
(189,378)
Movement in foreign currency translation reserve
(5,718)
(5,718)
Balance as of March 31, 2024
$
(195,096)
$
(195,096)
35
12.
Accumulated other comprehensive loss (continued)
The
table below
presents
the change
in
accumulated
other comprehensive
loss per
component
during
the
nine
months
ended
March 31, 2025:
Nine months ended
March 31, 2025
Accumulated
foreign
currency
translation
reserve
Total
Balance as of July 1, 2024
$
(188,355)
$
(188,355)
Release of foreign currency translation reserve related to liquidation
of subsidiaries
6
6
Movement in foreign currency translation reserve
(5,450)
(5,450)
Balance as of March 31, 2025
$
(193,799)
$
(193,799)
The table
below
presents the
change
in accumulated
other comprehensive
loss per
component
during
the
nine
months ended
March 31, 2024:
a
Nine months ended
March 31, 2024
Accumulated
foreign
currency
translation
reserve
Total
Balance as of July 1, 2023
$
(195,726)
$
(195,726)
Release of foreign currency translation reserve related to disposal of Finbond
equity securities
1,543
1,543
Movement in foreign currency translation reserve related to equity
-accounted investment
489
489
Movement in foreign currency translation reserve related to liquidation
of subsidiaries
(952)
(952)
Movement in foreign currency translation reserve
(450)
(450)
Balance as of March 31, 2024
$
(195,096)
$
(195,096)
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.
There were
no
reclassifications from accumulated other comprehensive loss to net loss during the
three months ended March 31,
2025 and 2024. During the
nine months ended March
31, 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 nine months ended March
31, 2024, the Company
reclassified losses of $
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
6).
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.
36
13.
Stock-based compensation
The Company’s
Amended and Restated
2022 Stock
Incentive Plan (“20
22 Plan”)
and the vesting
terms of certain
stock-based
awards granted are described in Note 17 to the Company’s audited consolidated financial statements included in its Annual Report on
Form 10-K for the year ended June 30, 2024.
Stock option and restricted stock activity
Options
The following table summarizes stock option activity for the nine months
ended March 31, 2025 and 2024:
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 - 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
(36,345)
3.02
-
70
-
Forfeited
(13,333)
11.23
-
-
8.83
Outstanding - March 31, 2025
5,868,570
8.71
3.79
886
1.20
Outstanding - June 30, 2023
673,274
4.37
5.14
239
1.67
Granted – December 2023
500,000
3.50
5.17
880
1.76
Exercised
(23,217)
1.20
-
14
-
Forfeited
(195,739)
3.93
-
-
1.39
Outstanding - March 31, 2024
954,318
4.03
5.24
45
1.78
The Company awarded
400,000
stock options to an executive officer during the three months ended
March 31, 2025 with strike
prices ranging from $
8
to $
14
, and an aggregate of
1,000,000
stock options during the nine months ended March 31, 2025 with strike
prices ranging
from $
6
to $
14
. These
stock options,
together with
the
600,000
that were
awarded
in December
2024, 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 Company awarded
500,000
stock options to Ali Mazanderani, the
Company’s
Executive Chairman,
during the
nine months
ended March
31, 2024.
These options
vested in
December 2024,
but may
only be sold during a
period commencing from January
31, 2028 to January 31, 2029.
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.
During the three and nine
months ended March 31,
2025, the Company received $
0.06
million and $
0.1
million from the exercise
of
19,331
and
36,345
stock options,
respectively.
During the
three and
nine months
ended March
31, 2024,
the Company
received
$
0.05
million and $
0.07
million from the exercise of
15,832
and
23,217
stock options, respectively. Employees forfeited an aggregate
of
13,333
stock options
during each
of the
three and
nine months
ended March
31, 2025.
Employees and
a non-employee
director
forfeited an aggregate of
8,893
and
195,739
stock options during the three and nine months ended March 31, 2024.
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 following table.
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.
37
13.
Stock-based compensation (continued)
Stock option and restricted stock activity (continued)
Options (continued)
The table below presents the range
of assumptions used to value stock options
granted during the nine months
ended March 31,
2025 and 2024:
Nine months ended
March 31,
2025
2024
Expected volatility
43
%
56
%
Expected dividends
0
%
0
%
Expected life (in years)
2
5
Risk-free rate
4.3
%
2.1
%
The following table presents stock options vested and expected to vest as of
March 31, 2025:
Number of
shares
Weighted
average
exercise
price
($)
Weighted
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
($’000)
Vested
and expecting to vest - March 31, 2025
5,868,570
8.71
3.79
886
These options have an exercise price range of $
3.01
to $
14.00
.
The following table presents stock options that are exercisable as of March
31, 2025:
Number of
shares
Weighted
average
exercise
price
($)
Weighted
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
($’000)
Exercisable - March 31, 2025
387,901
4.58
4.91
285
During the
three months
ended March
31, 2025
and 2024,
respectively,
26,982
and
28,569
stock options
became exercisable.
During the
nine months
ended March
31, 2025
and 2024,
respectively,
26,982
and
116,063
stock options
became exercisable.
The
Company issues new shares to satisfy stock option exercises.
38
13.
Stock-based compensation (continued)
Stock option and restricted stock activity (continued)
Restricted stock
The following table summarizes restricted stock activity for the nine
months ended March 31, 2025 and 2024:
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
1,396,110
5,204
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
Total vested
(556,641)
2,865
Vested
– July 2024
(78,801)
394
Vested
– November 2024
(213,687)
1,134
Vested
– November 2024, with performance conditions
(103,638)
524
Vested
– December 2024
(77,306)
417
Vested
– February 2025
(13,922)
68
Vested
– March 2025
(69,287)
328
Forfeitures
(108,243)
537
Non-vested – March 31, 2025
2,816,172
10,955
Non-vested – June 30, 2023
2,614,419
11,869
Total Granted
934,521
3,622
Granted – October 2023
333,080
1,456
Granted – October 2023, with performance awards
310,916
955
Granted – October 2023
225,000
983
Granted – January 2024
56,330
197
Granted – February 2024
9,195
31
Total vested
(339,803)
1,274
Vested
– July 2023
(78,800)
302
Vested
– November 2023
(109,833)
429
Vested
– December 2023
(67,073)
234
Vested
– February 2023
(14,811)
53
Vested
– March 2023
(69,286)
256
Forfeitures
(77,668)
278
Non-vested – March 31, 2024
3,131,469
13,434
Grants
In
August
2024,
October
2024
and
January
2025,
respectively,
the
Company
granted
32,800
,
100,000
and
65,000
shares
of
restricted stock to
employees which have
time -based vesting
conditions and which
are subject
to the
employees continued employment
with the Company through the applicable vesting dates.
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
%.
39
13.
Stock-based compensation (continued)
Stock option and restricted stock activity (continued)
Restricted stock (continued)
Grants (continued)
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.
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.
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 and
February 2024,
the Company awarded
56,330
and
9,195
, respectively, shares of restricted
stock with time-based vesting conditions to employees.
In October 2023, the Company
awarded
310,916
shares of restricted stock to three
of its executive officers
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
10
% appreciation
in the
Company’s
stock price
off a
base price
of $
4.00
over the
measurement
period commencing on September 30, 2023 through November 17, 2026, and (2) the recipient is employed by the Company on a full-
time basis when the condition in (1) is met. 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, 2023, was $
3.90
.
The appreciation levels (times and price) and vesting percentages as of each
period ended are as follows:
●
Prior to the first anniversary of the grant date:
0
%;
●
Fiscal
2025,
the
Company’s
30-day
volume
weighted-average
stock
price
(“VWAP”)
before
November
17,
2024
is
approximately
1.10
times higher (i.e. $
4.40
or higher) than $
4.00
:
33
%;
●
Fiscal 2026, the Company’s
VWAP before
November 17, 2025 is
1.21
times higher (i.e. $
4.84
or higher) than $
4.00
:
67
%;
●
Fiscal 2027, the Company’s
VWAP before
November 1, 2026 is
1.33
times higher (i.e. $
5.32
) than $
4.00
:
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
48.3
% for
the closing
price (of
$
4.37
), 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.
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 three and nine months ended March 31, 2025, the Company recorded a stock-based compensation charge of $
0.1
million and $
0.3
million,
respectively,
and
included
the issuance
of
16,500
and
49,500
shares of
common stock
in its
issued
and
outstanding
share
count.
Vesting
In July 2024,
78,801
shares of restricted
stock granted to Mr. Meyer, our former
Group CEO, vested. In
November 2024,
103,638
shares of restricted
stock with
performance conditions (share
price targets) vested
following the
achievement of the
agreed performance
condition. In November,
December 2024, February 2025 and March
2025, an aggregate of
374,202
shares of restricted stock granted
to employees vested. Certain employees elected
for
137,809
shares to be withheld to
satisfy the withholding tax liability on
the vesting
of their shares. These
137,809
shares have been included in the Company’s
treasury shares.
In July 2023,
78,800
shares of restricted stock
granted to Mr.
Meyer vested. In November,
December 2023, February
2024 and
March 2024,
an aggregate
of
261,003
shares of
restricted stock
granted to
employees vested.
Certain employees
elected for
53,486
shares to be withheld to satisfy
the withholding tax liability on the vesting
of their shares. These
53,486
shares have been included in
the Company’s treasury shares.
40
13.
Stock-based compensation (continued)
Stock option and restricted stock activity (continued)
Restricted stock (continued)
Forfeitures
During
the
three
and
nine
months
ended
March
31,
2025,
respectively,
employees
forfeited
67,922
and
108,243
shares
of
restricted stock following their
termination of employment with
the Company or the
failure to achieved agreed
performance conditions
(
29,121
shares were forfeited
following the failure
to achieved agreed
share performance targets).
During the three
and nine months
ended March 31,
2024, respectively,
employees forfeited
55,539
and
77,668
shares of restricted
stock following their
termination of
employment with the Company.
Stock-based compensation charge and unrecognized compensation
cost
The Company recorded a
stock-based compensation charge, net,
excluding charges related to
the post-combination compensation
charges discussed in Note 2, during the
three months ended March 31, 2025 and 2024, of $
2.5
million and $
2.1
million, respectively,
which comprised:
Total
charge
Allocated to cost
of goods sold, IT
processing,
servicing and
support
Allocated to
selling, general
and
administration
Three months ended March 31, 2025
Stock-based compensation charge
$
2,531
$
-
$
2,531
Reversal of stock compensation charge related to stock
options and restricted stock forfeited
(34)
-
(34)
Total - three months
ended March 31, 2025
$
2,497
$
-
$
2,497
Three months ended March 31, 2024
Stock-based compensation charge
$
2,202
$
-
$
2,202
Reversal of stock compensation charge related to stock
options and restricted stock forfeited
(112)
-
(112)
Total - three months
ended March 31, 2024
$
2,090
$
-
$
2,090
The Company recorded a
stock-based compensation charge, net,
excluding charges related to
the post-combination compensation
charges discussed
in Note 2,
during the nine
months ended March
31, 2025 and
2024, of $
7.5
million and $
5.7
million respectively,
which comprised:
a
Total
charge
Allocated to cost
of goods sold, IT
processing,
servicing and
support
Allocated to
selling, general
and
administration
Nine months ended March 31, 2025
Stock-based compensation charge
$
7,563
$
-
$
7,563
Reversal of stock compensation charge related to stock
options and restricted stock forfeited
(45)
-
(45)
Total - nine months
ended March 31, 2025
$
7,518
$
-
$
7,518
Nine months ended March 31, 2024
Stock-based compensation charge
$
5,782
$
-
$
5,782
Reversal of stock compensation charge related to stock
options and restricted stock forfeited
(129)
-
(129)
Total - nine months
ended March 31, 2024
$
5,653
$
-
$
5,653
41
13.
Stock-based compensation (continued)
The stock-based compensation charges
have been allocated to selling,
general and administration based
on the allocation of the
cash compensation paid to
the relevant employees. Stock-based compensation
charge of $
1.0
million related to the post-combination
compensation charges discussed
in Note 2 are included
in the caption transaction
costs related to Adumo
and Recharger acquisitions
and
certain
compensation
costs
included
on
the
unaudited
condensed
consolidated
statement
of
operations
for
the
three
and
nine
months ended March 31,
2025. These stock-based charges are
classified as cash settled
awards and are
in in other
payables as of March
31, 2025, refer to Note 10.
As of March 31, 2025,
the total unrecognized compensation
cost related to stock options
was $
3.1
million, which the Company
expects to
recognize over
one and half years
. As
of March
31, 2025,
the total
unrecognized compensation
cost related
to restricted
stock awards was $
5.8
million, which the Company expects to recognize over
two years
.
During the three months ended March 31, 2025 and 2024, the Company recorded a deferred tax benefit of $
0.3
million and $
0.2
million,
respectively,
related
to the
stock-based
compensation
charge
recognized
related to
employees
of Lesaka.
During
the
nine
months ended March 31, 2025 and
2024, the Company recorded a deferred
tax benefit of $
0.8
million and $
0.5
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.
14.
(Loss) Earnings per share
The Company
has issued redeemable
common stock
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 three
and nine months ended March 31, 2025
and 2024. Accordingly,
the
two-class
method
presented
below
does
not
include
the
impact
of
any
redemption.
The Company’s
redeemable
common
stock
is
described in Note 14 to the Company’s
audited consolidated financial statements included in its Annual Report on Form 10-K
for the
year ended June 30, 2024.
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 three
and nine
months ended
March 31,
2025 and
2024, 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
has 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 Company
has excluded
employee stock
options to
purchase
198,203
and
34,798
shares of common
stock from the calculation
of diluted loss per
share during the
three months ended March
31,
2025 and 2024 because the effect would be antidilutive. The Company has excluded employee stock options to purchase
206,068
and
42,770
shares of common stock from the calculation of diluted loss
per share during the nine months ended March 31, 2025 and
2024,
because the effect would be antidilutive.
The
calculation
of diluted
(loss) earnings
per
share
includes the
dilutive
effect
of
a portion
of the
restricted
stock granted
to
employees
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.
42
14.
(Loss) Earnings per share (continued)
The vesting conditions for all awards made are discussed in Note 17 to the Company’s audited consolidated financial statements
included in its Annual Report on Form 10-K for the year ended June
30, 2024.
The
following
table
presents
net
loss
attributable
to
Lesaka
and
the
share
data
used
in
the
basic
and
diluted
loss
per
share
computations using the two-class method:
Three months ended
Nine months ended
March 31,
March 31,
2025
2024
2025
2024
(in thousands except
(in thousands except
percent and
percent and
per share data)
per share data)
Numerator:
Net loss attributable to Lesaka
$
(22,058)
$
(4,047)
$
(58,734)
$
(12,405)
Undistributed loss
(22,058)
(4,047)
(58,734)
(12,405)
Percent allocated to common shareholders
(Calculation 1)
96%
96%
96%
95%
Numerator for loss per share: basic and diluted
$
(21,262)
$
(3,868)
$
(56,616)
$
(11,816)
Denominator
Denominator for basic (loss) earnings per share:
weighted-average common shares outstanding
78,347
60,990
69,724
60,134
Effect of dilutive securities:
Denominator for diluted (loss) earnings
per share: adjusted weighted average
common shares outstanding and assuming
conversion
78,347
60,990
69,724
60,134
Loss per share:
Basic
$
(0.27)
$
(0.06)
$
(0.81)
$
(0.20)
Diluted
$
(0.27)
$
(0.06)
$
(0.81)
$
(0.20)
(Calculation 1)
Basic weighted-average common shares
outstanding (A)
78,347
60,990
69,724
60,134
Basic weighted-average common shares
outstanding and unvested restricted shares
expected to vest (B)
81,282
63,805
72,333
63,134
Percent allocated to common shareholders
(A) / (B)
96%
96%
96%
95%
Options to
purchase
5,143,500
shares of
the Company’s
common stock
at prices
ranging from
$
6.00
to $
14.00
per share
were
outstanding during the
three and
nine months ended
March 31,
2025, but were
not included in
the computation of
diluted (loss)
earnings
per share because the
options’ exercise price was
greater than the average
market price of the Company’s
common stock. Options to
purchase
742,543
shares of the Company’s
common stock at prices
ranging from $
3.50
to $
11.23
per share were outstanding
during
the three and nine months ended March 31, 2024, respectively, but were not included in the computation of diluted (loss) earnings per
share because
the options’
exercise price
was greater
than the
average market
price of
the Company’s
common stock.
The options,
which expire at various dates through February 3, 2032, were still outstanding
as of March 31, 2025.
15.
Supplemental cash flow information
The following table presents supplemental cash flow disclosures for the three and nine months ended March 31, 2025 and 2024:
Three months ended
Nine months ended
March 31,
March 31,
2025
2024
2025
2024
Cash received from interest
$
641
$
624
$
1,938
$
1,551
Cash paid for interest
$
2,809
$
3,464
$
10,322
$
12,697
Cash paid for income taxes
$
505
$
88
$
3,713
$
3,498
43
15.
Supplemental cash flow information (continued)
Disaggregation of cash, cash equivalents and restricted
cash
Cash, cash equivalents and restricted
cash included on the Company’s unaudited condensed consolidated statement of
cash flows
includes restricted cash
related to cash
withdrawn from the
Company’s
debt facilities to
fund ATMs.
This cash may
only be used
to
fund ATMs
and is
considered restricted
as to
use and
therefore is
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
9 for
additional
information regarding the
Company’s facilities. The following
table presents the
disaggregation of cash,
cash equivalents and
restricted
cash as of March 31, 2025 and 2024, and June 30, 2024:
March 31,
2025
March 31,
2024
June 30, 2024
Cash and cash equivalents
$
71,008
$
55,223
$
59,065
Restricted cash
115
4,383
6,853
Cash, cash equivalents and restricted cash
$
71,123
$
59,606
$
65,918
Leases
The following table presents supplemental
cash flow disclosure related to leases
for the three and nine months
ended March 31,
2025 and 2024:
Three months ended
Nine months ended
March 31,
March 31,
2025
2024
2025
2024
Cash paid for amounts included in the measurement of
lease liabilities
Operating cash flows from operating leases
$
1,256
$
853
$
3,472
$
2,225
Right-of-use assets obtained in exchange for lease
obligations
Operating leases
$
2,411
$
718
$
3,629
$
2,601
16.
Revenue recognition
Disaggregation of revenue
The
following
table
presents
the
Company’s
revenue
disaggregated
by
major
revenue
streams,
including
a
reconciliation
to
reportable segments for the three months ended March 31, 2025:
Merchant
Consumer
Enterprise
Total
Processing fees
$
34,431
$
7,583
$
6,581
$
48,595
South Africa
32,673
7,583
6,581
46,837
Rest of Africa
1,758
-
-
1,758
Technology
products
5,863
29
971
6,863
South Africa
5,790
29
971
6,790
Rest of Africa
73
-
-
73
Prepaid airtime sold
59,352
26
1,556
60,934
South Africa
52,682
26
1,556
54,264
Rest of Africa
6,670
-
-
6,670
Lending revenue
-
8,143
-
8,143
Interest from customers
1,793
504
-
2,297
Insurance revenue
-
5,170
-
5,170
Account holder fees
-
1,791
-
1,791
Other
998
850
29
1,877
South Africa
944
850
29
1,823
Rest of Africa
54
-
-
54
Total revenue, derived
from the following geographic
locations
102,437
24,096
9,137
135,670
South Africa
93,882
24,096
9,137
127,115
Rest of Africa
$
8,555
$
-
$
-
$
8,555
44
16.
Revenue recognition (continued)
Disaggregation of revenue (continued)
The
following
table
presents
the
Company’s
revenue
disaggregated
by
major
revenue
streams,
including
a
reconciliation
to
reportable segments for the three months ended March 31, 2024:
Merchant
Consumer
Enterprise
Total
Processing fees
$
21,944
$
6,353
$
6,738
$
35,035
South Africa
20,417
6,353
6,738
33,508
Rest of Africa
1,527
-
-
1,527
Technology
products
562
8
1,233
1,803
South Africa
518
8
1,233
1,759
Rest of Africa
44
-
-
44
Prepaid airtime sold
86,184
83
1,401
87,668
South Africa
81,083
83
1,401
82,567
Rest of Africa
5,101
-
-
5,101
Lending revenue
-
6,229
-
6,229
Interest from customers
1,553
-
-
1,553
Insurance revenue
-
3,178
-
3,178
Account holder fees
-
1,560
-
1,560
Other
604
493
71
1,168
South Africa
551
493
71
1,115
Rest of Africa
53
-
-
53
Total revenue, derived
from the following geographic
locations
110,847
17,904
9,443
138,194
South Africa
104,122
17,904
9,443
131,469
Rest of Africa
$
6,725
$
-
$
-
$
6,725
The
following
table
presents
the
Company’s
revenue
disaggregated
by
major
revenue
streams,
including
a
reconciliation
to
reportable segments for the nine months ended March 31, 2025:
Merchant
Consumer
Enterprise
Total
Processing fees
$
97,433
$
22,975
$
18,918
$
139,326
South Africa
92,010
22,975
18,918
133,903
Rest of Africa
5,423
-
-
5,423
Technology
products
15,829
96
3,449
19,374
South Africa
15,619
96
3,449
19,164
Rest of Africa
210
-
-
210
Prepaid airtime sold
211,158
66
4,794
216,018
South Africa
191,829
66
4,794
196,689
Rest of Africa
19,329
-
-
19,329
Lending revenue
-
22,475
-
22,475
Interest from customers
5,079
624
-
5,703
Insurance revenue
-
14,378
-
14,378
Account holder fees
-
5,255
-
5,255
Other
3,197
2,228
80
5,505
South Africa
3,029
2,228
80
5,337
Rest of Africa
168
-
-
168
Total revenue, derived
from the following geographic
locations
332,696
68,097
27,241
428,034
South Africa
307,566
68,097
27,241
402,904
Rest of Africa
$
25,130
$
-
$
-
$
25,130
45
16.
Revenue recognition (continued)
Disaggregation of revenue (continued)
The
following
table
presents
the
Company’s
revenue
disaggregated
by
major
revenue
streams,
including
a
reconciliation
to
reportable segments for the nine months ended March 31, 2024:
Merchant
Consumer
Enterprise
Total
Processing fees
$
67,254
$
18,261
$
19,992
$
105,507
South Africa
62,911
18,261
19,992
101,164
Rest of Africa
4,343
-
-
4,343
Technology
products
1,630
39
5,405
7,074
South Africa
1,496
39
5,405
6,940
Rest of Africa
134
-
-
134
Prepaid airtime sold
263,040
176
3,817
267,033
South Africa
248,183
176
3,817
252,176
Rest of Africa
14,857
-
-
14,857
Lending revenue
-
17,188
-
17,188
Interest from customers
4,526
-
-
4,526
Insurance revenue
-
8,686
-
8,686
Account holder fees
-
4,430
-
4,430
Other
2,028
1,411
293
3,732
South Africa
1,876
1,411
293
3,580
Rest of Africa
152
-
-
152
Total revenue, derived
from the following geographic
locations
338,478
50,191
29,507
418,176
South Africa
318,992
50,191
29,507
398,690
Rest of Africa
$
19,486
$
-
$
-
$
19,486
17.
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 and
branch locations through
which the
Company operates
its consumer
business in
South Africa.
The Company’s
operating leases
have remaining
lease terms
of between
one
and
five years
. The Company also operates parts
of its consumer business from
locations which it leases for a period
of less than
one year
. The Company’s
operating lease expense
during the three
months ended March
31, 2025 and
2024 was $
1.3
million and $
0.9
million, respectively.
The Company’s operating
lease expense during the nine
months ended March 31, 2025 and 2024
was $
3.5
million and $
2.2
million, respectively.
The
Company
has
also
entered
into
short-term
leasing
arrangements,
primarily
for
the
lease
of
branch
locations
and
other
locations,
to operate its consumer
business in South Africa.
The Company’s
short-term lease expense during
the three months ended
March 31, 2025 and 2024, was $
1.1
million and $
0.9
million, respectively. The Company’s
short-term lease expense during the nine
months ended March 31, 2025 and 2024, was $
3.4
million and $
2.8
million, respectively.
The following table presents supplemental balance
sheet disclosure related to the
Company’s right-of-use assets and its operating
lease liabilities as of March 31, 2025 and June 30, 2024:
March 31,
June 30,
2025
2024
Right of use assets obtained in exchange for lease obligations:
Weighted average
remaining lease term (years)
2.8
3.1
Weighted average
discount rate (percent)
9.6
10.5
46
17.
Leases (continued)
The maturities of the Company’s
operating lease liabilities as of March 31, 2025, are presented below:
Maturities of operating lease liabilities
Year
ended June 30,
2025 (excluding nine months to March 31, 2025)
$
1,578
2026
4,259
2027
2,841
2028
1,881
2029
742
Thereafter
256
Total undiscounted
operating lease liabilities
11,557
Less imputed interest
1,610
Total operating lease liabilities,
included in
9,947
Operating lease liability - current
3,814
Operating lease liability - long-term
$
6,133
18.
Operating segments
Operating segments
The Company discloses segment information as reflected in the management
information systems reports that its chief operating
decision maker 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 re
cast of previously reported information
The Company’s chief operating decision maker 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
chief
operating
decision
maker has
decided
to analyze
the Company’s
operating
performance primarily
based on
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.
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 alternative digital
payments (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.
47
18.
Operating segments (continued)
Reallocation of certain activities among operating segments (continued)
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
all 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 reconciliation of the reportable segment’s revenue to revenue from external customers for the three months ended March 31,
2025 and 2024, is as follows:
Revenue
Reportable
Segment
Inter-
segment
From
external
customers
Merchant
$
103,001
$
564
$
102,437
Consumer
24,096
-
24,096
Enterprise
9,444
307
9,137
Total for the three
months ended March 31, 2025
$
136,541
$
871
$
135,670
Merchant
$
111,801
$
954
$
110,847
Consumer
17,904
-
17,904
Enterprise
11,322
1,879
9,443
Total for the three
months ended March 31, 2024
$
141,027
2,833
138,194
The reconciliation of the reportable segment’s revenue to revenue from external customers for the nine months ended March 31,
2025 and 2024, is as follows:
Revenue
Reportable
Segment
Inter-
segment
From
external
customers
Merchant
$
334,442
$
1,746
$
332,696
Consumer
68,097
-
68,097
Enterprise
30,259
3,018
27,241
Total for the nine
months ended March 31, 2025
$
432,798
$
4,764
$
428,034
Merchant
$
341,044
$
2,566
$
338,478
Consumer
50,191
-
50,191
Enterprise
32,710
3,203
29,507
Total for the nine
months ended March 31, 2024
$
423,945
$
5,769
$
418,176
48
18.
Operating segments (continued)
The
Company
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”), the Company’s reportable segments’
measure of profit or
loss. The Company is
working on obtaining a
separate lending facility to
fund a portion of
its Consumer lending
during the twelve months ended June
30, 2025. The Company has included an
intercompany interest expense in its Consumer Segment
Adjusted EBITDA for the
three and nine months
ended March 31, 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 FV 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.
The reconciliation of the reportable segments’ measure of profit or loss to loss before income taxes for the three and
nine months
ended March 31, 2025 and 2024, is as follows:
Three months ended
Nine months ended
March 31,
March 31,
2025
2024
2025
2024
Reportable segments' measure of profit or loss
$
14,569
$
11,902
$
41,511
$
32,710
Operating loss: Group costs
(1,772)
(2,199)
(7,541)
(6,032)
Once-off costs
(2,306)
(907)
(4,599)
(169)
Interest adjustment
890
-
2,478
-
Unrealized Gain (Loss) FV for currency adjustments
114
(121)
(102)
(101)
Stock-based compensation charge adjustments
(2,497)
(2,090)
(7,518)
(5,653)
Depreciation and amortization
(8,429)
(5,791)
(22,928)
(17,460)
Loss on disposal of equity-accounted investments
-
-
(161)
-
Change in fair value of equity securities
(20,421)
-
(54,152)
-
Reversal of allowance of EMI doubtful debt
-
-
-
250
Interest income
645
628
1,952
1,562
Interest expense
(5,777)
(4,581)
(16,983)
(14,312)
Loss before income tax expense
$
(24,984)
$
(3,159)
$
(68,043)
$
(9,205)
49
18.
Operating segments (continued)
Operating segments (continued)
The following
tables summarize
supplemental
segment information
for the
three and
nine months
ended March
31, 2025
and
2024:
Three months ended
Nine months ended
March 31,
March 31,
2025
2024
2025
2024
Revenues
Merchant
$
103,001
$
111,801
$
334,442
$
341,044
Consumer
24,096
17,904
68,097
50,191
Enterprise
9,444
11,322
30,259
32,710
Total reportable segment
revenue
136,541
141,027
432,798
423,945
Segment Adjusted EBITDA
Merchant
(1)(2)
8,103
7,420
25,976
21,827
Consumer
(1)(2)
6,333
3,757
15,071
8,452
Enterprise
(2)
133
725
464
2,431
Total Segment Adjusted
EBITDA
14,569
11,902
41,511
32,710
Depreciation and amortization
Merchant
3,111
1,957
8,365
5,861
Consumer
255
179
692
527
Enterprise
89
93
283
308
Subtotal: Operating segments
3,455
2,229
9,340
6,696
Group costs
4,974
3,562
13,588
10,764
Total
8,429
5,791
22,928
17,460
Expenditures for long-lived assets
Merchant
2,686
2,802
12,355
7,538
Consumer
120
146
688
312
Enterprise
11
(5)
57
100
Subtotal: Operating segments
2,817
2,943
13,100
7,950
Group costs
-
-
-
-
Total
$
2,817
$
2,943
$
13,100
$
7,950
(1) Segment Adjusted EBITDA for the three months ended
March 31, 2025, includes retrenchment and reorganization
costs for
Merchant
of
$
0.7
million
(ZAR
12.9
million)
and
Enterprise
of
$
0.3
million
(ZAR
5.4
million).
Segment
Adjusted
EBITDA
for
Consumer includes retrenchment costs of $
0.01
million (ZAR
0.1
million) for the three months ended March 31, 2024.
(2) Segment Adjusted
EBITDA for the nine
months ended March
31, 2025, includes retrenchment
and reorganization costs
for
Merchant of $
0.7
million (ZAR
12.9
million), Consumer of $
0.1
million (ZAR
1.5
million) and Enterprise
of $
0.3
million (ZAR
5.6
million).
Segment
Adjusted
EBITDA for
Merchant
includes
retrenchment
costs of
$
0.2
million
(ZAR
4.7
million)
and
Consumer
includes retrenchment costs of $
0.2
million (ZAR
2.9
million) for the nine months ended March 31, 2024.
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.
50
19.
Income tax
Income tax in interim periods
For the purposes of interim
financial reporting, the Company
determines the appropriate income
tax provision by first
applying
the effective
tax rate
expected to
be applicable
for the
full fiscal
year to
ordinary income.
This amount
is then
adjusted for
the tax
effect
of
significant
unusual
items,
for
instance,
changes
in
tax
law,
valuation
allowances
and
non-deductible
transaction-related
expenses that
are reported
separately,
and have an
impact on the
tax charge.
The cumulative effect
of any change
in the enacted
tax
rate, if and when applicable, on the opening balance of deferred tax assets
and liabilities is also included in the tax charge as a discrete
event in the interim period in which the enactment date occurs.
For the three and
nine months ended March 31,
2025, the Company’s effective tax rate was
impacted by the tax expense
recorded
by the Company’s
profitable South African operations, non-deductible
expenses (including transaction-related expenditures)
,
the on-
going losses
incurred by
certain of
the Company’s
South African
businesses, a
valuation allowance
created related
to the fair
value
adjustment to MobiKwik,
and the associated valuation
allowances created related
to the deferred tax
assets recognized regarding net
operating losses incurred by these entities.
For the three and
nine months ended March 31,
2024, the Company’s effective tax rate was
impacted by the tax expense
recorded
by
the
Company’s
profitable
South
African
operations,
non-deductible
expenses,
the
on-going
losses
incurred
by
certain
of
the
Company’s
South African
businesses and
the associated
valuation
allowances created
related to
the deferred
tax assets
recognized
regarding net operating losses incurred by these entities.
Uncertain tax positions
As of
three months
ended March
31, 2025
and June
30, 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 March
31, 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.
20.
Commitments and contingencies
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.
RMB has
issued
guarantees
to
these
third
parties
amounting
to
ZAR
33.1
million
($
1.8
million,
translated
at
exchange
rates
applicable
as of
March 31,
2025) thereby
utilizing part
of the
Company’s
short-term
facilities. The
Company
pays commission
of
between
3.42
% per annum to
3.44
% per annum of the face
value of these guarantees and does
not recover any of the commission
from
third parties.
Nedbank has
issued guarantees
to these
third parties
amounting to
ZAR
2.1
million ($
0.1
million, translated
at exchange
rates
applicable
as of
March 31,
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.
The Company
has not
recognized any
obligation related
to these
guarantees in
its consolidated
balance sheet
as of
March 31,
2025. The maximum
potential amount that
the Company could
pay under these
guarantees is ZAR
35.2
million ($
1.9
million, translated
at exchange rates applicable as
of March 31, 2025). As
discussed in Note 9, the
Company has ceded and
pledged certain bank accounts
to
Nedbank
as security
for
the guarantees
issued
by them
with
an
aggregate
value
of ZAR
2.1
million
($
0.1
million,
translated
at
exchange rates applicable as
of March 31, 2025). The guarantees
have reduced the amount available
under its indirect and derivative
facilities in the Company’s short-term
credit facilities described in Note 9.
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.
51
21.
Subsequent events
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
is
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 shareholder
s
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.
52
21.
Subsequent events (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 are
expected to be measured at their
grant date fair value using
a Black
Scholes valuation
model.
A B
unit represent
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 years
service
with
the
Company,
with
criterion
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 has
not calculated
the grant date fair value of these awards as of the date of filing this Quarterly Report on Form
10-Q on May 7, 2025.
53
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year
ended June 30, 2024,
and the unaudited condensed consolidated financial statements and
the accompanying notes included in this Form 10-Q.
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.
Forward-looking statements
Some of the statements in this Form 10-Q constitute forward-looking
statements. These statements relate to future events or our
future financial performance
and involve known
and unknown
risks, uncertainties and
other factors that
may cause
our or our
industry’s
actual results,
levels of
activity,
performance
or achievements
to be
materially
different
from
any future
results, levels
of
activity,
performance or achievements expressed,
implied or inferred by these
forward-looking statements. Such factors
include, among other
things, those
listed under Item
1A.—“Risk Factors” in
our Annual
Report on Form
10-K for
the year ended
June 30, 2024.
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.
Although we believe
that the expectations
reflected in the
forward-looking statements are
reasonable, we do
not know whether
we can
achieve positive
future results,
levels of
activity,
performance, or
goals. Actual
events or
results may
differ
materially.
We
undertake no obligation to update any of the forward-looking statements after the date of this Form 10-Q to conform those statements
to reflect the occurrence of unanticipated events, except as required by applicable
law.
You
should read this Form 10-Q and the documents that we reference herein and the documents we have filed as exhibits hereto
and thereto
and which we
have filed with
the United States
Securities and
Exchange Commission
(“SEC”) completely
and with
the
understanding that our
actual future results,
levels of activity,
performance and achievements
may be materially
different from
what
we expect. We
qualify all of our forward-looking statements by these cautionary
statements.
Recent Developments
We
disclose our
financial results
across three
distinct operating
divisions:
Merchant, Consumer
and Enterprise.
Our evolving
integrated multi-product platform is organized around
addressing a number of customer needs.
Merchant Division
The Merchant Division (“Merchant”) serves merchants
and micro-merchants, combining existing Connect, Kazang and
Kazang
Insights (previously known as Touchsides)
operations as well as the bulk of Adumo, specifically merchant acquiring and software
by
way of its GAAP hospitality platform. Combined, we believe the Lesaka offering is the most comprehensive in the market in meeting
the needs of micro-
and medium-size businesses in the region, empowering merchants and micro-merchants to transact
efficiently and
fulfill their potential.
Our integrated multi-product range provides merchants
with card acquiring, cash management,
lending, software and Alternative
Digital Payments (“ADP”). ADP includes
our pre-paid solutions and supplier
enabled payments (previously referred
to as our value-
added services).
Performance in Merchant has been driven by:
Merchant acquiring
Merchant acquiring includes 81,106 devices deployed under the Adumo,
Card Connect and Kazang brands.
Q3 2025
Q3 2024
Q3 2023
2025 vs
2024
Number of devices in deployment
81,106
50,211
42,012
62%
Total Throughput
for the quarter (ZAR billions)
9.9
3.9
3.2
154%
●
Q3 2025
is inclusive
of approximately
27,000 devices
deployed 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.
●
Throughput increased to ZAR
9.9 billion for the
quarter, driven mainly by the
inclusion of Adumo in
Q3 2025 and
lower
than historic year-on-year growth attributable to
Kazang Pay.
54
Software
Our
software
solutions
are offered
through GAAP.
GAAP has
operations
in South
Africa,
Botswana,
Kenya
and
clients in
a
further 21 countries. It
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.
Q3 2025
Number of GAAP sites
9,640
Approximate ARPU per site (ZAR)
(1)
3,360
(1) ARPU
is calculated
on a
revenue
per site
basis, as
monthly figure
based on
a three-month
rolling
average for
the quarter
ending March 31, 2025.
●
GAAP was acquired on October 1, 2024. The number of GAAP sites was 9,640
as of March 31, 2025.
●
Monthly ARPU
per site,
which combines
hardware, software
and acquiring
revenue, was
approximately ZAR
3,360,
representing a 7% year-on-year growth.
Cash management
Our cash management and
digitalization solutions effectively “puts the
bank” in 4,550
merchants’ stores enabling them
to deposit
their cash faster
and more safely
on our proprietary
Cash Connect vaults.
Our cash business remains
a vital product
in our merchant
offering and is a key differentiator for us
in the digitalization of cash. It
is a very apt point
of entry for such a cash-heavy
market where
many merchants deal
with the
burdens, costs and
risks of handling
large amounts of
cash. We provide robust
cash vaults
in the
merchant
sector (through Cash
Connect) and are
building a presence
in the
micro-merchant sector (through
Kazang Vaults) enables our merchant
customer base to mitigate their operational risks pertaining to cash management
and security.
Q3 2025
Q3 2024
Q3 2023
2025 vs
2024
Number of devices in deployment
4,550
4,465
4,369
2%
Cash settlements (throughput) for the quarter (ZAR billions)
27.5
27.0
26.2
2%
Lending
Our lending solutions
are offered to
merchants through Capital
Connect and Adumo
Capital. Merchant lending
is an important
component in enabling the merchants we serve to compete
and grow.
Merchants can apply online and have access to funds within 24
hours. Adumo Capital is a joint venture with Retail Capital, a division of Tyme
Bank, with a 50:50 profit share.
Q3 2025
Q3 2024
Q3 2023
2025 vs
2024
Total credit disbursed
(ZAR millions)
(1)
332
219
194
52%
Total net loan book
size at period end (ZAR millions)
(1)
494
299
302
65%
(1) Amounts reflected above includes 100% of
Adumo Capital’s
credit disbursed and net loan book.
●
Q3 2025
is inclusive
of credit
disbursed
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.
●
We experienced significant growth in credit disbursed during the third quarter of fiscal 2025, driven
by Capital Connect
disbursing ZAR 283 million in Q3 2025, compared with ZAR 139 million last quarter (Q2 2025) and ZAR 219 million
a year ago (Q3 2024).
Alternative Digital Payments
ADP includes our pre-paid solutions and supplier enabled payments (previously
referred to as our value-added services).
Pre-paid
solutions
comprise
airtime,
electricity
and
gaming
vouchers.
Supplier
enabled
payments
predominantly
includes
supplier payments, with the balance attributable to international money transfers, bill payments, satellite (digital) television
offerings.
55
Q3 2025
Q3 2024
Q3 2023
2025 vs
2024
Number of devices in deployment
92,957
80,291
71,806
16%
Total throughput
for the quarter (ZAR billions)
10.6
8.3
7.5
28%
Pre-paid solutions throughput for the quarter (ZAR billions)
4.7
4.5
3.8
3%
Supplier enabled payments throughput for the quarter (ZAR
billions)
5.9
3.8
3.7
57%
●
We
had 92,957
devices deployed
as of March
31, 2025, representing
a 16% year-on-year
growth compared
to 80,291
devices as
of March
31, 2024.
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
28%
to
ZAR
10.6
billion
year-on-year,
driven
by
a
57%
increase
in
supplier
enabled
payments.
Consumer Division
The
Consumer
Division
(“Consumer”)
offers
a
transactional
account,
loans
and
insurance.
Consumer
includes
our
EasyPay
Payouts platform (previously known as
Adumo Payouts) where we
service consumers who are corporate
employees and receive work-
related benefit payments from their employers through us.
We continue
to deliver against our strategic focus areas underpinning our growth strategy in Consumer
.
Q3 2025
Q3 2024
Q3 2023
2025 vs
2024
Transactional accounts
(banking) - EasyPay Everywhere
("EPE")
Total active EPE transactional
account base at quarter end
(millions)
1.7
1.5
1.3
16%
Total active EPE transactional
account base at quarter end -
Permanent grant recipients (millions)
(1)
1.5
1.3
1.0
19%
Approximate Gross EPE account activations for the quarter -
Permanent grant recipients (number)
124,000
97,000
39,000
28%
Approximate Net EPE account activations for the quarter -
Permanent grant recipients (number)
(1)
89,000
58,000
1,000
53%
Lending - EasyPay Loans
Approximate number of loans originated during the quarter
(number)
320,000
266,000
207,000
20%
Gross advances in the quarter (ZAR millions)
641
416
320
54%
Loan book size, before allowances, at quarter end (ZAR
millions)
(2)
808
509
398
59%
Insurance - EasyPay Insurance
Approximate number of insurance policies written in the quarter
(number)
55,000
46,000
36,000
20%
Total active insurance
policies on book at quarter end (number)
527,671
414,243
309,165
27%
Average revenue
per customer per month, as of March 31,
(permanent grant beneficiaries) (ZAR)
106
90
78
18%
EasyPay Payouts
Approximate number of active cardholders
230,000
-
-
nm
Approximate load value for the quarter (ZAR millions)
155
-
-
nm
(1) Source: SASSA
statistical reports portal (2025)
| Permanent grant customers per SASSA’s
monthly Social Assistance report
(March 31, 2025).
(2) Gross loan book, before
provisions.
56
●
Driving customer acquisition, supported by increased
focus on customer service
o
We
achieved approximately 124,000
gross account activations
in the quarter,
compared to approximately
97,000 a
year
ago
(Q3
2024)
and
99,000
last
quarter
(Q2
2025).
This
result
reflects
continued
growth
at
the
new
levels
achieved for the permanent base since
fiscal 2024, and the impact
of operational issues experienced at the
Post Bank
specific to this quarter.
o
After
accounting
for
churn,
net
active
account
growth
(
permanent
grant
customers
per
SASSA’s
monthly
Social
Assistance report
for March
31, 2025,
on the
SASSA statistical
reports
portal)
for the
quarter was
approximately
89,000 accounts, compared to approximately 58,000 in
the third quarter of
fiscal 2024, and 65 000 a
quarter ago (Q2
2025).
o
Our total
active EPE
transactional
account base
stood at
approximately
1.7 million
at the
end of
March 2025,
of
which
approximately
1.5
million
(or
approximately
90%)
are
permanent
grant
recipients
(
permanent
grant
customers
per
SASSA’s
monthly
Social
Assistance
report
for
March
31,
2025,
on
the
SASSA
statistical
reports
portal).
The balance comprises Social Relief of Distress (“SRD”) grant recipients, which was introduced during the
COVID pandemic and extended by
another year in February
2025, to continue until March 2026, in its
current form.
o
Our priority
is to grow
our permanent
grant recipient
customers base,
where we
can build
deeper relationships
by
offering products such as insurance and lending. We
do not offer the same breadth of service to the SRD grant base
due to the temporary nature of the grant.
●
Progress on cross
selling
EasyPay Loans
o
We
originated
approximately 320,000
loans during
the quarter,
with our
consumer
loan book,
before allowances
(“gross
book”),
increasing
59% to
ZAR 808
million
as of
March
31, 2025,
compared
to ZAR
509
million
as of
March 31, 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
a number
of 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
quarter three fiscal 2024.
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
35% of our
active permanent
grant account
base as of
March 31, 2025,
compared to 32%
as of March
31, 2024. Approximately 55,000
new policies were
written
in the quarter, compared to
approximately 46,000 in the
comparable period in fiscal
2024. The total number
of active
policies has grown
27% to approximately
528,000 policies as of
March 31, 2025,
compared to 414,000 policies
as
of March 31, 2024.
ARPU
o
ARPU for
our permanent
client base
has increased
to approximately
ZAR 106
per month
for the
third quarter
of
fiscal 2025, from approximately ZAR 90 in the third quarter of fiscal 2024.
EasyPay Payouts
o
On 1 October,
2024, the EasyPay Payouts business officially became part
of the Consumer Division.
o
The number of active
card holders was approximately
230,000 at the end
of the third quarter
of fiscal 2025, with a
load value of approximately ZAR 155 million for quarter ended March
31, 2025.
Enterprise Division
Our
Enterprise
Division
(“Enterprise”)
focuses
on
large
corporates,
mobile
network
operators,
banks,
governments,
municipalities, and,
through Recharger,
landlords utilizing
Recharger’s
prepaid electricity
metering solution.
Our offering
includes
our
bill and
utility payments
platform,
a new
payment
switch, Prism
Switch, as
well as
Hardware
Security
Modules, a
third-party
vending
and
security
business.
Enterprise
serves
third
party corporates,
and
the
technology
needs
of our
Consumer
and
Merchant
Divisions.
57
Q3 2025
Q3 2024
2025 vs
2024
Bill Payments
Total Throughput
for the quarter (ZAR billions)
8
7
12%
Utility Payments
Approximate number of registered prepaid electricity meters deployed (number)
502,790
-
nm
Total Throughput
for the quarter (ZAR billions)
1.8
1.7
9%
Switching
Approximate number of transactions (million)
(1)
2.2
-
nm
(1)
Our
new
payment
switch,
Prism
Switch
has
been
in
production
since
June
2024
thus
prior
period
comparatives
are
not
applicable.
●
The
Recharger
transaction
closed on
March
3, 2025.
Utility
payments
throughput
for
Q3 2025
is inclusive
of
R116
million attributable to Recharger
utility payments for the month
of March 2025, the impact of
which is not included in
the prior period comparatives.
Acquisition of Recharger
On November 20, 2024, we announced the acquisition of Recharger. With closing conditions satisfied, the deal closed on March
3,
2025,
demonstrating
positive
advancement
of
our
strategy
in
the
Enterprise
Division.
Recharger,
allocated
to
the
Enterprise
operating segment,
is a South African
prepaid electricity submetering
and payments business
with a base
of over 500,000
registered
prepaid electricity meters. We
expect the acquisition to act as an entry point for us into the South African private
utilities space while
augmenting the Enterprise division’s
alternative payment offering.
Debt refinance and new banking partner
At the end of February 2025, we completed the ZAR
4.5 billion refinance of our Group’s debt facilities, including Investec Bank
as a new banking
partner alongside our incumbent
bank, RMB. The benefits
of the debt refinance
include: consolidating most
of the
Group’s
legacy senior
debt facilities
at the
centre, reducing
the Group’s
overall weighted
average borrowing
rate by
approximately
1.3%
per
year,
reshaping
the
repayment
profile
of
our
senior
debt,
diversifying
our
funding
sources
and
increasing
debt
facility
headroom,
thereby creating flexibility and capacity for organic and inorganic
growth.
Lesaka Employee Share Trust
We successfully launched Lesaka’s Employee Share Ownership Plan (“ESOP”) in March 2025 reflecting our
commitment to our
people. Our ESOP is
designed to create
alignment with our long-term
growth objectives. The
Lesaka ESOP Trust will
hold 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 the company’s Broad-
Based Black
Economic
Empowerment (“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
South
African
Reserve
Bank
(“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.
58
Critical Accounting Policies
Our unaudited condensed 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. Critical accounting policies
are those
that reflect
significant judgments
or uncertainties
and may
potentially result
in materially
different
results under
different
assumptions
and
conditions.
We
have
identified
the
following
critical
accounting
policies that
are
described
in
more
detail
in
our
Annual Report on Form 10-K for the year ended June 30, 2024:
●
Business Combinations and the Recoverability of Goodwill;
●
Intangible Assets Acquired Through Acquisitions;
●
Revenue recognition – principal versus agent considerations;
●
Valuation
of investment in Cell C;
●
Recoverability of equity securities and equity-accounted investments;
●
Deferred Taxation;
●
Stock-based Compensation;
●
Accounts Receivable and Allowance for Doubtful Accounts Receivable;
and
●
Lending.
Recent accounting pronouncements adopted
Refer to Note
1 to
our unaudited condensed
consolidated financial statements
for a full
description of accounting
pronouncements
adopted, including the dates of adoption and the effects on
our unaudited condensed consolidated financial statements.
Recent accounting pronouncements not yet adopted
as of March 31, 2025
Refer
to
Note
1
to
our
unaudited
condensed
consolidated
financial
statements
for
a
full
description
of
recent
accounting
pronouncements not yet adopted as
of March 31, 2025, including
the expected dates of adoption
and effects on our financial
condition,
results of operations and cash flows.
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
Three months ended
Nine months ended
Year
ended
March 31,
March 31,
June 30,
2025
2024
2025
2024
2024
ZAR : $ average exchange rate
18.5066
18.7313
18.1212
18.7536
18.7070
Highest ZAR : $ rate during period
19.1171
19.4568
19.1171
19.4568
19.4568
Lowest ZAR : $ rate during period
18.0985
18.2076
17.1144
17.6278
17.6278
Rate at end of period
18.3508
18.8760
18.3508
18.8760
18.1808
59
Translation exchange
rates for financial reporting purposes
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 three and nine months ended March 31,
2025
and 2024, vary slightly from the averages shown in the table
above.
Except
as
described
below,
the
translation
rates
we
use
in
presenting
our
results
of
operations
are
the
rates
shown
in
the
following table:
Three months ended
Nine months ended
Year
ended
Table 2
March 31,
March 31,
June 30,
2025
2024
2025
2024
2024
Income and expense items: $1 = ZAR
18.4021
18.8780
18.0393
18.7571
18.6844
Balance sheet items: $1 = ZAR
18.3508
18.8760
18.3508
18.8760
18.1808
We
have translated the
results of operations and
operating segment information
for the three and
nine months ended March
31,
2025
and 2024, provided
in the tables
below using the
actual average exchange rates
per month (i.e.
for each of
January 2025, February
2025,
and
March
2025
for
the
third
quarter
of
fiscal
2025)
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
year
to
date
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.
Results of Operations
The discussion
of our
consolidated overall
results of
operations is
based on
amounts as
reflected
in our
unaudited condensed
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 unaudited condensed 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.
60
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
unaudited
condensed
consolidated
financial
statements
in
Note
18
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 the three and nine
months ended March 31, 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
fiscal
2024 we
presented certain
lease charges
on a separate
line outside
of our
operating segments.
Prior period
information has
been re-
presented 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.
Our fiscal 2025
financial results include
Adumo from October
1, 2024 and
Recharger from March 3,
2025. Adumo and
Recharger
are not included in our financial results for fiscal 2024.
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.
Third quarter of fiscal 2025 compared to third quarter
of fiscal 2024
The following
factors had
a significant
impact on
our results
of operations
during the
third quarter
of fiscal
2025 as
compared
with the same period in the prior year:
●
Lower revenue in ZAR:
Our revenues decreased 4% in ZAR, primarily due
to fewer low margin prepaid airtime sales and a
lower
contribution
from
our
legacy
Enterprise
businesses,
which
was
partially
offset
by
the
inclusion
of
Adumo
and
Recharger,
an
increase
in
ADP throughput
in
Merchant,
as well
as higher
transaction,
insurance
and
lending revenues
in
Consumer;
●
Operating
income
increase,
before
transaction
costs:
Operating
income
before
transaction
and
related
costs
increased
primarily due to
a strong performance
by Consumer and
the contribution from
Adumo and Recharger
from March 3,
2025,
which was partially
offset by higher
costs and the increase
in amortization of
acquisition-related intangible assets
related to
the acquisition of Adumo;
●
Non-cash fair value adjustment related to equity securities:
We recorded a non
-cash fair value loss of $20.4 million during
the third quarter of fiscal 2025 related to our investment in MobiKwik;
●
Higher net interest
charge:
Net interest charge
increased to $5.1
million (ZAR 95.0
million) from $4.0
million (ZAR 74.6
million) primarily
due to higher
overall borrowings,
which was partially
offset by
a small increase
in interest received
as a
result of the inclusion of Adumo; and
●
Foreign
exchange
movements:
The
U.S.
dollar
was
3%
weaker
against
the
ZAR
during
the
third
quarter
of
fiscal
2025
compared to the prior period, which positively impacted our U.S. dollar
reported results.
61
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 United States Dollars
Three months ended March 31,
2025
2024
%
$ ’000
$ ’000
change
Revenue
135,670
138,194
(2%)
Cost of goods sold, IT processing, servicing and support
91,233
107,854
(15%)
Selling, general and administration
34,217
23,124
48%
Depreciation and amortization
8,429
5,791
46%
Transaction costs related to Adumo and Recharger
acquisitions and certain
compensation costs
1,222
631
94%
Operating income
569
794
(28%)
Change in fair value of equity securities
(20,421)
-
nm
Interest income
645
628
3%
Interest expense
5,777
4,581
26%
Loss before income tax (benefit) expense
(24,984)
(3,159)
691%
Income tax (benefit) expense
(2,934)
931
nm
Net loss before earnings from equity-accounted investments
(22,050)
(4,090)
439%
Earnings from equity-accounted investments
12
43
(72%)
Net loss
(22,038)
(4,047)
445%
Less net income attributable to non-controlling interest
20
-
nm
Net loss attributable to us
(22,058)
(4,047)
445%
Table 4
In South African Rand
Three months ended March 31,
2025
2024
%
ZAR ’000
ZAR ’000
change
Revenue
2,510,061
2,609,913
(4%)
Cost of goods sold, IT processing, servicing and support
1,688,015
2,036,881
(17%)
Selling, general and administration
632,841
436,746
45%
Depreciation and amortization
155,919
109,379
43%
Transaction costs related to Adumo and Recharger
acquisitions and certain
compensation costs
22,361
11,915
88%
Operating income
10,925
14,992
(27%)
Change in fair value of equity securities
(373,784)
-
nm
Interest income
11,944
11,861
1%
Interest expense
106,923
86,504
24%
Loss before income tax (benefit) expense
(457,838)
(59,651)
668%
Income tax (benefit) expense
(53,650)
17,575
nm
Net loss before earnings from equity-accounted investments
(404,188)
(77,226)
423%
Earnings from equity-accounted investments
220
811
(73%)
Net loss
(403,968)
(76,415)
429%
Less net income attributable to non-controlling interest
369
-
nm
Net loss attributable to us
(404,337)
(76,415)
429%
Revenue decreased
by $2.5 million
(ZAR 99.9
million) or
1.8% (in ZAR
3.8%). The
decrease was primarily
due to fewer
low
margin
prepaid
airtime
sales,
which
was
partially
offset
by
the
inclusion
of
Adumo,
an
increase
in
the
volume
of
ADP provided
(prepaid airtime),
the impact
of an
increase in
certain issuing
fee base
prices year-over-year,
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 quarter.
Cost of
goods sold,
IT processing,
servicing and
support decreased
by $16.6
million (ZAR
348.9
million) or
15.4% (in
ZAR
17.1%),
primarily
due
to
the decrease
in low
margin
prepaid
airtime
sales, which
was partially
offset
by the
inclusion
of Adumo,
higher commissions paid related to ADP revenue generated, and higher
insurance-related claims and third-party transaction fees.
62
Selling, general
and administration
expenses increased
by $11.1
million (ZAR
196.1 million),
or 48.0%
(in ZAR
44.9%). The
increase
was
primarily
due
to
the
inclusion
of
Adumo;
higher
employee-related
expenses
(including
the
impact
of
annual
salary
increases);
reorganization and retrenchment costs, an increase in the allowance for credit losses as a result of higher lending activities
by both Consumer
and Merchant, higher
stock-based compensation
charges; and
the year-over-year impact
of inflationary increases
on certain expenses, which was partially offset by
lower bonus provision expense.
Depreciation and amortization
expense increased by
$2.6 million (ZAR 46.5
million),
or 45.6% (42.5%). 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
.
Transaction
costs related
to Adumo
and Recharger
acquisitions and
certain compensation
costs increased
primarily due
to the
inclusion of post-combination compensation charges recognized related to the Recharger acquisition. Refer to Note
2 to our unaudited
condensed consolidation financial statements for additional information.
Our operating
income margin
for the
third quarter
of fiscal
2025
and 2024
was 0.4%
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 $20.4
million during
the third
quarter of
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 third quarter
of fiscal 2024, or
any fair value adjustments
for Cell C during
the third quarter of
fiscal 2025 or 2024,
respectively.
We
continue
to
carry
our
investment
in
Cell
C
at
$0
(zero).
Refer
to
Note
5
to
our
unaudited
condensed
consolidation
financial
statements for the methodology and inputs used in the fair value calculation
for MobiKwik and Cell C.
Interest on surplus cash was flat at $0.6 million (ZAR 11.9
million) from $0.6 million (ZAR 11.9 million)
.
Interest expense increased to $5.8 million (ZAR 106.9 million) from $4.6 million (ZAR 86.5 million). In ZAR, the increase was
primarily by higher
overall borrowings during
the third quarter
of fiscal 2025
compared with the
comparable period in
the prior quarter.
Fiscal 2025
income
tax benefit
was $(2.9)
million (ZAR
(53.7)
million) compared
to an
income
tax expense
of $0.9
million
(ZAR 17.6 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 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,
a valuation allowance created
related to the fair value
adjustment to MobiKwik,
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.
The table below presents the relative earnings (loss) from our equity-accounted
investments:
Table 5
Three months ended March 31,
2025
2024
$ %
$ ’000
$ ’000
change
Other
12
43
(72%)
Total
income (loss) from equity-accounted investments
12
43
(72%)
63
Results of operations by operating segment
The composition of revenue and the contributions of our business activities to operating
loss are illustrated below:
Table 6
In United States Dollars
Three months ended March 31,
2025
% of
2024
% of
% change
Operating Segment
$ ’000
total
$ ’000
total
Consolidated revenue:
Merchant
103,001
76%
111,801
81%
(8%)
Consumer
24,096
18%
17,904
13%
35%
Enterprise
9,444
7%
11,322
8%
(17%)
Subtotal: Operating segments
136,541
101%
141,027
102%
(3%)
Eliminations
(871)
(1%)
(2,833)
(2%)
(69%)
Total
consolidated revenue
135,670
100%
138,194
100%
(2%)
Group Adjusted EBITDA:
Merchant
(1)(2)
8,103
63%
7,420
76%
9%
Consumer
(1)(2)
6,333
49%
3,757
39%
69%
Enterprise
(2)
133
1%
725
7%
(82%)
Group costs
(1,772)
(13%)
(2,199)
(22%)
(19%)
Group Adjusted EBITDA (non-GAAP)
(3)
12,797
100%
9,703
100%
32%
(1) Segment Adjusted
EBITDA for the three
months ended March
31, 2025, includes reorganization
and retrenchment costs of
$0.7 million for Merchant and Enterprise of $0.3
million. Segment Adjusted EBITDA Consumer includes retrenchment costs
of $0.01
million for the third quarter of fiscal 2024.
(2) Lease expenses which were
previously presented on a
separate line in fiscal 2024
are now included in Merchant,
Enterprise
and Consumer Segment
Adjusted EBITDA. The prior
period has been
re-presented to conform with
current period presentation.
See
also “—Results
of Operations
—
Presentation of
Merchant, Consumer
and Enterprise
by segment
for fiscal
2025 to
date and
fiscal
2024”.
(3) Group Adjusted EBITDA
is a non-GAAP measure, refer
to reconciliation below at
“—Results of Operations—Use of
Non-
GAAP Measures”.
Table 7
In South African Rand
Three months ended March 31,
2025
% of
2024
% of
% change
Operating Segment
ZAR ’000
total
ZAR ’000
total
Consolidated revenue:
Merchant
1,905,817
76%
2,111,386
81%
(10%)
Consumer
445,845
18%
338,170
13%
32%
Enterprise
174,565
7%
213,856
8%
(18%)
Subtotal: Operating segments
2,526,227
101%
2,663,412
102%
(5%)
Eliminations
(16,166)
(1%)
(53,499)
(2%)
(70%)
Total
consolidated revenue
2,510,061
100%
2,609,913
100%
(4%)
Group Adjusted EBITDA:
Merchant
(1)(2)
149,858
63%
140,091
76%
7%
Consumer
(1)(2)
117,144
49%
70,988
39%
65%
Enterprise
(2)
2,384
1%
13,716
7%
(83%)
Group costs
(32,623)
(13%)
(41,529)
(22%)
(21%)
Group Adjusted EBITDA (non-GAAP)
(3)
236,763
100%
183,266
100%
29%
(1) Segment
Adjusted EBITDA
Merchant and
Segment Adjusted
EBITDA Merchant
include reorganization
and retrenchment
costs of
ZAR 12.9
million and
Enterprise of
ZAR 5.4
million, respectively,
for the
third quarter
of fiscal
2025.
Segment Adjusted
EBITDA for Consumer includes retrenchment costs of ZAR 0.1 million for
the third quarter of fiscal 2024.
(2) Lease expenses which were
previously presented on a
separate line in fiscal 2024
are now included in Merchant,
Enterprise
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”.
64
Merchant
Segment
revenue
primarily
decreased
due
to fewer
low margin
prepaid
airtime
sales (“Pinned
airtime”),
which
was partially
offset by
the inclusion of
Adumo, a higher
volume of ADP.
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 the
third quarter of fiscal
2025.
We recorded a significant proportion of our
airtime sales in revenue
(see further below) and cost of sales, while only earning a relatively small margin. This significantly depresses the
Segment Adjusted
EBITDA margins
shown by
the business.
From the
first quarter
of fiscal
2025, we
have experienced
a shift
in the
mix between
the
sale of Pinned Airtime and distribution of pinless prepaid airtime
(“Pinless Airtime”),
and this trend has continued through to the third
quarter of fiscal 2025, with the volume of Pinned Airtime sales decreasing,
which results in a lower revenue and related cost of sales,
and an overall improved margin.
Our Segment Adjusted EBITDA margin for the
third quarter of fiscal 2025 and 2024 was 7.9% and 6.6%, respectively.
Consumer
Segment revenue
increased primarily
due to
higher transaction
fees generated
from the
higher EPE
account holders
base, the
impact
of
an
increase
in
certain
issuing
fee
base
prices
year-over-year,
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
the quarter,
higher insurance-related claims,
interest expense (of
approximately ZAR 16.5
million) incurred
to fund our lending book and the year-over-year impact of inflationary increases on certain expenses. As noted during the first quarter
of fiscal 2025, we
intend to obtain a separate
lending facility to fund a
portion of our lending
during fiscal 2025. Therefore,
we have
included an intercompany interest expense in our Consumer Segment Adjusted EBITDA for the third quarter of fiscal 2025 compared
with the third quarter of fiscal 2024.
Our Segment Adjusted EBITDA margin for the
third quarter of fiscal 2025 and 2024 was 26.3%
and 21.0%, 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 fewer sales, which was partially
offset by the inclusion of Recharger.
Our Segment Adjusted (loss) EBITDA margin for the
third quarter of fiscal 2025 and 2024 was 1.41% and 6.4%, 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
decreased
compared with
the prior
period due
to lower
bonus
provision
expense, which
was
partially offset
by higher
employee costs
resulting from
an increase
in the
number of
individuals allocated
to group
costs and
base
salary adjustments, audit and consulting fees.
Year
to date fiscal 2025 compared to year to date fiscal 2024
The following factors
had a significant
impact on our
results of operations
during the year
to date fiscal
2025 as compared
with
the same period in the prior year:
●
Revenue flat in $, lower
revenue in ZAR:
Our revenues were flat
in U.S. dollar and
decreased 1.1% in ZAR, primarily
due
to
the
inclusion
of
Adumo
and
Recharger,
an
increase
in
value-added
services
activity
in
Merchant,
as
well
as
higher
transaction,
insurance and
lending revenues
in Consumer,
which was
partially offset
by fewer
Pinned Airtime
sales and
a
lower contribution from Enterprise;
●
Operating
income
increase,
before
transaction
costs:
Operating
income,
before
transaction
and
related
costs,
increased
significantly primarily due to contribution from
Adumo from October 1, 2024 and
Recharger from March 3, 2025, which
was
partially
offset
by
increased
costs
and
the
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 $54.2 million during
the year to date fiscal 2025 related to our investment in MobiKwik;
●
Higher net
interest charge:
Net interest
charge
increased to
$15.0 million
(ZAR 272.5
million) from
$12.8 million
(ZAR
239.0 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% weaker
against the ZAR
during the year
to date fiscal
2025 compared
to the prior period, which adversely impacted our U.S. dollar reported
results.
65
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 8
In United States Dollars
Nine months ended March 31,
2025
2024
%
$ ’000
$ ’000
change
Revenue
428,034
418,176
2%
Cost of goods sold, IT processing, servicing and support
303,418
329,610
(8%)
Selling, general and administration
97,213
67,146
45%
Depreciation and amortization
22,928
17,460
31%
Transaction costs related to Adumo and Recharger
acquisitions and certain
compensation costs
3,174
665
377%
Operating income
1,301
3,295
(61%)
Change in fair value of equity securities
(54,152)
-
nm
Loss on disposal of equity-accounted investments
161
-
nm
Reversal of allowance for EMI doubtful debt receivable
-
250
nm
Interest income
1,952
1,562
25%
Interest expense
16,983
14,312
19%
Loss before income tax (benefit) expense
(68,043)
(9,205)
639%
Income tax (benefit) expense
(9,268)
1,881
nm
Net loss before income (loss) from equity-accounted investments
(58,775)
(11,086)
430%
Income (Loss) from equity-accounted investments
89
(1,319)
nm
Net loss
(58,686)
(12,405)
373%
Less net income attributable to non-controlling interest
48
-
nm
Net loss attributable to us
(58,734)
(12,405)
373%
Table 9
In South African Rand
Nine months ended March 31,
2025
2024
%
ZAR ’000
ZAR ’000
change
Revenue
7,754,951
7,842,078
(1%)
Cost of goods sold, IT processing, servicing and support
5,495,767
6,181,076
(11%)
Selling, general and administration
1,761,823
1,259,415
40%
Depreciation and amortization
415,665
327,408
27%
Transaction costs related to Adumo and Recharger
acquisitions and certain
compensation costs
56,809
12,550
353%
Operating income
24,887
61,629
(60%)
Change in fair value of equity securities
(988,494)
-
nm
Loss on disposal of equity-accounted investments
2,886
-
nm
Reversal of allowance for EMI doubtful debt receivable
-
4,741
nm
Interest income
35,347
29,309
21%
Interest expense
307,831
268,262
15%
Loss before income tax (benefit) expense
(1,238,977)
(172,583)
618%
Income tax (benefit) expense
(169,202)
35,245
nm
Net loss before income (loss) from equity-accounted investments
(1,069,775)
(207,828)
415%
Income (Loss) from equity-accounted investments
1,586
(25,041)
nm
Net loss
(1,068,189)
(232,869)
359%
Less net income attributable to non-controlling interest
865
-
nm
Net loss attributable to us
(1,069,054)
(232,869)
359%
66
Revenue increased
by $9.9
million (ZAR
87.1 million),
or 2.4%
(in ZAR,
1.1%), primarily
due to the
inclusion of
Adumo, an
increase in the
volume of value-added
services provided (Pinless
Airtime and gaming),
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, which was partially offset by fewer
Pinned Airtime sales.
Cost of goods sold, IT
processing, servicing and support
decreased by $26.2 million
(or 7.9%) and, in ZAR,
decreased by ZAR
685.3 million (or 11.1%), primarily due to the decrease in Pinned Airtime sales,
which was partially offset by the inclusion of Adumo,
higher commissions paid related to ADP revenue generated, and higher
insurance-related claims and third-party transaction fees.
Selling, general
and administration
expenses increased
by $30.1
million (ZAR
502.4 million),
or 44.8%
(in ZAR
39.9%). The
increase was primarily due to the inclusion of Adumo; higher employee-related expenses (including annual bonuses and
annual salary
increases); higher stock-based
compensation charges,
consulting fees, audit
fees, and travel expenses;
and the year-over-year
impact
of inflationary increases on certain expenses.
Depreciation and amortization
expense increased by $5.5
million (ZAR 88.3 million),
or 31.3% (27.0%). 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.
Transaction
costs related
to Adumo
and Recharger
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,
and
increased
primarily
due
to
the
inclusion
of
post-combination
compensation
charges
recognized related
to the
Recharger
acquisition. Refer
to Note
2 to
our unaudited
condensed consolidation
financial statements
for
additional information.
Our
operating
income
margin
for
the
year
to
date
fiscal
2025
and
2025
was
0.3%
and
0.8%,
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 $54.2 million during
the year to date 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 year
to date fiscal 2024,
or any fair value adjustments
for Cell C during
the year to date fiscal 2025
or 2024, respectively.
We continue
to
carry our investment in Cell C at $0 (zero).
We recorded a loss of $0.2
million related to the change in
our investment in an equity security
recorded under the equity method
to consolidation during fiscal 2025. Refer
to Note 2 to our consolidated financial statements
for additional information regarding
this
loss.
Interest on surplus cash increased to $2.0 million (ZAR 35.3 million) from $1.6 million (ZAR 29.3 million), primarily due to the
inclusion of Adumo and higher overall average cash balances on deposit during
the year to date fiscal 2025 compared with 2024.
Interest expense increased to $17.0
million (ZAR 307.8 million)
from $14.3 million (ZAR 268.3
million). In ZAR, the increase
was primarily as a result of higher overall borrowings during the year to date fiscal 2025
compared with the comparable period in the
prior quarter.
Fiscal 2025 income tax benefit
was $(9.3) million (ZAR (169.2)
million) compared an income tax
expense of $1.9 million
(ZAR
35.2
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 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),
a valuation allowance
created related to the fair value adjustment to MobiKwik,
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.
67
Finbond is listed on the Johannesburg Stock
Exchange and reports its six-month results during
our first half and its
annual results
during our fourth
quarter. We sold our entire remaining interest
in Finbond during the
year to date
fiscal 2024. The
table below presents
the relative (loss) earnings from our equity-accounted investments:
Table 10
Nine months ended March 31,
2025
2024
$ %
$ ’000
$ ’000
change
Finbond
-
(1,445)
nm
Share of net loss
-
(278)
nm
Impairment
-
(1,167)
nm
Other
89
126
(29%)
89
(1,319)
nm
Results of operations by operating segment
The composition of revenue and the contributions of our business activities to operating
loss are illustrated below:
Table 11
In United States Dollars
Nine months ended March 31,
2025
% of
2024
% of
% change
Operating Segment
$ ’000
total
$ ’000
total
Consolidated revenue:
Merchant
334,442
79%
341,044
82%
(2%)
Consumer
68,097
16%
50,191
12%
36%
Enterprise
30,259
7%
32,710
8%
(7%)
Subtotal: Operating segments
432,798
102%
423,945
102%
2%
Eliminations
(4,764)
(2%)
(5,769)
(2%)
(17%)
Total
consolidated revenue
428,034
100%
418,176
100%
2%
Group Adjusted EBITDA:
Merchant
(1)(2)
25,976
76%
21,827
82%
19%
Consumer
(1)(2)
15,071
44%
8,452
32%
78%
Enterprise
(1)(2)
464
1%
2,431
9%
(81%)
Group costs
(7,541)
(21%)
(6,032)
(23%)
25%
Group Adjusted EBITDA (non-GAAP)
(3)
33,970
100%
26,678
100%
27%
(1) Segment Adjusted
EBITDA for the nine
months ended March
31, 2025, includes reorganization
and retrenchment costs for
Merchant of $0.7
million, Enterprise of
$0.3 million, and
Consumer of $0.1
million. Segment
Adjusted EBITDA for
Merchant includes
retrenchment costs of $0.2 million and Consumer includes retrenchment
costs of $0.2 million for year to date fiscal 2024.
(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 12
In South African Rand
Nine months ended March 31,
2025
% of
2024
% of
% change
Operating Segment
ZAR ’000
total
ZAR ’000
total
Consolidated revenue:
Merchant
6,058,673
79%
6,395,041
82%
(5%)
Consumer
1,234,595
16%
941,566
12%
31%
Enterprise
548,390
7%
613,770
8%
(11%)
Subtotal: Operating segments
7,841,658
102%
7,950,377
102%
(1%)
Eliminations
(86,707)
(2%)
(108,299)
(2%)
(20%)
Total
consolidated revenue
7,754,951
100%
7,842,078
100%
(1%)
Group Adjusted EBITDA:
Merchant
(1)(2)
470,476
76%
409,236
82%
15%
Consumer
(1)(2)
273,313
44%
158,833
32%
72%
Enterprise
(1)(2)
8,415
1%
45,689
9%
(82%)
Group costs
(135,542)
(21%)
(113,172)
(23%)
20%
Group Adjusted EBITDA (non-GAAP)
(3)
616,662
100%
500,586
100%
23%
68
(1) Segment Adjusted
EBITDA for the nine
months ended March
31, 2025, includes reorganization
and retrenchment costs for
Merchant of
ZAR 12.9
million, Enterprise
of ZAR
5.6 million,
and Consumer
of ZAR
1.5 million.
Segment Adjusted
EBITDA for
Merchant includes retrenchment costs
of ZAR 4.7 million
and Consumer includes retrenchment
costs of ZAR 2.9 million
for year to
date fiscal 2024.
(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”.
Merchant
Segment revenue
primarily increased
due to
the inclusion
of Adumo,
a higher
volume of
ADP provided
(Pinless Airtime
and
gaming), which was
partially offset by
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 the third
quarter of fiscal
2025. From the
first quarter of
fiscal 2025, we
have
experienced
a shift
in the
mix between
the sale
of Pinned
Airtime and
distribution of
Pinless Airtime,
and this
trend has
continued
through to the third
quarter of fiscal 2025, with
the volume of Pinned
Airtime sales decreasing, which
results in a lower revenue
and
related cost of sales, and an overall improved margin.
Our Segment
Adjusted EBITDA
margin
(calculated as
Segment Adjusted
EBITDA divided
by revenue)
for the
year to
date
fiscal 2025 and 2024 was 7.8% and 6.4%, 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 in December
2024
and
the
third
quarter
of
fiscal
2025,
higher
insurance-related
claims,
interest
expense
(of
approximately
ZAR
45.0
million)
incurred to fund our lending book, higher computer software license costs, and
the year-over-year impact of inflationary increases on
certain expenses.
As discussed
in our commentary
for the second
quarter of
fiscal 2025,
we have included
an intercompany
interest
expense in our Consumer Segment Adjusted EBITDA for year to date
fiscal 2025 compared with the year to date fiscal 2024.
Our Segment Adjusted EBITDA margin for the year
to date fiscal 2025 and 2024 was 22.1% and 16.8%, 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 the year
to date fiscal 2025 and 2024 was 1.5% and 7.4%, respectively.
Group costs
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.
69
Presentation of Merchant, Consumer and Enterprise by segment for fiscal 2025 to date and fiscal 2024
The tables below present Merchant, Consumer and Enterprise revenue
and EBITDA for fiscal 2025
to date and fiscal 2024,
including lease charges, as well as the U.S. dollar/ ZAR exchange
rates applicable per fiscal quarter and year:
Table 13
Fiscal 2025
In United States dollars
Quarter 1
Quarter 2
Quarter 3
F2025
$ ’000
$ ’000
$ ’000
$ ’000
Revenue
Merchant
115,630
115,811
103,001
334,442
Consumer
21,072
22,929
24,096
68,097
Enterprise
11,882
8,933
9,444
30,259
Subtotal: Operating segments
148,584
147,673
136,541
432,798
Eliminations
(3,038)
(855)
(871)
(4,764)
Total
consolidated revenue
145,546
146,818
135,670
428,034
Group Adjusted EBITDA:
Merchant
7,554
10,319
8,103
25,976
Consumer
4,396
4,342
6,333
15,071
Enterprise
362
(31)
133
464
Group costs
(2,949)
(2,820)
(1,772)
(7,541)
Group Adjusted EBITDA (non-GAAP)
9,363
11,810
12,797
33,970
Income and expense items: $1 = ZAR
17.72
17.85
18.40
18.04
Table 14
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
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.
70
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
are
working
on
obtaining a
separate lending
facility to
fund a
portion of
our Consumer
lending during
the twelve
months ended
June 30,
2025.
We
expected to have this facility in place on July 1, 2024, however,
we have been unable to finalize terms as the separate lending facility
will form part
of a
broader refinancing of
our facilities. Therefore, we
have included an
intercompany interest expense in
our Consumer
Segment Adjusted
EBITDA for
the three
and nine
months ended
March 31,
2025. Once-off
items represents
non-recurring income
and expense items, including costs related to acquisitions and transactions consummated
or ultimately not pursued.
The table below presents the reconciliation between GAAP net loss attributable
to Lesaka to Group Adjusted EBITDA:
Table 15
Three months ended
March 31,
Nine months ended
March 31,
2025
2024
2025
2024
$ ’000
$ ’000
$ ’000
$ ’000
Loss attributable to Lesaka - GAAP
(22,058)
(4,047)
(58,734)
(12,405)
Less net income attributable to non-controlling interest
(20)
-
(48)
-
Net loss
(22,038)
(4,047)
(58,686)
(12,405)
(Earnings) loss from equity accounted investments
(12)
(43)
(89)
1,319
Net loss before (earnings) loss from equity-accounted investments
(22,050)
(4,090)
(58,775)
(11,086)
Income tax (benefit) expense
(2,934)
931
(9,268)
1,881
Loss before income tax expense
(24,984)
(3,159)
(68,043)
(9,205)
Interest expense
5,777
4,581
16,983
14,312
Interest income
(645)
(628)
(1,952)
(1,562)
Reversal of allowance for doubtful EMI loan receivable
-
-
-
(250)
Net loss on disposal of equity-accounted investment
-
-
161
-
Change in fair value of equity securities
20,421
-
54,152
-
Operating income
569
794
1,301
3,295
PPA amortization
(amortization of acquired intangible assets)
4,974
3,562
13,588
10,762
Depreciation and amortization
3,455
2,229
9,340
6,698
Stock-based compensation charges
2,497
2,090
7,518
5,653
Interest adjustment
(890)
-
(2,478)
-
Once-off items
(1)
2,306
907
4,599
169
Unrealized loss (gain) FV for currency adjustments
(114)
121
102
101
Group Adjusted EBITDA - Non-GAAP
12,797
9,703
33,970
26,678
(1) The table below presents the components of once-off
items for the periods presented:
Table 16
Three months ended
March 31,
Nine months ended
March 31,
2025
2024
2025
2024
$ ’000
$ ’000
$ ’000
$ ’000
Transaction costs
1,084
276
1,621
456
Transaction costs related to Adumo and Recharger
acquisitions and
certain compensation costs
1,222
631
3,174
665
Indirect taxes provision release
-
-
(196)
-
Income recognized related to closure of legacy businesses
-
-
-
(952)
Total once-off
items
2,306
907
4,599
169
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
related
to
closure
of
legacy
businesses represents
(i) gains
recognized
related to
the release
of the
foreign currency
translation reserve
on deconsolidation
of a
subsidiaries 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.
71
Liquidity and Capital Resources
As of March 31, 2025, our cash and cash equivalents were
$71.0 million and comprised of U.S. dollar-denominated
balances of
$3.2 million,
ZAR-denominated balances
of ZAR 1.2
billion ($65.9 million),
and other currency
deposits, primarily
Botswana pula,
of $1.9 million,
all amounts translated
at exchange rates
applicable as of
March 31, 2025.
The increase in
our unrestricted cash
balances
from June 30,
2024, was primarily due
to the positive contribution
from our Merchant
and Consumer operations
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,
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,
2024, as
well as
Note 9
to these condensed
consolidated financial
statements for
additional information
related to our borrowings.
Available short-term
borrowings
Summarized below are our short-term facilities available and utilized as of
March 31, 2025:
Table 17
RMB GBF
RMB Other
Nedbank
$ ’000
ZAR ’000
$ ’000
ZAR ’000
$ ’000
ZAR ’000
Total
short-term facilities available, comprising:
Total overdraft
38,195
700,901
-
-
-
-
Indirect and derivative facilities
(1)
-
-
5,487
100,700
8,531
156,556
Total
short-term facilities available
38,195
700,901
5,487
100,700
8,531
156,556
Utilized short-term facilities:
Overdraft
23,550
432,156
-
-
-
-
Indirect and derivative facilities
(1)
-
-
1,804
33,097
115
2,107
Total
short-term facilities utilized
23,550
432,156
1,804
33,097
115
2,107
Interest rate, based on South African prime rate
10.50%
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 ($194.7 million translated at
exchange rates as of March
31, 2025)
as described
in Note
9. 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
.
We also
have a
revolving credit
facility,
of ZAR
300.0 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.
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 March 31, 2025, includes restricted cash of $0.1 million
that has been ceded and pledged.
72
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 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.
Cash flows from operating activities
Third quarter
Net cash provided by
operating activities during the
third quarter of fiscal
2025 was $10.7 million
(ZAR 196.2 million) compared
to net cash utilized of
$19.2 million (ZAR 362.1 million) during
the third quarter of fiscal
2024. Excluding the impact of income
taxes,
our cash
provided by
operating activities
during the
third quarter
of fiscal
2025 was
positively impacted
by movements
within our
Merchant and Enterprise businesses related to quarter-end transaction processing activities,
lower inventory holdings as of March 31,
2025, and the contribution from our Merchant and Consumer businesses,
which was partially offset by the impact of cash utilized
for
the significant net growth in our Consumer and Merchant finance
loans receivable books.
During the third quarter of fiscal 2025, we paid first provisional South African tax payments of $0.6 million (ZAR 10.9 million)
related primarily to certain of Adumo’s
subsidiaries 2025 tax year.
We also
paid taxes totaling $0.1 million in
other tax jurisdictions,
primarily
in Namibia
and Botswana
during
the third
quarter of
fiscal
2025.
During
the third
quarter
of fiscal
2024,
we
paid
taxes
totaling $0.1 million in other tax jurisdictions, primarily in Botswana.
Taxes paid (refunded)
during the third quarter of fiscal 2025 and 2024 were as follows:
Table 18
Three months ended March 31,
2025
2024
2025
2024
$
$
ZAR
ZAR
‘000
‘000
‘000
‘000
First provisional payments
594
1
10,885
18
Second provisional payments
-
36
-
691
Tax refund received
(151)
(7)
(2,016)
(128)
Total South African
taxes paid
443
30
8,869
581
Foreign taxes paid
62
58
1,148
1,072
Total
tax paid
505
88
10,017
1,653
Year
to date
Net cash used in operating activities during the year to date of fiscal 2025
was $2.6 million (ZAR 47.6 million) compared to net
cash provided by operating activities
of $23.1 million (ZAR 434.0
million) during the year
to date of fiscal
2024. Excluding the impact
of income taxes, our cash used in operating activities during the year to date of 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
the
significant net
growth in
our Consumer
and Merchant
finance loans
receivable books,
which was
partially offset
by was
positively
impacted by the contribution from Merchant and Consumer businesses.
During the year to date of
fiscal 2025, we paid first provisional
South African tax payments of
$3.7 million (ZAR 67.1 million)
related to our 2025. We
also paid taxes totaling $0.2 million in other tax
jurisdictions, primarily in Namibia and Botswana during
the
year to date of fiscal 2025. During the year to
date of fiscal 2024, we paid first provisional
South African tax payments of $2.7 million
(ZAR 49.5
million) related
to our
2024 tax
year and
South African
tax payments
related to
prior years
of $0.6
million (ZAR
12.2
million). We also
paid taxes totaling $0.2 million in other tax jurisdictions, primarily in Botswana.
73
Taxes (refunded)
paid during the year to date of fiscal 2025 and 2024 were as follows:
Table 19
Nine months ended March 31,
2025
2024
2025
2024
$
$
ZAR
ZAR
‘000
‘000
‘000
‘000
First provisional payments
3,682
2,663
67,149
49,534
Second provisional payments
-
36
-
691
Taxation paid related
to prior years
93
641
1,660
12,187
Tax refund received
(264)
(38)
(4,069)
(768)
Total South African
taxes paid
3,511
3,302
64,740
61,644
Foreign taxes paid
202
196
3,693
3,677
Total
tax paid
3,713
3,498
68,433
65,321
Cash flows from investing activities
Third quarter
Cash used
in investing
activities for
the third
quarter of
fiscal 2025
included
capital expenditures
of $2.8
million (ZAR
51.8
million), primarily due to
the acquisition of
vaults and POS
devices. We also incurred expenditures of
$1.7 million (ZAR
30.8 million),
primarily related
to the capitalization
of development costs,
during the third
quarter of fiscal
2025. During the
third quarter of
fiscal
2025, we paid $6.7 million related to acquisition of certain businesses, including
Recharger.
Cash used
in
investing
activities for
the third
quarter
of fiscal
2024
included
capital
expenditures
of $2.9
million
(ZAR 55.6
million), primarily due to the acquisition of vaults and POS devices
.
Year
to date
Cash used
in investing
activities for
the year
to date
of fiscal
2025 included
capital expenditures
of $13.1
million (ZAR
236.3
million), primarily due to
the acquisition of
vaults and POS
devices. We also incurred expenditures of
$2.3 million (ZAR
41.0 million),
primarily related
to the
capitalization of
development costs,
during the
third quarter
of fiscal
2025. During
the year
to date of
fiscal
2025, we paid $10.6 million related to acquisition of certain businesses, including
Adumo and Recharger.
Cash used
in investing
activities for
the year
to date
of fiscal
2024 included
capital expenditures
of $8.0
million (ZAR 149.1
million), primarily due to the acquisition of vaults. During the
year to date of 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 flows from financing activities
Third quarter
During the third quarter of fiscal 2025, we utilized $21.4 million from our South African overdraft facilities to partially fund the
acquisition
of
Recharger
and
for
the
February
2025
refinance
of
certain
of
our
facilities,
and
repaid
$50.5
million
towards
our
refinanced
facilities.
We
utilized
$175.8
million
of
our
long-term
borrowings
for
the
February
2025
refinance
of
certain
of
our
facilities. We
repaid $134.5 million of
long-term borrowings towards our
refinanced facilities and in
accordance with our repayment
schedule and paid
$7.2 million to settle
Adumo’s
borrowings.
We
also paid fees
of $0.5
million related the
February 2025 refinance
and paid dividends to the non-controlling interest of $0.1 million.
During the third
quarter of fiscal 2024
,
we utilized $24.9 million
from our South
African overdraft facilities
to fund our
ATMs
and our cash management business through Connect, and repaid
$43.4 million of those facilities. We utilized $3.4 million of our long-
term borrowings to fund
the acquisition of certain
capital expenditures and for
working capital requirements. We
repaid $7.2 million
of
long-term
borrowings
in
accordance
with
our
repayment
schedule
as
well
as
to
settle
a
portion
of
our
revolving
credit
facility
utilized.
74
Year
to date
During the
year to date
of fiscal 2025,
we utilized $94.2
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 $84.9 million of those facilities,
including towards our refinanced facilities.
We
utilized $189.5 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 $130.0 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 the year to date
of fiscal 2024, we utilized
$153.5 million from our South
African overdraft facilities to fund
our ATMs
and our
cash management
business through
Connect, and
repaid $172.2
million of
those facilities.
We
utilized $14.4
million of
our
long-term borrowings
to fund
the acquisition
of certain
capital expenditures
and for
working capital
requirements. We
repaid $13.1
million of long-term borrowings
in accordance with
our repayment schedule as
well as to
settle a portion
of our revolving
credit facility
utilized. We
also paid $0.2
million to repurchase
shares from employees
in order for
the employees to
settle taxes due
related to the
vesting of shares of restricted stock.
Off-Balance Sheet Arrangements
We have no off
-balance sheet arrangements.
Capital Expenditures
We
expect capital
spending for
the fourth
quarter of
fiscal 2025
to primarily
include spending
for acquisition
of POS
devices,
vaults,
computer software, computer and office equipment, as well as for
our ATM infrastructure and branch network in South Africa.
Our capital expenditures for the third quarter of fiscal 2025
and 2025 are discussed under “—Liquidity and Capital Resources—Cash
flows
from
investing
activities.”
Our
capital
expenditures
for
the
past
three
fiscal
years
were
funded
through
internally
generated
funds, or our asset-backed borrowing
arrangements. We
had outstanding capital commitments as of
March 31, 2025, of $0.1 million.
We expect to fund
these expenditures through internally generated funds and available facilities.
75
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
In addition to the tables below, see
Note 5 to the unaudited condensed consolidated financial statements for
a discussion of
market risk.
We
have
short and
long-term borrowings
in South
Africa which
attract interest
at rates
that fluctuate
based on
changes in
the
South African prime
and 3-month JIBAR
interest rates. The
following table illustrates
the effect on
our annual expected
interest charge,
translated at exchange
rates applicable as
of March 31,
2025, as a
result of changes
in the South
African prime and
3-month JIBAR
interest rates, using
our outstanding short
and long-term borrowings
as of March
31, 2025. The
effect of a
hypothetical 1% (i.e.
100
basis points)
increase
and
a
1% decrease
in
the
interest
rates
applicable
to
the
borrowings
as of
March
31,
2025,
are shown.
The
selected 1% hypothetical change does not reflect what could be considered the
best- or worst-case scenarios.
Table 20
As of March 31, 2025
Annual expected
interest charge
($ ’000)
Hypothetical
change in
interest rates
Estimated annual
expected interest
charge after
hypothetical change
in interest rates
($ ’000)
Interest on South African borrowings
23,853
1%
26,048
(1%)
21,658
The following
table summarizes
our exchange-traded
equity security
with equity
and liquidity
price risk
as of
March 31, 2025.
The effects
of a
hypothetical 10%
increase and
a 10%
decrease in
market prices
as of
March 31,
2025, is
also shown.
The selected
10% hypothetical change does not reflect what could be
considered the best or worst case scenarios. Indeed, results
could be far worse
due both to the nature of equity markets and the liquidity risk associated with the
equity security.
Table 21
As of March 31, 2025
Fair value
($ ’000)
Hypothetical
price change
Estimated fair value
after hypothetical
change in price
($ ’000)
Percentage Increase
(Decrease) in
Shareholders’ Equity
Exchange-traded equity securities
22,113
10%
24,324
1%
10%
19,902
(1%)
76
Item 4. 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)
promulgated under the Securities Exchange Act of 1934, as amended, as of
March 31, 2025.
We previously identified and disclosed in Part II, Item 9A of our Annual Report on Form 10-K for the
year ended June 30, 2024,
material weaknesses in our internal control over financial reporting
related to: (1) information technology general controls (“ITGCs”),
specifically
insufficient
risk
assessment,
design
and
implementation,
monitoring
activities
and
training
of
individuals
to
operate
controls
in the
areas of
user access
and
program-change
management
for
certain
information
technology
systems
that support
our
financial reporting processes and (2) insufficient design and implementation of controls and associated policies
and procedures in our
annual goodwill impairment assessment. A material weakness is a deficiency,
or 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 will not be prevented or detected on a timely basis.
As a result of
insufficient time to design, implement and fully
test controls to ensure we
have remediated
the material weaknesses
discussed in our
Annual Report on
Form 10-K for
our fiscal year
ended June 30,
2024 (as described
above), the executive
chairman
and the group chief financial officer concluded
that our disclosure controls and procedures were not effective as of
March 31, 2025.
Notwithstanding
the
previously
identified
material
weaknesses,
management
believes
the
condensed
consolidated
financial
statements included
in this Quarterly
Report on
Form 10-Q fairly
present, in
all material respects,
our financial
condition, results
of
operations and cash flows as of and for the periods presented in accordance with
GAAP.
Remediation Plan
Management has made
good progress
and continues to
actively work
on remediating the
identified material weakness
and remains
committed
to
remediating
the material
weakness
in
a
timely
manner.
Our remediation
process is
ongoing
and
includes, but
is not
limited to, the following steps:
-
the
review
of
ITGCs
and
implementation
of
changes
to
certain
controls
to
address
the
issues
related
to
the
material
weaknesses identified above; and
-
the review and implementation of changes to the design of the controls related
to the goodwill impairment assessment.
The remediation plan
may be adjusted
as is appropriate,
as we continue
to evaluate and
enhance our internal
control over financial
reporting. Other than the
design and implementation of
the remediation plan, there
have not been any
changes in our internal control
over
financial
reporting
during
the
fiscal
quarter
ended
March
31,
2025,
that
have
materially
affected,
or
are
reasonably
likely
to
materially affect, our internal control over financial reporting.
77
Part II. Other Information
Item 1A. Risk Factors
See “Item
1A RISK
FACTORS”
in Part
I of
our Annual
Report on
Form 10-K
for the
fiscal year
ended June
30, 2024,
for a
discussion
of
risk
factors
relating
to
(i)
our
business,
(ii)
operating
in
South
Africa
and
other
foreign
markets,
(iii) government
regulation, and (iv) our common stock. Except
as set forth below, there have been no material
changes from the risk factors previously
disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30,
2024.
We may not be able
to successfully integrate Adumo and Recharger’s operations
with our business.
On October 1, 2024, we announced the closing of our ZAR 1.67 billion ($96.2 million) investment to acquire a 100% interest in
Adumo and
on March
5, 2024,
we announced
the closing
of our
ZAR 503.4
million ($27.0
million) investment
to acquire
a 100%
interest in
Recharger.
Integrating these
businesses into
our company
may require
significant attention
from our
senior management
which may divert their attention from our day-to-day business. The difficulties of integration may be increased by cultural differences
between
our
two
organizations
and
the
necessity
of
retaining
and
integrating
personnel,
including
Adumo
and
Recharger’s
key
employees and management team. The services of some of these individuals will be important to the continued growth and success of
Adumo and Recharger’s business and to our ability to integrate those businesses
with ours. If we were to lose the
services of these key
employees or
fail to
sufficiently integrate
them, our
ability to
operate
these businesses
successfully would
likely be
materially and
adversely impacted.
As such, if we are unable to successfully integrate Adumo and Recharger’s
operations into our business we could be required to
record material impairments, and as a result, our financial condition,
results of operations, cash flows and stock price could suffer.
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
safe assets, 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
recent
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.
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 fails
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 Grindrod Bank, a subsidiary
of 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 Grindrod
Bank
and ourselves.
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).
78
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 scheme's and
regulatory bodies. In
addition, if we
were to lose our
PASA registrations
or fail to have them renewed, it would be unable to operate its payment services.
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.
In
addition,
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,
or FSP,
license on June
9, 2015, and
EasyPay Financial
Services (Pty) Ltd
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 Bill
will make
significant changes
to the
current licensing
regime
however, the current proposal is that existing licences will be converted. The second draft of the Conduct of
Financial Institutions Bill
was published for public comment on September 29, 2020.
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.
79
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds
On
February
5,
2020,
our
board
of
directors
approved
the
replenishment
of
our
existing
share
repurchase
authorization
to
repurchase up to an aggregate of $100 million of common stock. The authorization
has no expiration date.
The table below presents information relating to purchases
of shares of our common stock
during the third quarter of fiscal 2025:
Table 22
(a)
(b)
(c)
(d)
Period
Total
number
of shares
purchased
Average price
paid per share
(US dollars)
Total
number of shares
purchased as part of publicly
announced plans or
programs
Maximum dollar value of
shares that may yet be
purchased under the plans
or programs
Jan 1, 2025 - Jan 31, 2025
-
-
-
100,000,000
Feb 1, 2025 - Feb 28, 2025
(1)
5,662
4.86
-
100,000,000
Mar 1, 2025 - Mar 31, 2025
-
-
-
100,000,000
Total
5,662
-
(1) Relates to the delivery of
5,662 shares of our common stock in
February 2025 to us by certain
of our employees to settle their
income tax liabilities. These shares do not reduce the repurchase authority
under the share repurchase program.
Other than as
reported in a
Current Report on
Form 8-K, we
did not
sell any
securities that
were not registered
under the Securities
Act during the third quarter of fiscal 2025.
Item 5. 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
March 31, 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.
80
Item 6. Exhibits
The following exhibits are filed as part of this Form 10-Q:
Incorporated by Reference Herein
Exhibit
No.
Description of Exhibit
Included
Herewith
Form
Exhibit
Filing Date
10.46
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
X
10.47
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
X
10.48
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
X
10.49
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
X
10.50
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
X
10.51
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
X
10.52
General Banking Facility Agreement dated February 27,
2025 between Lesaka Technologies (Proprietary) Limited
and FirstRand Bank Limited (acting through its Rand
Merchant Bank division)
X
10.53*
Contract of Employment, dated as of October 1, 2024,
between Lesaka Technologies (Pty) Ltd and Daniel Luke
Smith
X
10.54*
Restrictive Covenants Agreement, dated as of October 1,
2024, between Lesaka Technologies (Pty) Ltd and Daniel
Luke Smith
X
10.55*
Employment Agreement, dated as of October 1, 2024,
between Lesaka Technologies, Inc. and Daniel Luke Smith
X
10.56*
Restrictive Covenants Agreement, dated as of October 1,
2024, between Lesaka Technologies, Inc. and Daniel Luke
Smith
X
81
31.1
Certification of Principal Executive Officer pursuant to
Rule 13a-14(a) under the Exchange Act
X
31.2
Certification of Principal Financial Officer pursuant to Rule
13a-14(a) under the Exchange Act
X
32
Certification pursuant to 18 USC Section 1350
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
formatted
as
Inline
XBRL
and
contained
in
Exhibit 101
* Indicates a management contract or compensatory plan or arrangement.
82
SIGNATURES
Pursuant to
the requirements
of the
Securities Exchange
Act of
1934, the
registrant has
caused this
report to
be signed
on its
behalf by the undersigned, thereunto duly authorized, on May 7, 2025.
LESAKA TECHNOLOGIES, INC.
By: /s/ Ali Mazanderani
Ali Mazanderani
Executive Chairman
By: /s/ Dan Smith
Dan Smith
Group Chief Financial Officer,
Treasurer and Secretary