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As of February 3, 2025 (the latest practicable date),
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1
Form 10-Q
LESAKA TECHNOLOGIES, INC.
Table of Contents
Page No.
PART I. FINANCIAL INFORMATION
2
Part I. Financial information
Item 1. Financial Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets
December 31,
June 30,
2024
2024
(A)
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
$
Restricted cash related to ATM funding and credit facilities (Note 9)
Accounts receivable, net and other receivables (Note 3)
Finance loans receivable, net (Note 3)
Inventory (Note 4)
Total current assets before settlement assets
Settlement assets
Total current assets
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - December: $
$
OPERATING LEASE RIGHT-OF-USE (Note 17)
EQUITY-ACCOUNTED INVESTMENTS (Note 6)
GOODWILL (Note 7)
INTANGIBLE ASSETS, NET (Note 7)
DEFERRED INCOME TAXES
OTHER LONG-TERM ASSETS, including equity securities (Note 6 and 8)
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities for ATM funding (Note 9)
Short-term credit facilities (Note 9)
Accounts payable
Other payables (Note 10)
Operating lease liability - current (Note 17)
Current portion of long-term borrowings (Note 9)
Income taxes payable
Total current liabilities before settlement obligations
Settlement obligations
Total current liabilities
DEFERRED INCOME TAXES
OPERATING LEASE LIABILITY - LONG TERM (Note 17)
LONG-TERM BORROWINGS (Note 9)
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 8)
TOTAL LIABILITIES
REDEEMABLE COMMON STOCK
EQUITY
COMMON STOCK (Note 11)
Authorized:
Issued and outstanding shares, net of treasury - December:
PREFERRED STOCK
Authorized shares:
Issued and outstanding shares, net of treasury: December:
-
-
ADDITIONAL PAID-IN-CAPITAL
TREASURY SHARES, AT COST: December:
(302,319 )
(289,733 )
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 12)
(199,969 )
(188,355 )
RETAINED EARNINGS
TOTAL LESAKA EQUITY
NON-CONTROLLING INTEREST
TOTAL EQUITY
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY
$
$
(A) – Derived from audited financial statements
See Notes to Unaudited Condensed Consolidated Financial Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
3
Three months ended
Six months ended
December 31,
December 31,
2024
2023
2024
2023
(In thousands, except per share
data)
(In thousands, except per share
data)
REVENUE (Note 16)
$
$
$
$
EXPENSE
Cost of goods sold, IT processing, servicing and support
Selling, general and administration
Depreciation and amortization
Transaction costs related to Adumo acquisition (Note 2)
OPERATING INCOME
CHANGE IN FAIR VALUE OF EQUITY SECURITIES (Note 5 and 6)
(33,731 )
(33,731 )
LOSS ON DISPOSAL OF EQUITY-ACCOUNTED INVESTMENT
(Note 6)
REVERSAL OF ALLOWANCE FOR DOUBTFUL EMI DEBT
RECEIVABLE
INTEREST INCOME
INTEREST EXPENSE
LOSS BEFORE INCOME TAX (BENEFIT) EXPENSE
(38,568 )
(2,064 )
(43,059 )
(6,046 )
INCOME TAX (BENEFIT) EXPENSE (Note 19)
(6,412 )
(6,334 )
NET LOSS BEFORE EARNINGS (LOSS) FROM EQUITY-
ACCOUNTED INVESTMENTS
(32,156 )
(2,750 )
(36,725 )
(6,996 )
EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS
(Note 6)
(1,362 )
NET LOSS
(32,106 )
(2,707 )
(36,648 )
(8,358 )
LESS NET INCOME ATTRIBUTABLE TO NON-CONTROLLING
INTEREST
NET LOSS ATTRIBUTABLE TO LESAKA
$
(32,134 )
$
(2,707 )
$
(36,676 )
$
(8,358 )
Net loss per share, in United States dollars
(Note 14):
Basic loss attributable to Lesaka shareholders
$
(0.40 )
$
(0.04 )
$
(0.51 )
$
(0.13 )
Diluted loss attributable to Lesaka shareholders
$
(0.40 )
$
(0.04 )
$
(0.51 )
$
(0.13 )
See Notes to Unaudited Condensed Consolidated Financial Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income
4
Three months ended
Six months ended
December 31,
December 31,
2024
2023
2024
2023
(In thousands)
(In thousands)
Net loss
$
(32,106 )
$
(2,707 )
$
(36,648 )
$
(8,358 )
Other comprehensive (loss) income, net of taxes
Movement in foreign currency translation reserve
(22,731 )
(12,206 )
Release of foreign currency translation reserve related to
liquidation of subsidiaries (Note 12)
(952 )
(952 )
Release of foreign currency translation reserve related to
disposal of Finbond equity securities (Note 12)
Movement in foreign currency translation reserve related
to equity-accounted investments
Total other comprehensive (loss) income, net of
taxes
(22,725 )
(12,200 )
Comprehensive (loss) income
(54,831 )
(48,848 )
(2,010 )
Less comprehensive loss attributable to non-
controlling interest
Comprehensive (loss) income attributable to
Lesaka
$
(54,273 )
$
$
(48,290 )
$
(2,010 )
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 December 31, 2023 (dollar amounts in thousands)
Balance – October 1, 2023
$
(25,244,286 )
$
(288,238 )
$
$
$
(196,081 )
$
$
$
$
Shares repurchased (Note 13)
(50,975 )
(198 )
(50,975 )
(198 )
(198 )
Restricted stock granted (Note 13)
Exercise of stock options (Note 13)
Stock-based compensation charge
(Note 13)
Reversal of stock-based compensation
charge (Note 13)
(14,002 )
(14,002 )
(8 )
(8 )
(8 )
Stock-based compensation charge
related to equity-accounted investment
(Note 6)
(147 )
(147 )
(147 )
Net loss
(2,707 )
(2,707 )
(2,707 )
Other comprehensive loss (Note 12)
Balance – December 31, 2023
$
(25,295,261 )
$
(288,436 )
$
$
$
(189,378 )
$
$
$
$
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 six months ended December 31, 2023 (dollar amounts in thousands)
Balance – July
1, 2023
$
(25,244,286 )
$
(288,238 )
$
$
$
(195,726 )
$
$
$
$
Shares repurchased (Note 13)
(50,975 )
(198 )
(50,975 )
(198 )
(198 )
Restricted stock granted (Note 13)
Exercise of stock options (Note 13)
Stock-based compensation charge
(Note 13)
Reversal of stock-based compensation
charge (Note 13)
(22,129 )
(22,129 )
(17 )
(17 )
(17 )
Stock-based compensation charge
related to equity-accounted investment
(133 )
(133 )
(133 )
Net loss
(8,358 )
(8,358 )
(8,358 )
Other comprehensive loss (Note 12)
Balance – December 31, 2023
$
(25,295,261 )
$
(288,436 )
$
$
$
(189,378 )
$
$
$
$
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 December 31, 2024 (dollar amounts in thousands)
Balance – October 1, 2024
$
(25,563,808 )
$
(289,733 )
$
$
$
(177,830 )
$
$
$
$
Shares issued (Note 2 and Note 11)
-
-
Shares repurchased (Note 13)
(2,733,557 )
(12,586 )
(2,733,557 )
(12,586 )
(12,586 )
Restricted stock granted (Note 13)
Exercise of stock options (Note 13)
Stock-based compensation charge
(Note 13)
-
-
Reversal of stock-based compensation
charge (Note 13)
(37,221 )
(37,221 )
(11 )
(11 )
(11 )
Adumo non-controlling interest
acquired (Note 2)
Net loss
(32,134 )
(32,134 )
(32,106 )
Dividends paid to non-controlling
interest
(301 )
(301 )
Other comprehensive loss (Note 12)
(22,139 )
(22,139 )
(586 )
(22,725 )
Balance – December 31, 2024
$
(28,297,365 )
$
(302,319 )
$
$
$
(199,969 )
$
$
$
$
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 six months ended December 31, 2024 (dollar amounts in thousands)
Balance – July 1, 2024
$
(25,563,808 )
$
(289,733 )
$
$
$
(188,355 )
$
$
$
$
Shares issued (Note 2 and Note 11)
-
-
Shares repurchased (Note 13)
(2,733,557 )
(12,586 )
(2,733,557 )
(12,586 )
(12,586 )
Restricted stock granted
Exercise of stock options (Note 13)
Stock-based compensation charge
(Note 13)
-
-
Reversal of stock-based compensation
charge (Note 13)
(40,321 )
(40,321 )
(11 )
(11 )
(11 )
Stock-based compensation charge
related to equity-accounted investment
(Note 6)
Adumo non-controlling interest
acquired (Note 2)
-
-
Net loss
(36,676 )
(36,676 )
(36,648 )
Dividends paid to non-controlling
interest
-
-
(301 )
(301 )
Other comprehensive loss (Note 12)
(11,614 )
(11,614 )
(586 )
(12,200 )
Balance – December 31, 2024
$
(28,297,365 )
$
(302,319 )
$
$
$
(199,969 )
$
$
$
$
See Notes to Unaudited Condensed Consolidated Financial Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
9
Three months ended
Six months ended
December 31,
December 31,
2024
2023
2024
2023
(In thousands)
(In thousands)
Cash flows from operating activities
Net loss
$
(32,106 )
$
(2,707 )
$
(36,648 )
$
(8,358 )
Depreciation and amortization
Movement in allowance for doubtful accounts receivable
Fair value adjustment related to financial liabilities
(454 )
(836 )
(264 )
(870 )
Loss on disposal of equity-accounted investments (Note 6)
(Earnings) Loss from equity-accounted investments
(50 )
(43 )
(77 )
Movement in allowance for doubtful loans to equity-accounted investments
(250 )
Change in fair value of equity securities (Note 5 and 6)
Profit on disposal of property, plant and equipment
(14 )
(163 )
(41 )
(199 )
Movement in interest payable
(1,573 )
Facility fee amortized
Stock-based compensation charge (Note 13)
Dividends received from equity-accounted investments
Increase in accounts receivable
(11,988 )
(13,157 )
(4,295 )
(15,502 )
Increase in finance loans receivable
(8,325 )
(2,889 )
(9,915 )
(3,377 )
(Increase) Decrease in inventory
(4,560 )
(5,449 )
Increase (Decrease) in accounts payable and other payables
(9,042 )
(Decrease) Increase in taxes payable
(153 )
(654 )
(346 )
Decrease in deferred taxes
(8,928 )
(1,032 )
(9,374 )
(1,594 )
Net cash (used in) provided by operating activities
(9,166 )
(13,302 )
Cash flows from investing activities
Capital expenditures
(6,318 )
(2,198 )
(10,283 )
(5,007 )
Proceeds from disposal of property, plant and equipment
Acquisition of intangible assets
(428 )
(47 )
(601 )
(182 )
Acquisitions, net of cash acquired
(3,957 )
(3,957 )
Proceeds from disposal of equity-accounted investment (Note 6)
Repayment of loans by equity-accounted investments
Net change in settlement assets
(1,266 )
(43 )
(11,280 )
Net cash (used in) provided by investing activities
(11,494 )
(11,212 )
(11,991 )
Cash flows from financing activities
Proceeds from bank overdraft (Note 9)
Repayment of bank overdraft (Note 9)
(4,512 )
(66,048 )
(35,540 )
(128,841 )
Long-term borrowings utilized (Note 9)
Repayment of long-term borrowings (Note 9)
(8,322 )
(3,184 )
(13,794 )
(5,813 )
Acquisition of treasury stock (Note 13)
(12,586 )
(198 )
(12,586 )
(198 )
Proceeds from exercise of stock options
Guarantee fee
(431 )
(431 )
Dividends paid to non-controlling interest
(301 )
(301 )
Net change in settlement obligations
(2,439 )
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
(5,278 )
(2,052 )
Net increase (decrease) in cash, cash equivalents and restricted cash
(5,181 )
Cash, cash equivalents and restricted cash – beginning of period
Cash, cash equivalents and restricted cash – end of period (Note 15)
$
$
$
$
See Notes to Unaudited Condensed Consolidated Financial Statements
10
LESAKA TECHNOLOGIES, INC
Notes to the Unaudited Condensed Consolidated Financial Statements
for the three and six months ended December 31, 2024 and 2023
(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 six
months ended December 31, 2024 and 2023, 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.
Recent accounting pronouncements adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance regarding
Segment Reporting (Topic
280)
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 December 31, 2024
In December 2023, the FASB issued guidance regarding
Income Taxes (Topic 740)
requirements. The guidance requires entities, on an annual basis, to (1) disclose specific categories in the income tax rate reconciliation
and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items
is equal to or greater than five percent of the amount computed by multiplying pre-tax income or loss by the applicable statutory
income tax rate). This guidance is effective for the Company beginning July 1, 2025. The Company is currently assessing the impact
of this guidance on its financial statements and related disclosures.
In November 2024, the FASB issued guidance regarding
Income Statement—Reporting Comprehensive Income—Expense
Disaggregation Disclosures
(Subtopic 220-40)
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 six months ended December 31, 2023. The cash paid, net of cash received
related to the Company’s acquisitions during the six months ended December 31, 2024, is summarized in the table below:
Total
Total cash paid
$
Less: cash acquired
Total cash paid, net of cash received
$
11
2. Acquisitions (continued)
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
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 also provides card issuing program management to
corporate clients such as Anglo American and Coca-Cola;
●
The Adumo ISV business, also 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
(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
Company’s common stock (“Consideration Shares”) with a value of $
cash of $
million ($
closing price on the Johannesburg Stock Exchange on October 1, 2024, was ZAR
exchange rate).
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
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.
12
2. Acquisitions (continued)
2025 Acquisitions (continued)
October 2024 acquisition of Adumo (continued)
The Company incurred transaction-related expenditures of $
to the acquisition of Adumo. The Company’s accruals presented in Note 10 of as December 31, 2024, includes an accrual of transaction
related expenditures of $
remainder of the 2025 fiscal year.
November 2024 acquisition of Innervation Value Added Services Namibia Pty Ltd (continued)
Effective November 1, 2024, the Company, through its wholly owned subsidiary Adumo Technologies Proprietary Limited
(“Adumo AT”), acquired the remaining shares (representing
% of the issued and outstanding shares) it did not own in Innervation
Value Added Services Namibia Pty Ltd (“IVAS Nam”) for $
rates). IVAS Nam was accounted for using the equity method prior to the acquisition of a controlling interest in the company. Adumo
paid ZAR
be paid in
transaction costs related to this acquisition.
The preliminary purchase price allocation of acquisitions during the six months ended December 31, 2024, translated at the
foreign exchange rates applicable on the date of acquisition, in provided is the table below:
Acquisitions during fiscal 2025 through December 31, 2024
Adumo
IVAS Nam
Total
Cash and cash equivalents
$
$
$
Accounts receivable
Inventory
Property, plant and equipment
Operating lease right of use asset
Equity-accounted investment
Goodwill
Intangible assets
Deferred income taxes assets
Other long-term assets
Current portion of long-term borrowings
(1,178 )
(1,178 )
Accounts payable
(3,266 )
(388 )
(3,654 )
Other payables
(28,045 )
(226 )
(28,271 )
Operating lease liability - current
(1,019 )
(1,019 )
Income taxes payable
(150 )
(42 )
(192 )
Deferred income taxes liabilities
(6,994 )
(6,994 )
Operating lease liability - long-term
(326 )
(326 )
Long-term borrowings
(7,308 )
(7,308 )
Other long-term liabilities
(141 )
(141 )
Settlement assets
Settlement liabilities
(8,530 )
(8,530 )
Fair value of assets and liabilities on acquisition
$
$
$
The fair value of the non-controlling interests recorded 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
% minority discount. The allocation of the purchase price 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 the valuation of the non-controlling interest.
13
2. Acquisitions (continued)
2025 Acquisitions (continued)
Intangible assets acquired
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 six months ended December 31, 2024:
Adumo – technology assets
$
Adumo – customer relationships
Adumo – brands
$
On acquisition, the Company recognized a deferred tax liability of approximately $
intangible assets during the six months ended December 31, 2024.
Pro forma results related to acquisitions
Pro forma results of operations have not been presented for the acquisition of IVAS Nam because the effect of the IVAS Nam
acquisition is not material to the Company. Since the closing of the IVAS Nam acquisition, it has contributed revenue and net income
of $
The results of Adumo’s operations are reflected in the Company’s financial statements from October 1, 2024. The following
unaudited pro forma revenue and net income information has been prepared as if the acquisition of Adumo had occurred on July 1,
2023 using the applicable average foreign exchange rates for the periods presented:
Three months
ended
December 31,
2023
Six months ended
December 31,
2024
2023
Revenue
$
$
$
Net loss
$
(3,040 )
$
(35,024 )
$
(15,088 )
The unaudited pro forma financial information presented above includes the business combination accounting and other effects
from the acquisition 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; and (3) an adjustment to exclude all
applicable transaction-related costs recognized in the Company’s consolidated statement of operations for six months ended December
31, 2024, and include the applicable transaction -related costs for 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 acquisition, Adumo has contributed revenue of $
including intangible assets amortization related to assets acquired, net of deferred taxes, of $
14
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 December 31, 2024, and June 30, 2024, are presented in
the table below:
December 31,
June 30,
2024
2024
Accounts receivable, trade, net
$
$
Accounts receivable, trade, gross
Allowance for doubtful accounts receivable, end of period
Beginning of period
Reversed to statement of operations
(200 )
(511 )
Charged to statement of operations
Utilized
(493 )
(67 )
Foreign currency adjustment
(82 )
Current portion of amount outstanding related to sale of interest in Carbon, net of
allowance: December 2024: $
; June 2024: $
Current portion of total held to maturity investments
Investment in
% of Cedar Cellular Investment 1 (RF) (Pty) Ltd
% notes
Other receivables
Total accounts receivable, net and other receivables
$
$
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 $
of an allowance for doubtful loans receivable of $
to the sale of the $
Investment in
% of Cedar Cellular Investment 1 (RF) (Pty) Ltd
% 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 December 31, 2024, and
June 30, 2024, respectively was $
Other receivables include prepayments, deposits, income taxes receivable and other receivables.
15
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 December 31, 2024, and June 30, 2024, is presented in the table below:
December 31,
June 30,
2024
2024
Microlending finance loans receivable, net
$
$
Microlending finance loans receivable, gross
Allowance for doubtful finance loans receivable, end of period
Beginning of period
Reversed to statement of operations
(162 )
(210 )
Charged to statement of operations
Utilized
(1,166 )
(1,795 )
Foreign currency adjustment
(100 )
Merchant finance loans receivable, net
Merchant finance loans receivable, gross
Allowance for doubtful finance loans receivable, end of period
Beginning of period
Reversed to statement of operations
(23 )
(359 )
Charged to statement of operations
Utilized
(607 )
(1,672 )
Foreign currency adjustment
(118 )
Total finance loans receivable, net
$
$
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 $
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
, with the majority of loans
originated having a tenor of
. 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
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 December 31, 2024, was
%. The performing component (that is, outstanding loan payments
not in arrears) of the book exceeds more than
%, of the outstanding lending book as of each of June 30, 2024 and December 31,
2024.
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
, with the majority of
loans originated having a tenor of approximately
. 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.
16
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 December 31, 2024, was approximately
%. 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
%,
% and
%, 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
%,
% and
%, respectively,
of the outstanding lending book as of December 31, 2024.
4. Inventory
The Company’s inventory comprised the following categories as of December 31, 2024, and June 30, 2024:
December 31,
June 30,
2024
2024
Raw materials
$
$
Work-in-progress
Finished goods
$
$
Finished goods as of June 30, 2024, includes $
goods subject to sale restrictions. The Company sold all of this inventory during the first two months of the six months ended December
31, 2024.
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.
17
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 and November 2024, with further reductions expected in the short-term. 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.
18
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
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 $
Asset measured at fair value using significant unobservable inputs – investment in Cell C
The Company’s Level 3 asset represents an investment of
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 December 31, 2024 and June 30, 2024, respectively, and valued Cell C at $
of December 31, 2024, 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
% and a minority discount of
%. The Company utilized the latest business plan provided by
Cell C management for the period ending December 31, 2027, for the December 31, 2024, 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 December 31, 2024 and June 30, 2024:
Weighted Average Cost of Capital ("WACC"):
Between
% and
% over the period of the forecast
Long term growth rate:
% (
% as of June 30, 2024)
Marketability discount:
% (
% as of June 30, 2024)
Minority discount:
% (
% as of June 30, 2024)
Net adjusted external debt - December 31, 2024:
(1)
ZAR
Net adjusted external debt - June 30, 2024:
(2)
ZAR
(1) translated from ZAR to U.S. dollars at exchange rates applicable as of December 31, 2024.
(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
% decrease and
%
increase in the WACC rate and the EBITDA margins respectively used in the Cell C valuation on December 31, 2024, all amounts
translated at exchange rates applicable as of December 31, 2024:
Sensitivity for fair value of Cell C investment
1.0% increase
1.0% decrease
WACC rate
$
$
EBITDA margin
$
$
The aggregate fair value of the MobiKwik and Cell C’s shares as of December 31, 2024, represented
% 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.
19
5. Fair value of financial instruments
The following table presents the Company’s assets measured at fair value on a recurring basis as of December 31, 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
$
$
$
$
Investment in MobiKwik
Related to insurance
business:
Cash, cash equivalents and
restricted cash (included
in other long-term assets)
Fixed maturity
investments (included in
cash and cash equivalents)
Total assets at fair value
$
$
$
$
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)
Fixed maturity investments
(included in cash and cash
equivalents)
Total assets at fair value
$
$
$
$
There have been
There was
3, during the six months ended December 31, 2024 and 2023.
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 six months ended December 31, 2024:
Carrying value
Assets
Balance as of June 30, 2024
$
Foreign currency adjustment
(1)
Balance as of December 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.
20
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 six months ended December 31, 2023:
Carrying value
Assets
Balance as of June 30, 2023
$
Foreign currency adjustment
(1)
Balance as of December 31, 2023
$
(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
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 December 31, 2024, and June 30, 2024, was as
follows:
December 31,
June 30,
2024
2024
Sandulela Technology (Pty) Ltd ("Sandulela")
%
%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)
%
%
Sale and impairment of Finbond shares during the three and six months ended December 31, 2023
On August 10, 2023, the Company, through its wholly owned subsidiary Net1 Finance Holdings (Pty) Ltd, entered into an
agreement with Finbond to sell its remaining shareholding to Finbond for a cash consideration of ZAR
ZAR
finalized in December 2023. The cash proceeds received of ZAR
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 $
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
2023 agreement referred to above to calculate the determined fair value for Finbond.
21
6. Equity-accounted investments and other long-term assets (continued)
Equity-accounted investments (continued)
Sale and impairment of Finbond shares during the three and six months ended December 31, 2023 (continued)
The Company sold
The Company did
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 three and six months ended December 31, 2023:
2023
Loss on disposal of Finbond shares:
Consideration received in cash
$
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
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
%, in Carbon to
Etobicoke for $
equity interest and the loan had a carrying value of $
shares purchased as security for the amounts outstanding under the binding term sheet. The Company received $
and the outstanding balance due by Etobicoke was expected to be paid as follows: (i) $
was received in October 2023), and (ii) the remaining amount, of $
of December 31, 2024 (refer to Note 3)).
Summarized below is the movement in equity-accounted investments and loans provided to equity-accounted investments during
the six months ended December 31, 2024:
Total
(1)
Investment in equity
Balance as of June 30, 2024
$
Comprehensive income:
Other comprehensive income
Equity accounted (loss) earnings
Share of net (loss) earnings
Impairment
Dividends received
(65 )
Equity-accounted investment acquired in business combination (Note 2)
Disposal of equity accounted investment (Note 2)
(507 )
Foreign currency adjustment
(2)
(7 )
Balance as of December 31, 2024
$
(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.
22
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 December 31, 2024, and June 30, 2024:
December 31,
June 30,
2024
2024
Total equity investments
$
$
Investment in
% of Cell C (June 30, 2024:
%) at fair value (Note 5)
Investment in
% of MobiKwik (June 30, 2024:
%)
(1)
Investment in
% of CPS (June 30, 2024:
%) at fair value
(1)(2)
Policy holder assets under investment contracts (Note 8)
Reinsurance assets under insurance contracts (Note 8)
Other long-term assets
Total other long-term assets
$
$
(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 December 31, 2024. The Company used this valuation as the basis for its adjustment to decrease the carrying value of its
investment in MobiKwik by $
of MobiKwik for the three and six months ended December 31, 2024, of $
of equity securities” in the consolidated statement of operations for the three and six months ended December 31, 2024.
Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to
maturity investments as of December 31, 2024:
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
$
$
$
$
Investment in CPS
Held to maturity:
Investment in Cedar Cellular notes
Total
$
$
$
$
23
7. Goodwill and intangible assets, net
Goodwill
Summarized below is the movement in the carrying value of goodwill for the three months ended December 31, 2024:
Gross value
Accumulated
impairment
Carrying
value
Balance as of June 30, 2024
$
$
(19,348 )
$
Acquisitions (Note 2)
(1)
-
Foreign currency adjustment
(2)
(10,989 )
(10,522 )
Balance as of December 31, 2024
$
$
(18,881 )
$
(1) – Represents goodwill arising from the acquisition of Adumo and IVAS Namibia and translated at the foreign exchange rates
applicable on the date the transactions became effective. This goodwill has been allocated to the Merchant and Consumer 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.
Refer to Note 7 for additional information regarding changes to the Company’s reportable segments during the six months ended
December 31, 2024. Goodwill has been allocated to the Company’s reportable segments as follows:
Merchant
Consumer
Enterprise
Carrying
value
Balance as of June 30, 2024
$
$
$
$
Acquisitions (Note 2)
Foreign currency adjustment
(1)
(9,327 )
(674 )
(521 )
(10,522 )
Balance as of December 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.
Intangible assets, net
Carrying value and amortization of intangible assets
Summarized below is the carrying value and accumulated amortization of intangible assets as of December 31, 2024, and June
30, 2024:
As of December 31, 2024
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)
$
$
(14,941 )
$
$
$
(14,030 )
$
Software, integrated
platform and unpatented
technology
(1)
(31,056 )
(25,763 )
FTS patent
(2,035 )
(2,107 )
Brands and trademarks
(1)
(4,865 )
(4,300 )
Total finite-lived intangible
assets
$
$
(52,897 )
$
$
$
(46,200 )
$
(1) December 31, 2024 balances include the intangible assets acquired as part of the Adumo acquisition in October 2024.
24
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 December 31, 2024 and 2023,
was $
ended December 31, 2024 and 2023, was $
for the next five fiscal years and thereafter, assuming exchange rates that prevailed on December 31, 2024, 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 six months ended December 31, 2024)
$
Fiscal 2026
Fiscal 2027
Fiscal 2028
Fiscal 2029
Thereafter
Total future estimated annual amortization expense
$
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 six
months ended December 31, 2024:
Reinsurance
Assets
(1)
Insurance
contracts
(2)
Balance as of June 30, 2024
$
$
(2,241 )
Increase in policy holder benefits under insurance contracts
(5,028 )
Claims and decrease in policyholders’ benefits under insurance contracts
(260 )
Foreign currency adjustment
(3)
(67 )
Balance as of December 31, 2024
$
$
(2,585 )
(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 six months ended
December 31, 2024:
Assets
(1)
Investment
contracts
(2)
Balance as of June 30, 2024
$
$
(216 )
Increase in policy holder benefits under investment contracts
(8 )
Foreign currency adjustment
(3)
(7 )
Balance as of December 31, 2024
$
$
(217 )
(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.
25
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 engag ing with its borrowers to negotiate changes to its existing borrowing agreements or to introduce
language to cater for the transition to ZARONIA in its future borrowing agreements.
South Africa
The Company is currently renegotiating its borrowing facilities and expects the process to be concluded before March 31, 2025.
The amounts below have been translated at exchange rates applicable as of the dates specified. The JIBAR, an average of 3 month
negotiable certificates of deposit (“NCD”) rates, on December 31, 2024, was
%. The prime rate, the benchmark rate at which
private sector banks lend to the public in South Africa, on December 31, 2024, was
%, and reduced to
% on January 31,
2025, following a 0.25% reduction in the South African repo rate, the rate at which private sector banks borrow funds from the South
African Reserve Bank.
RMB Facilities, as amended, comprising a short-term facility (Facility E) and long-term borrowings
Long-term borrowings - Facility G and Facility H
As of December 31, 2024, Lesaka SA’s facilities included (i) Facility G of ZAR
ZAR
which ZAR
plus
%.
Available short-term facility - Facility E
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
million bridge facility. The Facility has been used by Lesaka SA to (i) settle an amount of ZAR
(refer to Note 2); (ii) pay Crossfin Holdings (RF) Proprietary Limited (“Crossfin Holdings”) ZAR
agreement concluded between Lesaka SA and Crossfin Holdings (refer to Note 11); (iii) pay an amount of ZAR
includes interest, notified by Investec Bank Limited to Adumo and Lesaka SA as a result of the transaction described in Note 2, and
(iv) pay an origination fee of ZAR
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 provides Lesaka SA with an additional ZAR
Facility”) which may be used for general corporate purposes. As of December 31, 2024, the Company had utilized ZAR
of the bridge facility.
Interest on the Facility and the GBF Facility is calculated at the prime rate plus
%. The Facility and the GBF Facility are
unsecured and are required to be repaid in full on or before February 28, 2025.
26
9. Borrowings (borrowings) (continued)
South Africa (continued)
Connect Facilities, comprising long-term borrowings and a short-term facility
As of December 31, 2024, the Connect Facilities include (i) an overdraft facility (general banking facility) of ZAR
(of which ZAR
ZAR
which ZAR
On October 29, 2024, the Company, through its wholly owned subsidiary Cash Connect Management Solutions (Pty) Ltd, entered
into an addendum to a facility letter with RMB, to obtain a ZAR
of approximately four months to specifically fund the purchase of prepaid airtime vouchers. This temporary increase is repayable in
equal daily instalments which commenced at the end of October 2024 with the final repayment due on February 15, 2025.
CCC Revolving Credit Facility, comprising long-term borrowings
As of December 31, 2024, the amount of the CCC Revolving Credit Facility was ZAR
million has been utilized). 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% per annum.
RMB facility, comprising indirect facilities
As of December 31, 2024, the aggregate amount of the Company’s short-term South African indirect credit facility with RMB
was ZAR
December 31, 2024 and June 30, 2024, the Company had utilized ZAR
respectively, of its indirect and derivative facilities of ZAR
issue guarantees, letters of credit and forward exchange contracts (refer to Note 20).
Nedbank facility, comprising short-term facilities
As of December 31, 2024, the aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited
was ZAR
million), which include guarantees, letters of credit and forward exchange contracts.
As of December 31, 2024 and June 30, 2024, the Company had utilized ZAR
($
the bank to issue guarantees, letters of credit and forward exchange contracts (refer to Note 20).
27
9. Borrowings (borrowings) (continued)
South Africa (continued)
Movement in short-term credit facilities (continued)
Summarized below are the Company’s short-term facilities as of December 31, 2024, and the movement in the Company’s short-
term facilities from as of June 30, 2024 to as of December 31, 2024:
RMB
RMB
RMB
RMB
Nedbank
Facility E
Bridge
Indirect
Connect
Facilities
Total
Short-term facilities available as of
December 31, 2024
$
$
$
$
$
$
Overdraft
Indirect and derivative facilities
Movement in utilized overdraft
facilities:
Restricted as to use for ATM
funding only
No restrictions as to use
Balance as of June 30, 2024
Utilized
Repaid
(31,028 )
(3,374 )
(34,402 )
Guarantee fee paid
(431 )
(431 )
Foreign currency
adjustment
(1)
(2,683 )
(566 )
(2,851 )
Balance as of December 31, 2024
No restrictions as to use
$
$
$
$
$
$
Interest rate as of December 31,
2024 (%)
(2)
N/A
13.05
N/A
N/A
Movement in utilized indirect and
derivative facilities:
Balance as of June 30, 2024
$
$
$
$
$
$
Foreign currency adjustment
(1)
(63 )
(4 )
(67 )
Balance as of December 31, 2024
$
$
$
$
$
$
(1) Represents the effects of the fluctuations between the ZAR and the U.S. dollar.
(2) Facility E interest was set at prime, RMB Bridge at prime plus
% and the Connect facility at prime less
%.
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 December 31, 2024 and 2023, was $
and $
the caption interest expense on the condensed consolidated statement of operations during the six months ended December 31, 2024
and 2023, was $
The Company cancelled Adumo’s overdraft arrangements on October 1, 2024, and settled Adumo’s outstanding overdraft
balance of ZAR
included on the Company’s unaudited condensed consolidated statements of cash flows for the three and six months ended December
31, 2024.
28
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 December
31, 2024:
Facilities
Lesaka
RMB
G & H
Connect
RMB
A&B
CCC
RMB
Connect
Wesbank
Asset
backed
Total
Included in current
$
$
$
$
$
Included in long-term
Opening balance as of June 30, 2024
Facilities utilized
Facilities repaid
(3,911 )
(554 )
(2,117 )
(6,582 )
Non-refundable fees amortized
Capitalized interest
Capitalized interest repaid
(95 )
(95 )
Foreign currency adjustment
(1)
(2,374 )
(2,302 )
(414 )
(307 )
(5,397 )
Closing balance as of December 31, 2024
Included in current
Included in long-term
Unamortized fees
(149 )
(149 )
Due within 2 years
Due within 3 years
Due within 4 years
Due within 5 years
$
$
$
$
$
Interest rates as of December 31, 2024 (%):
Base rate (%)
Margin (%)
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 G and Facility H is based on the JIBAR in effect from time to time plus a margin, which margin is
calculated as: (i)
% if the Look Through Leverage (“LTL”) ratio is greater than 3.50x; (ii)
% if the LTL ratio is less than
3.50x but greater than 2.75x; (iii)
% if the LTL ratio is less than 2.75x but greater than 1.75x; or (iv)
% if the LTL ratio is less
than 1.75x. The LTL ratio is expressed as times (“x”), and was introduced to calculate the margin used in the determination of the
interest rate. The LTL ratio is calculated as the Total Attributable Net Debt to the Total Attributable EBITDA, as defined in the
Company’s borrowing arrangements with RMB, for the measurement period ending on a specified date.
(3) Interest on Facility A and Facility B is calculated based on JIBAR plus a margin, which margin is calculated as (i)
% if
the Leverage Ratio (“LR”) is greater than 3.50x; (ii)
% if the LR is less than 3.50x but greater than 2.50x; (iii)
% if the LTL
ratio is less than 2.50x.
(4) Interest is charged at prime plus
% per annum on the utilized balance.
(5) Interest is charged at prime plus
% per annum on the utilized balance.
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 December 31, 2024 and 2023, was $
and $
31, 2024 and 2023, respectively, were $
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 $
servicing and support on the condensed consolidated statement of operations for the three months ended December 31, 2024 and 2023.
29
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 six months ended December 31, 2024 and 2023, was $
and $
2024 and 2023, respectively, were $
facilities relates to borrowings utilized to fund a portion of the Company’s merchant finance loans receivable and this interest expense
of $
the condensed consolidated statement of operations for the six months ended December 31, 2024 and 2023.
The Company cancelled Adumo’s long-term borrowings arrangements on October 1, 2024, and settled Adumo’s outstanding
balances of ZAR
borrowings included on the Company’s unaudited condensed consolidated statements of cash flows for the three and six months ended
December 31, 2024.
10. Other payables
Summarized below is the breakdown of other payables as of December 31, 2024, and June 30, 2024:
December 31,
June 30,
2024
2024
Clearing accounts
$
$
Vendor wallet balances
Accruals
Provisions
Value -added tax payable
Payroll-related payables
Participating merchants' settlement obligation
Other
$
$
Other includes deferred income, client deposits and other payables.
11. Capital structure
October 2024 repurchase of common stock
On October 1, 2024, the Company, through Lesaka SA, and Crossfin Holdings entered into a share purchase agreement under
which Lesaka SA purchased
was settled in early October 2024, and the shares of 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 six months ended
December 31, 2024. The repurchase was made outside of the Company’s $
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
of its common stock at a price of $
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
no value and, accordingly, has not recognized the put option in its consolidated financial statements.
30
11. Capital structure (continued)
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 six months ended December 31, 2024 and 2023, respectively, and the number
of shares, net of treasury, excluding non-vested equity shares that have not vested as of December 31, 2024 and 2023, respectively:
December 31,
December 31,
2024
2023
Number of shares, net of treasury:
Statement of changes in equity
Less: Non-vested equity shares that have not vested as of end of period
Number of shares, net of treasury, excluding non-vested equity shares that have not
vested
12. Accumulated other comprehensive loss
The table below presents the change in accumulated other comprehensive loss per component during the three months ended
December 31, 2024:
Three months ended
December 31, 2024
Accumulated
foreign
currency
translation
reserve
Total
Balance as of October 1, 2024
$
(177,830 )
$
(177,830 )
Release of foreign currency translation reserve related to liquidation of subsidiaries
Movement in foreign currency translation reserve
(22,145 )
(22,145 )
Balance as of December 31, 2024
$
(199,969 )
$
(199,969 )
The table below presents the change in accumulated other comprehensive loss per component during the three months ended
December 31, 2023:
Three months ended
December 31, 2023
Accumulated
foreign
currency
translation
reserve
Total
Balance as of October 1, 2023
$
(196,081 )
$
(196,081 )
Release of foreign currency translation reserve related to disposal of Finbond equity securities
Movement in foreign currency translation reserve related to liquidation of subsidiaries
(952 )
(952 )
Movement in foreign currency translation reserve
Balance as of December 31, 2023
$
(189,378 )
$
(189,378 )
31
12. Accumulated other comprehensive loss (continued)
The table below presents the change in accumulated other comprehensive loss per component during the six months ended
December 31, 2024:
Six months ended
December 31, 2024
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
Movement in foreign currency translation reserve
(11,620 )
(11,620 )
Balance as of December 31, 2024
$
(199,969 )
$
(199,969 )
The table below presents the change in accumulated other comprehensive loss per component during the six months ended
December 31, 2023:
a
Six months ended
December 31, 2023
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
Movement in foreign currency translation reserve related to equity-accounted investment
Movement in foreign currency translation reserve related to liquidation of subsidiaries
(952 )
(952 )
Movement in foreign currency translation reserve
Balance as of December 31, 2023
$
(189,378 )
$
(189,378 )
The movement in the foreign currency translation reserve represents the impact of translation of consolidated entities which have
a functional currency (which is primarily ZAR) to the Company’s reporting currency, which is USD.
During each of the three and six months ended December 31, 2024, the Company reclassified a loss of $
respectively, from accumulated other comprehensive loss (accumulated foreign currency translation reserve) to net loss related to the
liquidation of subsidiaries During each of the three and six months ended December 31, 2023, the Company reclassified losses of $
million, respectively, 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 $
comprehensive loss (accumulated foreign currency translation reserve) to net loss related to the liquidation of subsidiaries.
32
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 six months ended December 31, 2024 and 2023:
Number of
shares
Weighted
average
exercise
price
($)
Weighted
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
($'000)
Weighted
average
grant date
fair value
($)
Outstanding - June 30, 2024
Granted - December 2024
-
Granted - December 2024
-
Exercised
(17,014 )
-
-
Forfeited
(13,333 )
-
-
Outstanding - December 31, 2024
Outstanding - June 30, 2023
Granted – December 2023
Exercised
(7,385 )
-
-
Forfeited
(186,846 )
-
-
Outstanding - December 31, 2023
The Company awarded
The Company awarded a further
. The
the Company through to the vesting date. The
stock options to Ali Mazanderani, the Company’s Executive Chairman, during the three and six months ended December 31, 2023.
These options vested in December 2024, but may only be exercised during a period commencing from January 31, 2028 to January
31, 2029.
During each of the three and six months ended December 31, 2024, the Company received $
and $
options during each of the three and six months ended December 31, 2024. Employees and a non-employee director forfeited an
aggregate of
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
- day volatility.
The estimated expected life of the option was determined based on the historical behavior of employees who were granted options
with similar terms.
The table below presents the range of assumptions used to value stock options granted during the six months ended December
31, 2024 and 2023:
Six months ended
December 31,
2024
2023
Expected volatility
%
%
Expected dividends
%
%
Expected life (in years)
Risk-free rate
%
%
33
13. Stock-based compensation (continued)
The Company’s Amended and Restated 2022 Stock Incentive Plan (“2022 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 (continued)
Options (continued)
The following table presents stock options vested and expected to vest as of December 31, 2024:
Number of
shares
Weighted
average
exercise
price
($)
Weighted
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
($’000)
Vested and expecting to vest - December 31, 2024
These options have an exercise price range of $
.
The following table presents stock options that are exercisable as of December 31, 2024:
Number of
shares
Weighted
average
exercise
price
($)
Weighted
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
($’000)
Exercisable - December 31, 2024
issues new shares to satisfy stock option exercises.
34
13. Stock-based compensation (continued)
Stock option and restricted stock activity (continued)
Restricted stock
The following table summarizes restricted stock activity for the six months ended December 31, 2024 and 2023:
Number of
shares of
restricted stock
Weighted
average grant
date fair value
($’000)
Non-vested – June 30, 2024
Total granted
Granted – August 2024
Granted – October 2024
Granted – November 2024, with performance conditions
Total vested
(473,432 )
Vested – July 2024
(78,801 )
Vested – November 2024
(213,687 )
Vested – November 2024, with performance conditions
(103,638 )
Vested – December 2024
(77,306 )
Forfeitures
(40,321 )
Non-vested – December 31, 2024
Non-vested – June 30, 2023
Total Granted
Granted – October 2023
Granted – October 2023, with performance awards
Granted – October 2023
Total vested
(255,706 )
Vested – July 2023
(78,800 )
Vested – November 2023
(109,833 )
Vested – December 2023
(67,073 )
Forfeitures
(22,129 )
Non-vested – December 31, 2023
Grants
In August 2024 and October 2024, respectively, the Company granted
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
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
% appreciation in the Company’s stock price off a base
price of $
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 $
.
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:
%;
●
Fiscal 2026, the Company’s 30-day volume weighted-average stock price (“VWAP”) before September 30, 2025 is
approximately
:
%;
●
Fiscal 2027, the Company’s VWAP before September 30, 2026 is
:
%;
●
Fiscal 2028, the Company’s VWAP before November 1, 2027 is
) than $
:
%.
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
% for the closing price (of $
), 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.
35
13. Stock-based compensation (continued)
Stock option and restricted stock activity (continued)
Restricted stock (continued)
Grants (continued)
In October 2023, the Company awarded
The Company also awarded
except if the executive officer is terminated for cause, in which case the award will be forfeited.
In October 2023, the Company awarded
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
% appreciation in the Company’s stock price off a base price of $
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 $
.
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:
%;
●
Fiscal 2025, the Company’s 30-day volume weighted-average stock price (“VWAP”) before November 17, 2024 is
approximately
:
%;
●
Fiscal 2026, the Company’s VWAP before November 17, 2025 is
:
%;
●
Fiscal 2027, the Company’s VWAP before November 1, 2026 is
) than $
:
%.
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
% for the closing price (of $
), 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
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 six months ended December 31, 2024, the Company recorded a stock-based compensation charge of $
included the issuance of
Vesting
In July 2024,
2024, an aggregate of
to be withheld to satisfy the withholding tax liability on the vesting of their shares. These
Company’s treasury shares. In November 2024,
vested following the achievement of the agreed performance condition.
In July 2023,
the withholding tax liability on the vesting of their shares. These
Forfeitures
During the three and six months ended December 31, 2024, respectively, employees forfeited
restricted stock following their termination of employment with the Company or the failure to achieved agreed performance conditions
(
ended December 31, 2023, respectively, employees forfeited
of employment with the Company.
36
13. Stock-based compensation (continued)
Stock-based compensation charge and unrecognized compensation cost
The Company recorded a stock-based compensation charge, net during the three months ended December 31, 2024 and 2023, of
$
Total charge
Allocated to cost
of goods sold, IT
processing,
servicing and
support
Allocated to
selling, general
and
administration
Three months ended December 31, 2024
Stock-based compensation charge
$
$
-
$
Reversal of stock compensation charge related to stock
options and restricted stock forfeited
(11 )
-
(11 )
Total - three months ended December 31, 2024
$
$
-
$
Three months ended December 31, 2023
Stock-based compensation charge
$
$
-
$
Reversal of stock compensation charge related to stock
options and restricted stock forfeited
(8 )
-
(8 )
Total - three months ended December 31, 2023
$
$
-
$
The Company recorded a stock-based compensation charge, net during the six months ended December 31, 2024 and 2023, of
$
a
Total charge
Allocated to cost
of goods sold, IT
processing,
servicing and
support
Allocated to
selling, general
and
administration
Six months ended December 31, 2024
Stock-based compensation charge
$
$
-
$
Reversal of stock compensation charge related to stock
options and restricted stock forfeited
(11 )
-
(11 )
Total - six months ended December 31, 2024
$
$
-
$
Six months ended December 31, 2023
Stock-based compensation charge
$
$
-
$
Reversal of stock compensation charge related to stock
options and restricted stock forfeited
(17 )
-
(17 )
Total - six months ended December 31, 2023
$
$
-
$
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.
As of December 31, 2024, the total unrecognized compensation cost related to stock options was $
Company expects to recognize over
. As of December 31, 2024, the total unrecognized compensation cost related to restricted
stock awards was $
.
During the three months ended December 31, 2024 and 2023, the Company recorded a deferred tax benefit of $
$
months ended December 31, 2024 and 2023, the Company recorded a deferred tax benefit of $
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.
37
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
carrying value of the redeemable common stock during the three and six months ended December 31, 2024 and 2023. 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 six months ended December 31,
2024 and 2023, reflects only undistributed earnings. The computation below of basic (loss) earnings per share excludes the net loss
attributable to shares of unvested restricted stock (participating non-vested restricted stock) from the numerator and excludes the
dilutive impact of these unvested shares of restricted stock from the denominator.
Diluted (loss) earnings per share 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
31, 2024 and 2023 because the effect would be antidilutive. The Company has excluded employee stock options to purchase
and
and 2023, 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.
38
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
Six months ended
December 31,
December 31,
2024
2023
2024
2023
(in thousands except
(in thousands except
percent and
percent and
per share data)
per share data)
Numerator:
Net loss attributable to Lesaka
$
(32,134 )
$
(2,707 )
$
(36,676 )
$
(8,358 )
Undistributed loss
(32,134 )
(2,707 )
(36,676 )
(8,358 )
Percent allocated to common shareholders
(Calculation 1)
Numerator for loss per share: basic and diluted
$
(31,034 )
$
(2,588 )
$
(35,430 )
$
(7,961 )
Denominator
Denominator for basic (loss) earnings per share:
weighted-average common shares outstanding
Effect of dilutive securities:
Denominator for diluted (loss) earnings
per share: adjusted weighted average
common shares outstanding and assuming
conversion
Loss per share:
Basic
$
(0.40 )
$
(0.04 )
$
(0.51 )
$
(0.13 )
Diluted
$
(0.40 )
$
(0.04 )
$
(0.51 )
$
(0.13 )
(Calculation 1)
Basic weighted-average common shares
outstanding (A)
Basic weighted-average common shares
outstanding and unvested restricted shares
expected to vest (B)
Percent allocated to common shareholders
Options to purchase
outstanding during the three and six months ended December 31, 2024, 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
during the three and six months ended December 31, 2023, 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 December 31, 2024.
15. Supplemental cash flow information
The following table presents supplemental cash flow disclosures for the three and six months ended December 31, 2024 and
2023:
Three months ended
Six months ended
December 31,
December 31,
2024
2023
2024
2023
Cash received from interest
$
$
$
$
Cash paid for interest
$
$
$
$
Cash paid for income taxes
$
$
$
$
39
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 December 31, 2024 and 2023, and June 30, 2024:
December 31,
2024
December 31,
2023
June 30, 2024
Cash and cash equivalents
$
$
$
Restricted cash
Cash, cash equivalents and restricted cash
$
$
$
Leases
The following table presents supplemental cash flow disclosure related to leases for the three and nine months ended December
31, 2024 and 2023:
Three months ended
Six months ended
December 31,
December 31,
2024
2023
2024
2023
Cash paid for amounts included in the measurement of
lease liabilities
Operating cash flows from operating leases
$
$
$
$
Right-of-use assets obtained in exchange for lease
obligations
Operating leases
$
$
$
$
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 December 31, 2024:
Merchant
Consumer
Enterprise
Total
Processing fees
$
$
$
$
South Africa
Rest of Africa
Technology products
South Africa
Rest of Africa
Prepaid airtime sold
South Africa
Rest of Africa
Lending revenue
Interest from customers
Insurance revenue
Account holder fees
Other
South Africa
Rest of Africa
Total revenue, derived from the following geographic
locations
South Africa
Rest of Africa
$
$
$
$
40
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 December 31, 2023:
Merchant
Consumer
Enterprise
Total
Processing fees
$
$
$
$
South Africa
Rest of Africa
Technology products
South Africa
Rest of Africa
Prepaid airtime sold
South Africa
Rest of Africa
Lending revenue
Interest from customers
Insurance revenue
Account holder fees
Other
South Africa
Rest of Africa
Total revenue, derived from the following geographic
locations
South Africa
Rest of Africa
$
$
$
$
The following table presents the Company’s revenue disaggregated by major revenue streams, including a reconciliation to
reportable segments for the six months ended December 31, 2024:
Merchant
Consumer
Enterprise
Total
Processing fees
$
$
$
$
South Africa
Rest of Africa
Technology products
South Africa
Rest of Africa
Prepaid airtime sold
South Africa
Rest of Africa
Lending revenue
Interest from customers
Insurance revenue
Account holder fees
Other
South Africa
Rest of Africa
Total revenue, derived from the following geographic
locations
South Africa
Rest of Africa
$
$
$
$
41
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 six months ended December 31, 2023:
Merchant
Consumer
Enterprise
Total
Processing fees
$
$
$
$
South Africa
Rest of Africa
Technology products
South Africa
Rest of Africa
Prepaid airtime sold
South Africa
Rest of Africa
Lending revenue
Interest from customers
Insurance revenue
Account holder fees
Other
South Africa
Rest of Africa
Total revenue, derived from the following geographic
locations
South Africa
Rest of Africa
$
$
$
$
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
. The Company also operates parts of its consumer business from locations which it leases for a period of less than
. The Company’s operating lease expense during the three months ended December 31, 2024 and 2023 was $
$
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
December 31, 2024 and 2023, was $
six months ended December 31, 2024 and 2023, was $
The following table presents supplemental balance sheet disclosure related to the Company’s right-of-use assets and its operating
lease liabilities as of December 31, 2024 and June 30, 2024:
December 31,
June 30,
2024
2024
Right of use assets obtained in exchange for lease obligations:
Weighted average remaining lease term (years)
Weighted average discount rate (percent)
42
17. Leases (continued)
The maturities of the Company’s operating lease liabilities as of December 31, 2024, are presented below:
Maturities of operating lease liabilities
Year ended June 30,
2025 (excluding six months to December 31, 2024)
$
2026
2027
2028
2029
Thereafter
Total undiscounted operating lease liabilities
Less imputed interest
Total operating lease liabilities, included in
Operating lease liability - current
Operating lease liability - long-term
$
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. 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,
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.
Reallocation of certain activities among operating segments
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 prepaid airtime, and fees earned from the provision of value-
added services (“VAS”) 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.
43
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. 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 December
31, 2024 and 2023, is as follows:
Revenue
Reportable
Segment
Inter-
segment
From
external
customers
Merchant
$
$
$
Consumer
Enterprise
Total for the three months ended December 31, 2024
$
$
$
Merchant
$
$
$
Consumer
Enterprise
Total for the three months ended December 31, 2023
$
The reconciliation of the reportable segment’s revenue to revenue from external customers for the six months ended December
31, 2024 and 2023, is as follows:
Revenue
Reportable
Segment
Inter-
segment
From
external
customers
Merchant
$
$
$
Consumer
Enterprise
Total for the six months ended December 31, 2024
$
$
$
Merchant
$
$
$
Consumer
Enterprise
Total for the six months ended December 31, 2023
$
$
$
44
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 expected to have this facility in place on July 1, 2024, however, the
Company has been unable to finalize terms as the separate lending facility will form part of a broader refinancing of the Company’s
facilities. Therefore, the Company has included an intercompany interest expense in its Consumer Segment Adjusted EBITDA for the
three and six months ended December 31, 2024. 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 six months
ended December 31, 2024 and 2023, is as follows:
Three months ended
Six months ended
December 31,
December 31,
2024
2023
2024
2023
Reportable segments' measure of profit or loss
$
$
$
$
Operating loss: Group costs
(2,820 )
(2,011 )
(5,769 )
(3,833 )
Once-off costs
(488 )
(2,293 )
Interest adjustment
-
Unrealized Loss FV for currency adjustments
(435 )
(216 )
Stock-based compensation charge adjustments
(2,644 )
(1,804 )
(5,021 )
(3,563 )
Depreciation and amortization
(8,223 )
(5,813 )
(14,499 )
(11,669 )
Loss on disposal of equity-accounted investments
(161 )
(161 )
Change in fair value of equity securities
(33,731 )
(33,731 )
Reversal of allowance of EMI doubtful debt
Interest income
Interest expense
(6,174 )
(4,822 )
(11,206 )
(9,731 )
Loss before income tax expense
$
(38,568 )
$
(2,064 )
$
(43,059 )
$
(6,046 )
45
18. Operating segments (continued)
Operating segments (continued)
The following tables summarize supplemental segment information for the three and six months ended December 31, 2024 and
2023:
Three months ended
Six months ended
December 31,
December 31,
2024
2023
2024
2023
Revenues
Merchant
$
$
$
$
Enterprise
Consumer
Total reportable segment revenue
Segment Adjusted EBITDA
Merchant
(1)(2)
Enterprise
(2)
(31 )
Consumer
(1)(2)
Total Segment Adjusted EBITDA
Depreciation and amortization
Merchant
Enterprise
Consumer
Subtotal: Operating segments
Group costs
Total
Expenditures for long-lived assets
Merchant
Enterprise
Consumer
Subtotal: Operating segments
Group costs
Total
$
$
$
$
(1) Segment Adjusted EBITDA for the three months ended December 31, 2024, includes retrenchments costs for Consumer of
$
million) and Consumer includes retrenchment costs of $
(2) Segment Adjusted EBITDA for the six months ended December 31, 2024, includes retrenchments costs for Consumer of
$
retrenchment costs of $
for the six months ended December 31, 2023.
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.
46
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 six months ended December 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 (including transaction-related expenditures),
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.
For the three and six months ended December 31, 2023, 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 December 31, 2024 and June 30, 2023, the Company had
files income tax returns mainly in South Africa, Botswana, Namibia and in the U.S. federal jurisdiction. As of December 31, 2024,
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
applicable as of December 31, 2024) thereby utilizing part of the Company’s short-term facilities. The Company pays commission of
between
% per annum to
% 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
applicable as of December 31, 2024) thereby utilizing part of the Company’s short-term facilities. The Company pays commission of
between
% per annum to
% 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 December 31,
2024. The maximum potential amount that the Company could pay under these guarantees is ZAR
at exchange rates applicable as of December 31, 2024). 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
at exchange rates applicable as of December 31, 2024). 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.
47
21. Subsequent events
Proposed acquisition of Recharger
On November 20, 2024, the Company announced the acquisition of Recharger (Pty) Ltd (“Recharger”). The acquisition is subject
to the satisfaction of customary closing conditions, including certain regulatory approvals. As of January 29, 2025, all regulatory
approvals, including approval by the Competition Commission (South Africa), were satisfied. The acquisition is expected to close in
the third quarter of fiscal 2025.
The purchase consideration of ZAR
second tranche a year later. The purchase consideration will be settled through a combination of ZAR
to be issued for the equity consideration will be 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. The Company will also make a ZAR
at closing which will be used exclusively to repay a loan due by Recharger to the seller.
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.
48
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
Beginning in the second quarter of fiscal year 2025, Lesaka has commenced disclosing its financial results across three distinct
operating divisions: Merchant, Consumer and Enterprise. We are building an integrated multiproduct platform that is organized around
addressing a number of customer needs.
The Consumer Division (“Consumer”) will remain substantially the same. We offer consumers a transactional account, loans
and insurance. On 1 October the Adumo Payouts business officially became part of Consumer.
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 its merchant acquiring and processing
business and its GAAP hospitality platform. Combined the Lesaka offering will be amongst the most comprehensive in the market in
meeting the needs of micro and medium size businesses in the region. 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).
Our Enterprise Division (“Enterprise”) focuses on large corporates, mobile network operators, banks, governments and
municipalities. 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.
Merchant Division
This division provides merchant acquiring, software, cash management services, lending and ADP, that empower merchants and
micro-merchants to transact efficiently and fulfill their potential.
49
Performance in Merchant has been driven by:
Merchant acquiring
Fiscal quarter ended December 31,
Q2 2025
Q2 2024
Q2 2023
Number of devices in deployment
80,178
48,199
34,216
Total Throughput for the quarter (ZAR billions)
11.3
4.1
3.1
●
Merchant acquiring includes 80,178 devices deployed under the Adumo, Card Connect and Kazang brands. Q2 2025 is
inclusive of approximately 27,000 devices deployed under the Adumo brand with the Adumo transaction closing on
October 1, 2024.
●
Throughput increased to ZAR 11.3 billion for the quarter, driven mainly by the inclusion of Adumo in Q2 2025 and
supported by 19% year-on-year increase in throughput attributable to Kazang Pay.
Software
Our software solutions are offered through GAAP, a subsidiary of Adumo. GAAP has operations in South Africa, Botswana,
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.
Fiscal quarter ended December 31,
Q2 2025
Number of GAAP sites
9,705
Approximate ARPU per site (ZAR)
1
3,300
1.
ARPU is calculated on a revenue per site basis, as monthly figure based on a three-month rolling average for the quarter
ending December 31, 2024.
●
The Adumo transaction closed on October 1, 2024. The number of GAAP sites was 9,705 as of December 31, 2024.
●
ARPU per site, which combines hardware, software and acquiring revenue, was approximately ZAR 3,300 per month.
Cash management
Our cash management and digitalization
solutions effectively “puts the bank” in 4,664 merchants’ stores.
Fiscal quarter ended December 31,
Q2 2025
Q2 2024
Q2 2023
2025
vs. 2024
Number of devices in deployment
4,664
4,484
4,325
4%
Cash settlements (throughput) for the quarter (ZAR billions)
30.4
29.9
29.5
2%
●
Our cash business remains a vital product in our merchant offering and is a key differentiator for us in the digitalization
of cash. We provide robust cash vaults in the merchant sector (Cash Connect) and are building a presence in the micro-
merchant sector (Kazang Vaults), which enables our merchant customer base to mitigate their operational risks
pertaining to cash management and security.
Lending
Our lending
solutions are offered to merchants through Capital Connect and Adumo Capital, a joint venture with Retail Capital
(a division of Tyme Bank) for Merchant Cash Advance (“MCA”), with a 50:50 profit share.
Fiscal quarter ended December 31,
Q2 2025
Q2 2024
Q2 2023
Total credit disbursed (ZAR millions)
1
178
170
205
Total net loan book size at period end (ZAR millions)
343
253
290
1.
Amounts reflected above includes 100% of Adumo Capital’s credit disbursed and net loan book.
●
Q2 2025 is inclusive of credit disbursed under the Adumo brand with the Adumo transaction closing on October 1,
2024.
●
Capital Connect’s lending proposition is an important component in enabling the merchants we serve to compete and
grow.
●
Adumo Capital, a 50:50 joint venture with Retail Capital, enables merchants to access working capital in exchange for
a portion of future turnover at POS. Merchants can apply online and have access to funds within 24 hours.
50
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.
Fiscal quarter ended December 31,
Q2 2025
Q2 2024
Q2 2023
2025
vs. 2024
Number of devices in deployment
1
89,571
79,051
64,428
13%
Total throughput for the quarter (ZAR billions)
11.1
8.4
6.9
32%
Pre-paid solutions throughput for the quarter (ZAR billions)
4.9
4.6
3.7
7%
Supplier enabled payments throughput for the quarter (ZAR
billions)
6.2
3.8
3.2
63%
1.
2025 includes 5,714 devices attributable to the acquisition of Kazang Insights (formerly known as Touchsides), effective
May 1, 2024, which are not enabled for Alternative Digital Payments.
●
We had 89,571 devices deployed as of December 31, 2024, representing a 13% year-on-year growth compared to 79,051
devices as of December 31, 2023. This includes 5,714 devices in Kazang Insights
(formerly known as Touchsides)
sites
that are not yet enabled for ADP.
●
Core to our device placement strategy is the decision to focus on quality business and optimizing our existing fleet,
which is reflected in a healthy throughput growth.
●
Total throughput increased 32% to ZAR 11.1 billion year-on-year, driven by a 63% increase in supplier enabled
payments.
Consumer Division
In our Consumer Division we offer transactional accounts (banking), insurance, lending and payments solutions designed to
improve the lives of historically underserviced consumers and continue to deliver against our strategic focus areas underpinning our
growth strategy.
Consumer
Fiscal quarter ended December 31,
Q2 2025
Q2 2024
Q2 2023
2025
vs. 2024
Transactional accounts (banking) - EasyPay Everywhere ("EPE")
Total active EPE transactional account base at quarter end
(millions)
1.6
1.4
1.2
11%
Total active EPE transactional account base at quarter end
- Permanent grant recipients (millions)
1
1.4
1.2
1.0
16%
Approximate Gross EPE account activations for the
quarter -Permanent grant recipients (number)
99,000
137,000
43,000
(27%)
Approximate Net EPE account activations for the quarter
- Permanent grant recipients (number)
1
65,000
102,000
10,000
(37%)
Lending - EasyPay Loans
Approximate number of loans originated during the
quarter (number)
336,000
278,000
225,000
21%
Gross advances in the quarter (ZAR millions)
617
447
339
38%
Loan book size, before allowances, at quarter end
2
millions)
709
503
398
41%
Insurance - EasyPay Insurance
Approximate number of insurance policies written in the
quarter (number)
50,000
42,000
29,000
19%
Total active insurance policies on book at quarter end
(number)
496,488
384,338
294,157
29%
Average revenue per customer per month, as of
December 31, (permanent grant beneficiaries) (ZAR)
94
85
74
11%
Adumo Payouts
Approximate number of active cardholders
200,000
-
-
-
Approximate load value for the quarter (ZAR millions)
170
-
-
-
51
1.
Source: SASSA statistical reports portal (2024) | Permanent grant customers per SASSA’s monthly Social Assistance report
(December 31, 2024).
2.
Gross loan book, before provisions.
●
Driving customer acquisition
o
Gross EPE account activations, continue to grow at the new levels for the permanent base, post our marketing and
distribution network enhancements in fiscal 2024. We achieved approximately 99,000 gross account activations in
the quarter, compared to approximately 137,000 in the second quarter of fiscal 2024 which was higher than normal
due to operational issues at the Post Bank specific to that quarter; and approximately 71,000 gross activations a
quarter ago (Q1 2025). After accounting for churn, net active account growth (
permanent grant customers per
SASSA’s monthly Social Assistance report for December 31, 2024, on the SASSA statistical reports portal)
for the
quarter was approximately 65,000 accounts, compared to approximately 102,000 in the second quarter of fiscal
2024, and 33 000 in the first quarter of fiscal 2025.
o
Our total active EPE transactional account base stood at approximately 1.6 million at the end of December 2024, of
which approximately 1.4 million (or approximately 89%) are permanent grant recipients (
permanent grant
customers per SASSA’s monthly Social Assistance report for December 31, 2024, 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 in calendar year 2024.
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 336,000 loans during the quarter, with our consumer loan book, before allowances
(“gross book”), increasing 41% to ZAR 709 million as of December 31, 2024, compared to ZAR 503 million as of
December 31, 2023.
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 of approximately 6%, 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 two 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 35% of our active permanent grant account base as of
December 31, 2024, compared to 31% as of December 31, 2023. Approximately 50,000 new policies were written
in the quarter, compared to approximately 42,000 in the comparable period in fiscal 2024. The total number of active
policies has grown 29% to approximately 496,000 policies as of December 31, 2024, compared to 384,000 policies
as of December 31, 2023.
ARPU
o
ARPU for our permanent client base has increased to approximately ZAR 94 per month for the second quarter of
fiscal 2025, from approximately ZAR 85 in the second quarter of fiscal 2024.
Adumo Payouts
o
On 1 October the Adumo Payouts business officially became part of the Consumer Division.
o
The number of active card holders was approximately 200,000 at the end of the second quarter of fiscal 2025, with
a load value of approximately ZAR 170 million for quarter ended December 31, 2024.
52
Enterprise Division
In our Enterprise Division we deliver software and payment technology to enterprise clients, who are generally large-scale
corporate and government organizations, including but not limited to banks, mobile network operators and municipalities, driving
efficiency and innovation.
Fiscal quarter ended December 31,
Q2 2025
Q2 2024
2025
vs. 2024
Bill Payments
Total Throughput for the quarter (ZAR billions)
8.3
7.3
13%
Utility Payments
Total Throughput for the quarter (ZAR billions)
1.6
2.0
(16%)
Hardware Security Modules
Units
147
138
7%
Switching
1
Approximate number of transactions (million)
34
-
-
1.
Our new payment switch, Prism Switch has been in production since June 2024 thus prior period comparatives are not
applicable.
Acquisition of Recharger
On November 20, 2024, we announced the acquisition of Recharger (Pty) Ltd (“Recharger”), an acquisition subject to satisfaction
of customary closing conditions. As of January 29, 2025, all regulatory approvals, including approval by the Competition Commission,
have been satisfied. The transaction is expected to close in the third quarter of fiscal 2025, once the remaining procedural customary
closing conditions are satisfied.
The purchase consideration of ZAR 507 million will be paid over two tranches with the first tranche settled at closing and the
second tranche a year later. The purchase consideration will be settled through a combination of ZAR 332 million in cash and ZAR
175 million in shares of our common stock. The share price applied to determine the number of shares of our common stock to be
issued for the equity consideration will be based on the volume-weighted average price of our shares for the three-month period prior
to the disbursal of each tranche.
We
will also make a ZAR 43 million contribution to Recharger at closing which will be used
exclusively to repay a loan due by Recharger to the seller.
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.
Improvement in our Broad Based Black Economic Empowerment (“B-BBEE”) rating to level 3
B-BBEE is a key strategic priority for us. Achievement of B-BBEE objectives is measured by a scorecard which establishes a
weighting for various elements. Scorecards are independently reviewed by accredited BEE verification agencies which issue a
certificate that presents an entity’s BEE Contributor Status Level, with level 1 being the highest and “no rating” (a level below level 8)
as the lowest. During fiscal 2025 we reported that our independently verified B-BBEE rating improved to a level 3 rating from a level
4 rating achieved in fiscal year 2024.
53
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 December 31, 2024
Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting
pronouncements not yet adopted as of December 31, 2024, 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
Six months ended
Year ended
December 31,
December 31,
June 30,
2024
2023
2024
2023
2024
ZAR : $ average exchange rate
17.9054
18.7313
17.9327
18.6885
18.7070
Highest ZAR : $ rate during period
18.8296
19.4568
18.8296
19.4568
19.4568
Lowest ZAR : $ rate during period
17.3354
18.2076
17.1144
17.6278
17.6278
Rate at end of period
18.8296
18.2982
18.8296
18.2982
18.1808
54
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 six months ended December 31, 2024 and 2023, 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
Six months ended
Year ended
Table 2
December 31,
December 31,
June 30,
2024
2023
2024
2023
2024
Income and expense items: $1 = ZAR
17.8495
18.7108
17.7967
18.7124
18.6844
Balance sheet items: $1 = ZAR
18.8296
18.2982
18.8296
18.2982
18.1808
We have translated the results of operations and operating segment information for the three and six months ended December
31, 2024 and 2023, provided in the tables below using the actual average exchange rates per month (i.e. for each of October 2024,
November 2024, and December 2024 for the second 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.
55
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. 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. Adumo is 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)
Enterprise and (3) Consumer. 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.
Second quarter of fiscal 2025 compared to second quarter of fiscal 2024
The following factors had a significant impact on our results of operations during the second quarter of fiscal 2025 as compared
with the same period in the prior year:
●
Lower revenue in ZAR:
Our revenues decreased 2% in ZAR, primarily due to fewer low margin prepaid airtime sales and a
lower contribution from Enterprise, which was partially offset by the inclusion of Adumo, an increase in value-added services
activity in Merchant, as well as higher transaction, insurance and lending revenues in Consumer;
●
Operating income decrease:
Operating income decreased primarily due to higher costs and the increase in amortization of
acquisition-related intangible assets related to the acquisition of Adumo, which was partially offset by contribution from
Adumo from October 1, 2024;
●
Non-cash fair value adjustment related to equity securities:
We recorded a non -cash fair value loss of $33.7 million during
the second quarter of fiscal 2025 related to our investment in MobiKwik;
●
Higher net interest charge:
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:
compared to the prior period, which positively impacted our U.S. dollar reported results.
56
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 December 31,
2024
2023
%
$ ’000
$ ’000
change
Revenue
146,818
143,893
2%
Cost of goods sold, IT processing, servicing and support
101,298
114,266
(11%)
Selling, general and administration
36,520
21,541
70%
Depreciation and amortization
8,223
5,813
41%
Operating income
777
2,273
(66%)
Change in fair value of equity securities
(33,731)
-
nm
Loss on disposal of equity-accounted investments
161
-
nm
Interest income
721
485
49%
Interest expense
6,174
4,822
28%
Loss before income tax (benefit) expense
(38,568)
(2,064)
1,769%
Income tax (benefit) expense
(6,412)
686
nm
Net loss before earnings from equity-accounted investments
(32,156)
(2,750)
1,069%
Earnings from equity-accounted investments
50
43
16%
Net loss
(32,106)
(2,707)
1,086%
Less net income attributable to non-controlling interest
28
-
nm
Net loss attributable to us
(32,134)
(2,707)
1,087%
Table 4
In South African Rand
Three months ended December 31,
2024
2023
%
ZAR ’000
ZAR ’000
change
Revenue
2,629,200
2,694,506
(2%)
Cost of goods sold, IT processing, servicing and support
1,814,111
2,139,730
(15%)
Selling, general and administration
653,756
403,443
62%
Depreciation and amortization
147,086
108,863
35%
Operating income
14,247
42,470
(66%)
Change in fair value of equity securities
(614,710)
-
nm
Loss on disposal of equity-accounted investments
2,886
-
nm
Interest income
12,886
9,080
42%
Interest expense
110,580
90,329
22%
Loss before income tax (benefit) expense
(701,043)
(38,779)
1,708%
Income tax (benefit) expense
(116,954)
12,845
nm
Net loss before earnings from equity-accounted investments
(584,089)
(51,624)
1,031%
Earnings from equity-accounted investments
891
805
11%
Net loss
(583,198)
(50,819)
1,048%
Less net income attributable to non-controlling interest
496
-
nm
Net loss attributable to us
(583,694)
(50,819)
1,049%
Revenue increased by $2.9 million (or 2.0%) but decreased by ZAR 65.3 million (or 2.4%), and in ZAR, the decreased 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 value-added services provided (prepaid 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. 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 $13.0 million (ZAR 325.6 million) or 11.3% (in ZAR
15.2%), 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 VAS revenue generated, and higher insurance-related claims and third-party transaction fees.
57
Selling, general and administration expenses increased by $15.0 million (ZAR 250.3 million), or 69.5% (in ZAR 62.0%). The
increase was primarily due to the inclusion of Adumo; higher employee-related expenses (including the impact of annual salary
increases); higher stock-based compensation charges, audit and travel expenses; and the year-over-year impact of inflationary increases
on certain expenses.
Depreciation and amortization expense increased by $2.4 million (ZAR 38.2 million), or 41.5% (35.1%). The increase was due
to the inclusion of acquisition-related intangible asset amortization related to intangible assets identified pursuant to the Adumo
acquisition and an increase in depreciation expense related to additional POS devices deployed.
Our operating income margin for the second quarter of fiscal 2025 and 2024 was 0.5% and 1.6%, 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 $33.7 million during the first half 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
second quarter of fiscal 2024, or any fair value adjustments for Cell C during the second quarter of fiscal 2025 or 2024, respectively.
We continue to carry our investment in Cell C at $0 (zero). Refer to Note 5 for the methodology and inputs used in the fair value
calculation for MobiKwik and Cell C.
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 $0.7 million (ZAR 12.9 million) from $0.5 million (ZAR 9.1 million), primarily due to the
inclusion of Adumo.
Interest expense increased to $6.2 million (ZAR 110.6 million) from $4.8 million (ZAR 90.3 million. In ZAR, the increase was
primarily by higher overall borrowings during the second quarter of fiscal 2025 compared with the comparable period in the prior
quarter.
Fiscal 2025 tax expense was $(6.4) million (ZAR (117.0) million) compared to $0.7 million (ZAR 12.8 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 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 December 31,
2024
2023
$ %
$ ’000
$ ’000
change
Other
50
43
16%
Total income (loss) from equity-accounted investments
50
43
16%
58
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 December 31,
2024
% of
2023
% of
% change
Operating Segment
$ ’000
total
$ ’000
total
Consolidated revenue:
Merchant
115,811
79%
117,182
81%
(1%)
Consumer
22,929
16%
16,707
12%
37%
Enterprise
8,933
6%
11,921
8%
(25%)
Subtotal: Operating segments
147,673
101%
145,810
101%
1%
Eliminations
(855)
(1%)
(1,917)
(1%)
(55%)
Total consolidated revenue
146,818
100%
143,893
100%
2%
Group Adjusted EBITDA:
Merchant
(1)(2)
10,319
87%
7,497
84%
38%
Consumer
(1)(2)
4,342
37%
2,575
29%
69%
Enterprise
(2)
(31)
-
891
10%
nm
Group costs
(2,820)
(24%)
(2,011)
(23%)
40%
Group Adjusted EBITDA (non-GAAP)
(3)
11,810
100%
8,952
100%
32%
(1) Segment Adjusted EBITDA for the three months ended December 31, 2024, includes retrenchments costs for Consumer of
$0.01 million. Segment Adjusted EBITDA for Merchant includes retrenchment costs of $0.01 million and Consumer includes
retrenchment costs of $0.1 million for the three months ended December 31, 2023.
(2) Lease expenses which were previously presented on a separately 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. 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 December 31,
2024
% of
2023
% of
% change
Operating Segment
ZAR ’000
total
ZAR ’000
total
Consolidated revenue:
Merchant
2,074,003
79%
2,194,260
81%
(5%)
Consumer
410,687
16%
312,767
12%
31%
Enterprise
159,846
6%
223,193
8%
(28%)
Subtotal: Operating segments
2,644,536
16%
2,730,220
12%
(3%)
Eliminations
(15,336)
84%
(35,714)
88%
(57%)
Total consolidated revenue
2,629,200
100%
2,694,506
100%
(2%)
Group Adjusted EBITDA:
Merchant
(1)(2)
185,108
87%
140,429
84%
32%
Consumer
(1)(2)
77,488
37%
48,233
29%
61%
Enterprise
(2)
(537)
-
16,779
10%
nm
Group costs
(50,265)
(24%)
(37,663)
(23%)
33%
Group Adjusted EBITDA (non-GAAP)
(3)
211,794
100%
167,778
100%
26%
(1) Segment Adjusted EBITDA Merchant and Segment Adjusted EBITDA Consumer include retrenchment costs of ZAR 0.1
million, respectively, for the second quarter of fiscal 2025. Segment Adjusted EBITDA for Merchant includes retrenchment costs of
ZAR 0.1 million and Consumer includes retrenchment costs of ZAR 1.3 million for the three months ended December 31, 2023.
(2) Lease expenses which were previously presented on a separately 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”.
59
Merchant
Segment revenue primarily decreased due fewer low margin prepaid airtime sales (“Pinned airtime”), which was partially offset
by the inclusion of Adumo, a higher volume of value-added services provided (prepaid airtime and gaming). 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, especially employment-related expenditures, to expand our offering. 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 second 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 second quarter of fiscal 2025 and 2024 was 8.9% 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, higher insurance-related claims, interest expense (of approximately ZAR 13.6 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 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. 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 the Company’s facilities. Therefore, we have included an intercompany interest expense in our
Consumer Segment Adjusted EBITDA for the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024.
Our Segment Adjusted EBITDA margin for the second quarter of fiscal 2025 and 2024 was 18.9% and 15.4%, 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. In ZAR, the significant decrease in Segment Adjusted EBITDA is primarily due to the impact of fewer sales.
Our Segment Adjusted (loss) EBITDA margin for the second quarter of fiscal 2025 and 2024 was (0.35)% and 7.5%, respectively.
Group costs
Our group costs primarily include employee related costs in relation to employees specifically hired for group roles and costs
related directly to managing the US-listed entity; expenditures related to compliance with the Sarbanes-Oxley Act of 2002; non-
employee directors’ fees; legal fees; group and US-listed related audit fees; and directors’ and officers’ insurance premiums.
Our group costs for fiscal 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, travel, audit, consulting and legal fees.
First half of fiscal 2025 compared to first half of fiscal 2024
The following factors had a significant impact on our results of operations during the first half of fiscal 2025 as compared with
the same period in the prior year:
●
Flat revenue:
Our revenues were flat and increased 0.2% in ZAR, primarily due to the inclusion of Adumo, 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 decrease, before transaction costs:
Operating income, before Adumo-related transaction costs, decreased
primarily due to increased costs and the increase in amortization of acquisition-related intangible assets related to the
acquisition of Adumo, which was partially offset by contribution from Adumo from October 1, 2024;
●
Non-cash fair value adjustment related to equity securities:
We recorded a non -cash fair value loss of $33.7 million during
the first half of fiscal 2025 related to our investment in MobiKwik;
●
Higher net interest charge:
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:
to the prior period, which adversely impacted our U.S. dollar reported results.
60
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
Six months ended December 31,
2024
2023
%
$ ’000
$ ’000
change
Revenue
292,364
279,982
4%
Cost of goods sold, IT processing, servicing and support
212,185
221,756
(4%)
Selling, general and administration
63,246
44,056
44%
Depreciation and amortization
14,499
11,669
24%
Transaction costs related to Adumo acquisition
1,702
-
nm
Operating income
732
2,501
(71%)
Change in fair value of equity securities
(33,731)
-
nm
Loss on disposal of equity-accounted investments
161
-
nm
Reversal of allowance for EMI doubtful debt receivable
-
250
nm
Interest income
1,307
934
40%
Interest expense
11,206
9,731
15%
Loss before income tax (benefit) expense
(43,059)
(6,046)
612%
Income tax (benefit) expense
(6,334)
950
nm
Net loss before income (loss) from equity-accounted investments
(36,725)
(6,996)
425%
Income (Loss) from equity-accounted investments
77
(1,362)
nm
Net loss
(36,648)
(8,358)
338%
Less net income attributable to non-controlling interest
28
-
nm
Net loss attributable to us
(36,676)
(8,358)
339%
Table 9
In South African Rand
Six months ended December 31,
2024
2023
%
ZAR ’000
ZAR ’000
change
Revenue
5,244,890
5,232,165
0%
Cost of goods sold, IT processing, servicing and support
3,807,752
4,144,195
(8%)
Selling, general and administration
1,133,433
823,304
38%
Depreciation and amortization
259,746
218,029
19%
Transaction costs related to Adumo acquisition
29,997
-
nm
Operating income
13,962
46,637
(70%)
Change in fair value of equity securities
(614,710)
-
nm
Loss on disposal of equity-accounted investments
2,886
-
nm
Reversal of allowance for EMI doubtful debt receivable
-
4,741
nm
Interest income
23,403
17,448
34%
Interest expense
200,908
181,758
11%
Loss before income tax (benefit) expense
(781,139)
(112,932)
592%
Income tax (benefit) expense
(115,552)
17,670
nm
Net loss before income (loss) from equity-accounted investments
(665,587)
(130,602)
410%
Income (Loss) from equity-accounted investments
1,366
(25,852)
nm
Net loss
(664,221)
(156,454)
325%
Less net income attributable to non-controlling interest
496
-
nm
Net loss attributable to us
(664,717)
(156,454)
325%
Revenue increased by $12.4 million (ZAR 12.7 million), or 4.4% (in ZAR, 0.2%), 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 $9.6 million (or 4.3%) and, in ZAR, decreased by ZAR
336.4 million (or 8.1%), primarily due to the decrease in Pinned Airtime sales, which was partially offset by the inclusion of Adumo,
higher commissions paid related to VAS revenue generated, and higher insurance-related claims and third-party transaction fees.
61
Selling, general and administration expenses increased by $19.2 million (ZAR 310.1 million), or 43.6% (in ZAR 37.7%). 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 $2.8 million (ZAR 41.7 million), or 24.3% (19.1%). The increase was due
to the inclusion of acquisition-related intangible asset amortization related to intangible assets identified pursuant to the Adumo
acquisition and an increase in depreciation expense related to additional POS devices deployed.
Transaction costs related to Adumo acquisition includes fees paid to external service providers associated with legal and advisory
services procured to close the transaction on October 1, 2024.
Our operating (loss) income margin for the first half of fiscal 2025 and 2024 was 0.3% and 0.9%, 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 $33.7 million during the first half 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 first
half of fiscal 2024, or any fair value adjustments for Cell C during the first half of 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 $1.3 million (ZAR 23.4 million) from $0.9 million (ZAR 17.4 million), primarily due to the
inclusion of Adumo and higher overall average cash balances on deposit during the first half of fiscal 2025 compared with 2024.
Interest expense increased to $11.2 million from $9.7 million and, in ZAR, decreased to ZAR 200.9 million from ZAR 181.8
million. In ZAR, the increase was primarily as a result of higher overall borrowings during the first half of fiscal 2025 compared with
the comparable period in the prior quarter, which was partially offset by lower interest expense incurred on certain of our borrowing
for which we were able to negotiate lower rates of interest towards the end of calendar 2024.
Fiscal 2025 tax expense was $(6.3) million (ZAR (115.6) million) compared to $1.0 million (ZAR 17.7 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 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.
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 first half of fiscal 2024. The table below presents
the relative (loss) earnings from our equity-accounted investments:
Table 10
Six months ended December 31,
2024
2023
$ %
$ ’000
$ ’000
change
Finbond
-
(1,445)
nm
Share of net loss
-
(278)
nm
Impairment
-
(1,167)
nm
Other
77
83
(7%)
77
(1,362)
nm
62
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
Six months ended December 31,
2024
% of
2023
% of
% change
Operating Segment
$ ’000
total
$ ’000
total
Consolidated revenue:
Merchant
231,441
80%
229,243
82%
1%
Consumer
44,001
15%
32,287
12%
36%
Enterprise
20,815
7%
21,388
8%
(3%)
Subtotal: Operating segments
296,257
102%
282,918
102%
5%
Eliminations
(3,893)
(2%)
(2,936)
(2%)
33%
Total consolidated revenue
292,364
100%
279,982
100%
4%
Group Adjusted EBITDA:
Merchant
(1)(2)
17,873
84%
14,407
85%
24%
Consumer
(1)(2)
8,738
41%
4,695
28%
86%
Enterprise
(1)(2)
331
2%
1,706
10%
(81%)
Group costs
(5,769)
(27%)
(3,833)
(23%)
51%
Group Adjusted EBITDA (non-GAAP)
(3)
21,173
100%
16,975
100%
25%
(1) Segment Adjusted EBITDA Consumer and Segment Adjusted EBITDA Enterprise include retrenchment costs of $0.01
million and $0.00 million, respectively, for the first half of fiscal 2025. Segment Adjusted EBITDA for Merchant includes
retrenchment costs of $0.2 million and Consumer includes retrenchment costs of $0.2 million for the first half of fiscal 2024.
(2) Lease expenses which were previously presented on a separately 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
Six months ended December 31,
2024
% of
2023
% of
% change
Operating Segment
ZAR ’000
total
ZAR ’000
total
Consolidated revenue:
Merchant
4,152,856
80%
4,283,655
82%
(3%)
Enterprise
373,825
7%
399,914
8%
(7%)
Consumer
788,750
15%
603,396
12%
31%
Subtotal: Operating segments
5,315,431
101%
5,286,965
101%
1%
Eliminations
(70,541)
(1%)
(54,800)
(1%)
29%
Total consolidated revenue
5,244,890
100%
5,232,165
100%
0%
Group Adjusted EBITDA:
Merchant
(1)(2)
320,618
84%
269,145
85%
19%
Enterprise
(1)(2)
6,031
2%
31,973
10%
(81%)
Consumer
(1)(2)
156,169
41%
87,845
28%
78%
Group costs
(102,919)
(27%)
(71,643)
(23%)
44%
Group Adjusted EBITDA (non-GAAP)
(3)
379,899
100%
317,320
100%
20%
(1) Segment Adjusted EBITDA Consumer and Segment Adjusted EBITDA Enterprise include retrenchment costs of ZAR 0.1
million and ZAR 0.0 million, respectively, for the first half of fiscal 2025. Segment Adjusted EBITDA for Merchant includes
retrenchment costs of ZAR 4.7 million and Consumer includes retrenchment costs of ZAR 2.8 million for the first half of fiscal 2024.
(2) Lease expenses which were previously presented on a separately 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”.
63
Merchant
Segment revenue primarily increased due the inclusion of Adumo, a higher volume of value-added services 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, especially employment-
related expenditures, to expand our offering. 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 second 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 first half of
fiscal 2025 and 2024 was 7.7% and 6.3%, respectively.
Consumer
Segment revenue increased primarily due to higher transaction fees generated from the higher EPE account holders base, an
increase in certain issuing fee base prices and transaction activity in our issuing business, insurance premiums collected, lending
revenues following an increase in loan originations and the inclusion of Adumo. This increase in revenue has translated into improved
profitability, which was partially offset by a higher allowance for credit losses following an increase in loan originations in December
2024, higher insurance-related claims, interest expense (of approximately ZAR 28.5 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 first half of fiscal 2025 compared with the first half of fiscal 2024.
Our Segment Adjusted EBITDA margin for the first half of fiscal 2025 and 2024 was 19.9% and 14.5%, 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. In ZAR, the significant decrease in Segment Adjusted EBITDA is primarily due to the impact of few sales.
Our Segment Adjusted EBITDA margin for the first half of fiscal 2025 and 2024 was 1.6% and 8.0%, 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.
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
F2025
$ ’000
$ ’000
$ ’000
Revenue
Merchant
115,630
115,811
231,441
Consumer
21,072
22,929
44,001
Enterprise
11,882
8,933
20,815
Subtotal: Operating segments
148,584
147,673
296,257
Eliminations
(3,038)
(855)
(3,893)
Total consolidated revenue
145,546
146,818
292,364
Group Adjusted EBITDA:
Merchant
7,554
10,319
17,873
Consumer
4,396
4,342
8,738
Enterprise
362
(31)
331
Group costs
(2,949)
(2,820)
(5,769)
Group Adjusted EBITDA (non-GAAP)
9,363
11,810
21,173
Income and expense items: $1 = ZAR
17.72
17.85
17.80
64
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.
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. Once-off items represents
non-recurring income and expense items, including costs related to acquisitions and transactions consummated or ultimately not
pursued.
65
The table below presents the reconciliation between GAAP net loss attributable to Lesaka to Group Adjusted EBITDA:
Table 15
Three months ended
December 31,
Six months ended
December 31,
2024
2023
2024
2023
$ ’000
$ ’000
$ ’000
$ ’000
Loss attributable to Lesaka - GAAP
(32,134)
(2,707)
(36,676)
(8,358)
Less net income attributable to non-controlling interest
(28)
-
(28)
-
Net loss
(32,106)
(2,707)
(36,648)
(8,358)
(Earnings) loss from equity accounted investments
(50)
(43)
(77)
1,362
Net loss before (earnings) loss from equity-accounted investments
(32,156)
(2,750)
(36,725)
(6,996)
Income tax (benefit) expense
(6,412)
686
(6,334)
950
Loss before income tax expense
(38,568)
(2,064)
(43,059)
(6,046)
Interest expense
6,174
4,822
11,206
9,731
Interest income
(721)
(485)
(1,307)
(934)
Reversal of allowance for doubtful EMI loan receivable
-
-
-
(250)
Net loss on disposal of equity-accounted investment
161
-
161
-
Change in fair value of equity securities
33,731
-
33,731
-
Operating income
777
2,273
732
2,501
PPA amortization (amortization of acquired intangible assets)
4,867
3,592
8,614
7,200
Depreciation and amortization
3,356
2,221
5,885
4,469
Stock-based compensation charges
2,644
1,804
5,021
3,563
Interest adjustment
(757)
-
(1,588)
-
Once-off items
(1)
488
(816)
2,293
(738)
Unrealized loss (gain) FV for currency adjustments
435
(122)
216
(20)
Group Adjusted EBITDA - Non-GAAP
11,810
8,952
21,173
16,975
(1) The table below presents the components of once-off items for the periods presented:
Table 16
Three months ended
December 31,
Six months ended
December 31,
2024
2023
2024
2023
$ ’000
$ ’000
$ ’000
$ ’000
Transaction costs
684
102
787
180
Transaction costs related to Adumo acquisition
-
34
1,702
34
Indirect taxes provision release
(196)
-
(196)
-
Income recognized related to closure of legacy businesses
-
(952)
-
(952)
Total once-off items
488
(816)
2,293
(738)
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 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.
Liquidity and Capital Resources
As of December 31, 2024, our cash and cash equivalents were $60.6 million and comprised of U.S. dollar-denominated balances
of $3.1 million, ZAR-denominated balances of ZAR 961.0 million ($55.9 million), and other currency deposits, primarily Botswana
pula, of $1.6 million, all amounts translated at exchange rates applicable as of December 31, 2024. The decrease in our unrestricted
cash balances from June 30, 2024, was primarily due to the utilization of cash reserves to fund certain scheduled and other repayments
of our borrowings, purchase ATMs and vaults, pay annual bonuses, pay for expenses included in our group costs, and to make an
investment in working capital, which was partially offset by positive contribution from our Merchant and Consumer operations .
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.
66
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. For instance, in fiscal 2022, we obtained loan facilities
from RMB to fund a portion of our acquisition of Connect. Following the acquisition of Connect, we now utilize a combination of
short and long-term facilities to fund our operating activities and a long-term asset-backed facility to fund the acquisition of POS
devices and vaults. 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 December 31, 2024:
Table 17
RMB GBF
RMB Indirect
RMB Connect
Nedbank
$ ’000
ZAR ’000
$ ’000
ZAR ’000
$ ’000
ZAR ’000
$ ’000
ZAR ’000
Total short-term facilities
available, comprising:
Total overdraft
48,594
915,000
-
-
14,339
270,000
-
-
Indirect and derivative
facilities
(1)
-
-
7,170
135,000
-
-
8,314
156,556
Total short-term facilities
available
48,594
915,000
7,170
135,000
14,339
270,000
8,314
156,556
Utilized short-term
facilities:
Overdraft
40,086
762,382
-
-
11,066
208,364
-
-
Indirect and derivative
facilities
(1)
-
-
1,758
33,095
-
-
112
2,106
Total short-term facilities
available
40,086
762,382
1,758
33,095
11,066
208,364
112
2,106
Interest rate, based on South
African prime rate
13.05%
N/A
11.15%
N/A
(1) 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.
Long-term borrowings
We have aggregate long-term borrowing outstanding of ZAR 3.6 billion ($188.7 million translated at exchange rates as of
December 31, 2024) as described in Note 9. These borrowings include outstanding long-term borrowings obtained by Lesaka SA of
ZAR 1.0 billion, including accrued interest, which was used to partially fund the acquisition of Connect. The Lesaka SA borrowing
arrangements were amended in March 2023 to include a ZAR 200 million revolving credit facility. We have utilized ZAR 199.0
million of this facility as of December 31, 2024. In contemplation of the Connect transaction, Connect obtained total facilities of ZAR
1.3 billion, which were utilized to repay its existing borrowings, to fund a portion of its capital expenditures and to settle obligations
under the transaction documents, and which has subsequently been upsized for its operational requirements and has an outstanding
balance as of December 31, 2024, of ZAR 1.2 billion. 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.
On September 30, 2024, we obtained a ZAR 665.0 million funding facility from RMB which has been used to (i) settle an amount
of ZAR 232 .2 million due to the Adumo sellers; (ii) pay ZAR 207.2 million to acquire 2,601,410 shares of our common stock from
one of the Adumo sellers’ indirect shareholders; (iii) pay ZAR 147.5 million notified by Investec Bank Limited to Adumo and us as a
result of the acquisition, (iv) pay an origination fee of ZAR 7.6 million to RMB and (v) pay ZAR 70.0 million of transaction-related
expenses. On December 10, 2024, we obtained a ZAR 250.0 million general banking facility from RMB which is repayable in full by
the end of February 2025. We have included additional information regarding this general banking facility under available short-term
borrowings.
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 December 31, 2024, includes restricted cash of $0.1 million that has been ceded and pledged.
67
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
Second quarter
Net cash used operating activities during the second quarter of fiscal 2025 was $9.2 million (ZAR 163.6 million) compared to
net cash provided by operating activities of $0.6 million (ZAR 10.9 million) during the second quarter of fiscal 2024. Excluding the
impact of income taxes, our cash used in operating activities during the second quarter of fiscal 2025 includes cash utilized for the
significant net growth in our Consumer finance loans receivable book, which was partially offset by was positively impacted by the
contribution from our Merchant and Consumer businesses.
During the second quarter of fiscal 2025, we paid first provisional South African tax payments of $3.1 million (ZAR 56.3 million)
related to our 2025. We also paid taxes totaling $0.1 million in other tax jurisdictions, primarily in Botswana during the second quarter
of fiscal 2025. During the second quarter 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 $0.07 million (ZAR 1.3 million).
We also paid taxes totaling 0.1 million in other tax jurisdictions, primarily in Botswana.
Taxes paid (refunded) during the second quarter of fiscal 2025 and 2024 were as follows:
Table 18
Three months ended December 31,
2024
2023
2024
2023
$
$
ZAR
ZAR
‘000
‘000
‘000
‘000
First provisional payments
3,088
2,662
56,264
49,516
Taxation paid related to prior years
93
69
1,660
1,328
Total South African taxes paid
3,181
2,731
57,924
50,844
Foreign taxes paid
72
75
1,332
1,409
Total tax (refund) paid
3,253
2,806
59,256
52,253
First half
Net cash used operating activities during the first half of fiscal 2025 was $13.3 million (ZAR 236.7 million) compared to net
cash provided by operating activities of $4.0 million (ZAR 74.0 million) during the first half of fiscal 2024. Excluding the impact of
income taxes, our cash used in operating activities during the first half 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 finance loans receivable book, which was partially offset by was positively impacted by the
contribution from Merchant and Consumer businesses.
During the first half of fiscal 2025, we paid first provisional South African tax payments of $3.1 million (ZAR 56.3 million)
related to our 2025. We also paid taxes totaling $0.1 million in other tax jurisdictions, primarily in Botswana during the first half of
fiscal 2025. During the first half 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 $0.1 million in other tax jurisdictions, primarily in Botswana.
68
Taxes (refunded) paid during the first half of fiscal 2025 and 2024 were as follows:
Table 19
Six months ended December 31,
2024
2023
2024
2023
$
$
ZAR
ZAR
‘000
‘000
‘000
‘000
First provisional payments
3,088
2,662
56,264
49,516
Taxation paid related to prior years
93
641
1,660
12,187
Tax refund received
(113)
(31)
(2,053)
(640)
Total South African taxes paid
3,068
3,272
55,871
61,063
Foreign taxes paid
140
138
2,545
2,605
Total tax paid
3,208
3,410
58,416
63,668
Cash flows from investing activities
Second quarter
Cash used in investing activities for the second quarter of fiscal 2025 included capital expenditures of $6.3 million (ZAR 112.8
million), primarily due to the acquisition of vaults and POS devices. During the second quarter of fiscal 2025, we paid $4.0 million
related to acquisition of certain businesses, including Adumo.
Cash used in investing activities for the second quarter of fiscal 2024 included capital expenditures of $2.2 million (ZAR 41.1
million), primarily due to the acquisition of vaults and POS devices . During the second quarter 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.
First half
Cash used in investing activities for the first half of fiscal 2025 included capital expenditures of $6.3 million (ZAR 112.8 million),
primarily due to the acquisition of vaults and POS devices. During the first half of fiscal 2025, we paid $4.0 million related to
acquisition of certain businesses, including Adumo.
Cash used in investing activities for the first half of fiscal 2024 included capital expenditures of $2.2 million (ZAR 41.1 million),
primarily due to the acquisition of vaults. During the first half 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
Second quarter
During the second quarter of fiscal 2025, we utilized $48.9 million from our South African overdraft facilities to fund our ATMs
and our cash management business through Connect, and repaid $4.5 million of those facilities. We utilized $12.9 million of our long-
term 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 and for working capital requirements. We
repaid $8.3 million of long-term borrowings in accordance with our repayment schedule and paid $7.2 million to settle Adumo’s
borrowings. We also paid an origination fee of $0.4 million to secure additional borrowings as well as paid dividends to the non-
controlling interest of $0.3 million.
During the second quarter of fiscal 2024, we utilized $69.0 million from our South African overdraft facilities to fund our ATMs
and our cash management business through Connect, and repaid $66.0 million of those facilities. We utilized $8.6 million of our long-
term borrowings to fund the acquisition of certain capital expenditures and for working capital requirements. We repaid $3.2 million
of long-term borrowings in accordance with our repayment schedule as well as to settle a portion of our revolving credit facility
utilized. 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.
69
First half
During the first half of fiscal 2025, we utilized $48.9 million from our South African overdraft facilities to fund our ATMs and
our cash management business through Connect, and repaid $4.5 million of those facilities. We utilized $12.9 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 and for working capital requirements. We
repaid $8.3 million of long-term borrowings 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 $0.4 million to secure
additional borrowings as well as paid dividends to the non-controlling interest of $0.3 million.
During the first half of fiscal 2024, we utilized $69.0 million from our South African overdraft facilities to fund our ATMs and
our cash management business through Connect, and repaid $66.0 million of those facilities. We utilized $8.6 million of our long-
term borrowings to fund the acquisition of certain capital expenditures and for working capital requirements. We repaid $3.2 million
of long-term borrowings in accordance with our repayment schedule as well as to settle a portion of our revolving credit facility
utilized. 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 third 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 second quarter of fiscal 2025 and 2024 are discussed under “—Liquidity and Capital Resources—
Cash flows from investing activities.” All of our capital expenditures for the past three fiscal years were funded through internally
generated funds, or, following the Connect acquisition, our asset-backed borrowing arrangement. We had outstanding capital
commitments as of December 31, 2024, of $0.5 million. We expect to fund these expenditures through internally generated funds and
available facilities.
70
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In addition to the tables below, see Note 5 to the unaudited condensed consolidated financial statements for a discussion of
market risk.
We have short and long-term borrowings in South Africa which attract interest at rates that fluctuate based on changes in the
South African prime and 3-month JIBAR interest rates. The following table illustrates the effect on our annual expected interest charge,
translated at exchange rates applicable as of December 31, 2024, as a result of changes in the South African prime and 3-month JIBAR
interest rates, using our outstanding short and long-term borrowings as of December 31, 2024. The effect of a hypothetical 1% (i.e.
100 basis points) increase and a 1% decrease in the interest rates applicable to the borrowings as of December 31, 2024, are shown.
The selected 1% hypothetical change does not reflect what could be considered the best- or worst-case scenarios.
Table 20
As of December 31, 2024
Annual expected
interest charge
($ ’000)
Hypothetical
change in
interest rates
Estimated annual
expected interest
charge after
hypothetical change
in interest rates
($ ’000)
Interest on South African borrowings
17,874
1%
25,855
(1%)
23,390
The following table summarizes our exchange-traded equity security with equity and liquidity price risk as of December 31, 2024.
The effects of a hypothetical 10% increase and a 10% decrease in market prices as of December 31, 2024, 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 December 31, 2024
Fair value
Hypothetical
price change
Estimated fair value
after hypothetical
change in price
($ ’000)
Percentage Increase
(Decrease) in
Shareholders’ Equity
Exchange-traded equity securities
42,566
10%
46,823
2%
10%
38,309
(2%)
71
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 December 31, 2024.
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 and implement procedures to remediate 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 December 31, 2024.
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 is actively working to remediate the identified material weakness and is 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 December 31, 2024, that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
72
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’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. Integrating Adumo 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’s key employees and management team. The
services of these individuals will be important to the continued growth and success of Adumo’s business and to our ability to integrate
Adumo with us. If we were to lose the services of these key employees or fail to sufficiently integrate them, our ability to operate
Adumo successfully would likely be materially and adversely impacted.
As such, if we are unable to successfully integrate Adumo’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).
73
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.
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 second 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
Oct 1, 2024 - Oct 31, 2024
(1)
2,601,410
4.59
-
100,000,000
Nov 1, 2024 - Nov 30, 2024
(2)
61,821
4.96
-
100,000,000
Dec 1, 2024 - Dec 31, 2024
(2)
70,326
4.99
-
100,000,000
Total
2,733,557
-
(1) Relates to the repurchase of 2,601,410 shares of our common stock from Crossfin Holdings (RF) Proprietary Limited in
connection with our acquisition of Adumo. These shares do not reduce the repurchase authority under the share repurchase program.
(2) Relates to the delivery of 61,821 and 70,326 shares of our common stock in November and December, respectively, 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 second 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 December 31, 2024, no officers or directors, as defined
in Rule 16a-1(f),
, modified, or
as defined in Item 408 of Regulation S-K.
74
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
8-K
2.2
October 1, 2024
8-K
10.2
October 1, 2024
10-Q
10.41
November 6,
2024
8-K
10.1
December 10,
2024
X
14A
A
October 2, 2024
14A
B
October 2, 2024
X
X
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
75
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 February 5, 2025.
LESAKA TECHNOLOGIES, INC.
By: /s/ Ali Mazanderani
Ali Mazanderani
Executive Chairman
By: /s/ Dan L. Smith
Dan L. Smith
Group Chief Financial Officer, Treasurer and Secretary