LESAKA TECHNOLOGIES INC - Quarter Report: 2023 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
☒
EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2023
OR
☐
EXCHANGE ACT OF 1934
For the transition period from
To
Commission file number:
000-31203
LESAKA TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Florida
98-0171860
(State or other jurisdiction
(IRS Employer
of incorporation or organization)
Identification No.)
President Place, 4
th
Floor
,
Cnr. Jan Smuts Avenue and Bolton Road
,
Rosebank, Johannesburg
,
2196
,
South Africa
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code:
27
-
11
-
343-2000
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Title of each class
Trading Symbol(s)
Name of each exchange
on which registered
Common stock, par value $0.001 per share
LSAK
NASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.
YES
☒
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required
to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit such files).
YES
☒
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act (check one):
☐
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☐
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). YES
☐
☒
As of November 1, 2023 (the latest practicable date),
62,384,522
value $0.001 per share, net of treasury shares, were outstanding.
1
Form 10-Q
LESAKA TECHNOLOGIES, INC.
Table of Contents
Page No.
PART I. FINANCIAL INFORMATION
Notes to Unaudited Condensed Consolidated Financial Statements
8
51
2
Part I. Financial information
Item 1. Financial Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets
September 30,
June 30,
2023
2023
(A)
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
35,141
$
35,499
Restricted cash related to ATM funding and credit facilities (Note 8)
19,865
23,133
Accounts receivable, net and other receivables (Note 2)
27,939
25,665
Finance loans receivable, net (Note 2)
35,735
36,744
Inventory (Note 3)
27,754
27,337
Total current assets before settlement assets
146,434
148,378
Settlement assets
26,352
15,258
Total current assets
172,786
163,636
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - September: $
35,331
$
36,563
27,663
27,447
OPERATING LEASE RIGHT-OF-USE (Note 16)
5,655
4,731
EQUITY-ACCOUNTED INVESTMENTS (Note 5)
2,253
3,171
GOODWILL (Note 6)
133,139
133,743
INTANGIBLE ASSETS, NET (Note 6)
117,595
121,597
DEFERRED INCOME TAXES
9,859
10,315
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and 7)
77,822
77,594
TOTAL ASSETS
546,772
542,234
LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities for ATM funding (Note 8)
19,754
23,021
Short-term credit facilities (Note 8)
8,983
9,025
Accounts payable
13,595
12,380
Other payables (Note 9)
35,105
36,297
Operating lease liability - current (Note 16)
1,722
1,747
Current portion of long-term borrowings (Note 8)
3,630
3,663
Income taxes payable
1,292
1,005
Total current liabilities before settlement obligations
84,081
87,138
Settlement obligations
25,362
14,774
Total current liabilities
109,443
101,912
DEFERRED INCOME TAXES
45,713
46,840
OPERATING LEASE LIABILITY - LONG TERM (Note 16)
4,081
3,138
LONG-TERM BORROWINGS (Note 8)
130,587
129,455
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7)
2,253
1,982
TOTAL LIABILITIES
292,077
283,327
REDEEMABLE COMMON STOCK
79,429
79,429
EQUITY
COMMON STOCK (Note 10)
Authorized:
200,000,000
0.001
Issued and outstanding shares, net of treasury - September:
63,638,912
63,640,246
83
83
PREFERRED STOCK
Authorized shares:
50,000,000
0.001
Issued and outstanding shares, net of treasury: September:
-
-
-
-
ADDITIONAL PAID-IN-CAPITAL
337,490
335,696
TREASURY SHARES, AT COST: September:
25,244,286
25,244,286
(288,238)
(288,238)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 11)
(196,081)
(195,726)
RETAINED EARNINGS
322,012
327,663
TOTAL LESAKA EQUITY
175,266
179,478
NON-CONTROLLING INTEREST
-
-
TOTAL EQUITY
175,266
179,478
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY
$
546,772
$
542,234
(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
September 30,
2023
2022
(In thousands, except per
share data)
REVENUE (Note 15)
$
136,089
$
124,786
EXPENSE
Cost of goods sold, IT processing, servicing and support
107,490
100,528
Selling, general and administration
22,515
22,931
Depreciation and amortization
5,856
5,998
OPERATING INCOME (LOSS)
228
(4,671)
REVERSAL OF (ALLOWANCE) OF EMI DOUBTFUL DEBT (Note 2 and 5)
250
-
NET GAIN ON DISPOSAL OF EQUITY-ACCOUNTED INVESTMENTS (Note 5)
-
248
INTEREST INCOME
449
411
INTEREST EXPENSE
4,909
4,036
LOSS BEFORE INCOME TAX EXPENSE
(3,982)
(8,048)
INCOME TAX EXPENSE (Note 18)
264
31
NET LOSS BEFORE LOSS FROM EQUITY-ACCOUNTED INVESTMENTS
(4,246)
(8,079)
LOSS FROM EQUITY-ACCOUNTED INVESTMENTS (Note 5)
1,405
2,617
NET LOSS
$
(5,651)
$
(10,696)
Net loss per share, in United States dollars
(Note 13):
Basic loss attributable to Lesaka shareholders
$
(0.09)
$
(0.17)
Diluted loss attributable to Lesaka shareholders
$
(0.09)
$
(0.17)
See Notes to Unaudited Condensed Consolidated Financial Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income
4
Three months ended
September 30,
2023
2022
(In thousands)
Net loss
$
(5,651)
$
(10,696)
Other comprehensive (loss) income, net of taxes
Movement in foreign currency translation reserve
(844)
(22,093)
Movement in foreign currency translation reserve related to equity-accounted
investments
489
2,441
Release of foreign currency translation reserve related to disposal of Finbond equity
securities
-
2
Total other comprehensive loss, net of taxes
(355)
(19,650)
Comprehensive loss
(6,006)
(30,346)
Add comprehensive loss attributable to non-controlling interest
-
-
Comprehensive loss attributable to Lesaka
$
(6,006)
$
(30,346)
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 September 30, 2022 (dollar amounts in thousands)
Balance – July 1, 2022
87,215,613
$
83
(24,891,292)
$
(286,951)
62,324,321
$
327,891
$
362,737
$
(168,840)
$
234,920
$
-
$
234,920
$
79,429
Shares repurchased (Note 12)
(35,460)
(185)
(35,460)
-
(185)
(185)
Restricted stock granted (Note 12)
231,523
231,523
-
-
Exercise of stock options
2,000
-
2,000
6
6
6
Stock-based compensation charge
(Note 12)
-
1,462
1,462
1,462
Stock-based compensation charge
related to equity-accounted investment
(Note 5)
-
6
6
6
Net loss
-
(10,696)
(10,696)
-
(10,696)
Other comprehensive loss (Note 11)
(19,650)
(19,650)
-
(19,650)
Balance – September 30, 2022
87,449,136
$
83
(24,926,752)
$
(287,136)
62,522,384
$
329,365
$
352,041
$
(188,490)
$
205,863
$
-
$
205,863
$
79,429
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Changes in Equity
6
Lesaka Technologies, Inc. Shareholders
Number of
Shares
Amount
Number of
Treasury
Shares
Treasury
Shares
Number of
shares, net of
treasury
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
other
comprehensive
loss
Total
Lesaka
Equity
Non-
controlling
Interest
Total
Redeemable
common
stock
For the three months ended September 30, 2023 (dollar amounts in thousands)
Balance – July 1, 2023
88,884,532
$
83
(25,244,286)
$
(288,238)
63,640,246
$
335,696
$
327,663
$
(195,726)
$
179,478
$
-
$
179,478
$
79,429
Exercise of stock option (Note 12)
6,793
-
6,793
21
21
21
Stock-based compensation charge
(Note 12)
-
-
1,768
1,768
1,768
Reversal of stock-based compensation
charge (Note 12)
(8,127)
(8,127)
(9)
(9)
(9)
Stock-based compensation charge
related to equity-accounted investment
(Note 5)
14
14
14
Net loss
(5,651)
(5,651)
-
(5,651)
Other comprehensive loss (Note 11)
(355)
(355)
-
(355)
Balance – September 30, 2023
88,883,198
$
83
(25,244,286)
$
(288,238)
63,638,912
$
337,490
$
322,012
$
(196,081)
$
175,266
$
-
$
175,266
$
79,429
See Notes to Unaudited Condensed Consolidated Financial Statements
LESAKA TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
7
Three months ended
September 30,
2023
2022
(In thousands)
Cash flows from operating activities
Net loss
$
(5,651)
$
(10,696)
Depreciation and amortization
5,856
5,998
Movement in allowance for doubtful accounts receivable and finance loans receivable
1,525
1,049
Loss from equity-accounted investments (Note 5)
1,405
2,617
Movement in allowance for doubtful loans to equity-accounted investments
(250)
-
Fair value adjustment related to financial liabilities
(34)
63
Interest payable
1,764
26
Facility fee amortized
227
249
Net gain on disposal of equity-accounted investments (Note 5)
-
(248)
Profit on disposal of property, plant and equipment
(36)
(208)
Stock-based compensation charge (Note 12)
1,759
1,462
Dividends received from equity-accounted investments
-
21
Increase in accounts receivable and other receivables
(2,345)
(2,943)
Increase in finance loans receivable
(488)
(3,581)
Increase in inventory
(479)
(279)
Increase (Decrease) in accounts payable and other payables
375
(438)
Increase in taxes payable
308
642
Decrease in deferred taxes
(562)
(1,394)
Net cash provided by (used in) operating activities
3,374
(7,660)
Cash flows from investing activities
Capital expenditures
(2,809)
(4,501)
Proceeds from disposal of property, plant and equipment
284
417
Acquisition of intangible assets
(135)
-
Proceeds from disposal of equity-accounted investments (Note 5)
-
253
Loan to equity-accounted investment
-
112
Repayment of loans by equity-accounted investments
-
(112)
Net change in settlement assets
(11,237)
(1,884)
Net cash used in investing activities
(13,897)
(5,715)
Cash flows from financing activities
Proceeds from bank overdraft (Note 8)
59,574
146,068
Repayment of bank overdraft (Note 8)
(62,793)
(136,922)
Long-term borrowings utilized (Note 8)
2,471
1,059
Repayment of long-term borrowings (Note 8)
(2,629)
(1,580)
Acquisition of treasury stock (Note 12)
-
(185)
Proceeds from exercise of stock options
21
6
Net change in settlement obligations
10,696
1,987
Net cash provided by financing activities
7,340
10,433
Effect of exchange rate changes on cash
(443)
(8,487)
Net decrease in cash, cash equivalents and restricted cash
(3,626)
(11,429)
Cash, cash equivalents and restricted cash – beginning of period
58,632
104,800
Cash, cash equivalents and restricted cash – end of period (Note 14)
$
55,006
$
93,371
See Notes to Unaudited Condensed Consolidated Financial Statements
8
LESAKA TECHNOLOGIES, INC
Notes to the Unaudited Condensed Consolidated Financial Statements
for the three months ended September 30, 2023 and 2022
(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 months
ended September 30, 2023 and 2022, 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, 2023. 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 June 2016, the Financial Accounting Standards Board issued guidance regarding
Measurement of Credit Losses on Financial
Instruments
. The guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects
expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss
estimates. For trade and other receivables, loans, and other financial instruments, an entity is required to use a forward-looking
expected loss model rather than the incurred loss model for recognizing credit losses, which reflects losses that are probable. Credit
losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction
in the amortized cost basis of the securities. The guidance became effective for the Company beginning July 1, 2023. The adoption of
this guidance did not have a material impact on the Company’s financial statements and related disclosures, refer to Note 2.
In November 2019, the FASB issued guidance regarding
Hedging (Topic 815), and Leases (Topic 842).
accounting standards and amends the effective dates for certain major new accounting standards to give implementation relief to
certain types of entities, including Smaller Reporting Companies. The Company is a Smaller Reporting Company. Specifically, the
guidance changes some effective dates for certain new standards on the following topics in the FASB Codification, namely Derivatives
and Hedging (ASC 815); Leases (ASC 842); Financial Instruments — Credit Losses (ASC 326); and Intangibles — Goodwill and
Other (ASC 350). The guidance defers the adoption date of guidance regarding
Measurement of Credit Losses on Financial
Instruments
2023. The adoption of this guidance did not have a material impact on the Company’s financial statements and related disclosures,
refer to Note 2.
The Company’s updated accounting policy regarding allowance for credit losses is as follows:
Allowance for doubtful accounts receivable
Allowance for doubtful finance loans receivable
The Company uses historical default experience over the lifetime of loans in order to calculate a lifetime loss rate for its lending
books. The allowance for credit losses related to Consumer finance loans receivables is calculated by multiplying the lifetime loss rate
with the month-end outstanding lending book. The allowance for credit losses related to Merchant finance loans receivables is
calculated by adding together actual receivables in default plus multiplying the lifetime loss rate with the month-end outstanding
lending book. Prior to July 1, 2023, the Company regularly reviewed the ageing of outstanding amounts due from borrowers and
adjusted its allowance based on management’s estimate of the recoverability of the finance loans receivable. The Company writes off
microlending finance loans receivable and related service fees and interest if a borrower is in arrears with repayments for more than
three months or is deceased. The Company writes off merchant and working capital finance receivables and related fees when it is
evident that reasonable recovery procedures, including where deemed necessary, formal legal action, have failed.
9
1. Basis of Presentation and Summary of Significant Accounting Policies (continued)
Allowance for doubtful accounts receivable (continued)
Allowance for doubtful accounts receivable
The Company uses a lifetime loss rate by expressing write-off experience as a percentage of corresponding invoice amounts (as
opposed to outstanding balances). The allowance for credit losses related to these receivables has been calculated by multiplying the
lifetime loss rate with recent invoice/origination amounts. Prior to July 1, 2023, A specific provision is established where it is
considered likely that all or a portion of the amount due from customers renting safe assets, point of sale (“POS”) equipment, receiving
support and maintenance or transaction services or purchasing licenses or SIM cards from the Company will not be recovered. Non-
recoverability is assessed based on a quarterly review by management of the ageing of outstanding amounts, the location and the
payment history of the customer in relation to those specific amounts.
Recent accounting pronouncements not yet adopted as of September 30, 2023
There are no recent accounting pronouncements that have not yet been adopted as of September 30, 2023.
2.
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 September 30, 2023, and June 30, 2023, are presented in
the table below:
September 30,
June 30,
2023
2023
Accounts receivable, trade, net
$
10,231
$
11,037
Accounts receivable, trade, gross
10,401
11,546
Allowance for doubtful accounts receivable, end of period
170
509
Beginning of period
509
509
Reallocation to allowance for doubtful finance loans receivable
-
(418)
Reversed to statement of operations
(235)
(31)
Charged to statement of operations
179
2,005
Utilized
(284)
(1,645)
Foreign currency adjustment
1
89
Current portion of amount outstanding related to sale of interest in Carbon, net of
allowance: September 2023: $
750
; June 2023: $
750
250
-
Current portion of total held to maturity investments
-
-
Investment in
7.625
% of Cedar Cellular Investment 1 (RF) (Pty) Ltd
8.625
% notes
-
-
Other receivables
17,458
14,628
Total accounts receivable, net and other receivables
$
27,939
$
25,665
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
but, generally speaking, account balances in distress are identified very early and specific allowances are immediately created.
Subsequent recovery from distressed accounts are generally limited.
10
2.
Accounts receivable, net and other receivables and finance loans receivable, net (continued)
Accounts receivable, net and other receivables (continued)
Current portion of amount outstanding related to sale of interest in Carbon represents the amount due from the purchaser related
to the sale of the Company’s interest in Carbon Tech Limited (“Carbon”), an equity-accounted investment of $
0.25
allowance for doubtful loans receivable of $
0.25
face value of $
3.0
0.75
$
0.75
0.25
the equity-accounted investment in October 2023, and has reversed the allowance for doubtful loans receivable of $
0.25
the three months ended September 30, 2023.
Investment in
7.625
% of Cedar Cellular Investment 1 (RF) (Pty) Ltd
8.625
% notes represents the investment in a note which was
due to mature in August 2022 and forms part of Cell C’s capital structure. The carrying value as of each of September 30, 2023, and
June 30, 2023, respectively was $
0
Other receivables includes prepayments, deposits, income taxes receivable and other receivables.
Contractual maturities of held to maturity investments
Summarized below is the contractual maturity of the Company’s held to maturity investment as of September 30, 2023:
Cost basis
Estimated
fair
value
(1)
Due in one year or less
$
-
$
-
Due in one year through five years
(2)
-
-
Due in five years through ten years
-
-
Due after ten years
-
-
Total
$
-
$
-
(1) The estimated fair value of the Cedar Cellular note has been calculated utilizing the Company’s portion of the assets held by
Cedar Cellular, namely, Cedar Cellular’s investment in Cell C.
(2) The cost basis is zero ($
0.0
11
2.
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 September 30, 2023, and June 30, 2023, is presented in the table below:
September 30,
June 30,
2023
2023
Microlending finance loans receivable, net
$
20,877
$
20,605
Microlending finance loans receivable, gross
22,328
22,037
Allowance for doubtful finance loans receivable, end of period
1,451
1,432
Beginning of period
1,432
1,394
Reversed to statement of operations
(27)
-
Charged to statement of operations
416
1,452
Utilized
(364)
(1,214)
Foreign currency adjustment
(6)
(200)
Merchant finance loans receivable, net
14,858
16,139
Merchant finance loans receivable, gross
17,800
18,289
Allowance for doubtful finance loans receivable, end of period
2,942
2,150
Beginning of period
2,150
297
Reallocation from allowance for doubtful accounts receivable
-
418
Reversed to statement of operations
(202)
(1,268)
Charged to statement of operations
1,394
3,068
Utilized
(376)
-
Foreign currency adjustment
(24)
(365)
Total finance loans receivable, net
$
35,735
$
36,744
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 have been pledged as security for the Company’s revolving credit facility (refer to Note 8).
Allowance for credit losses
Microlending finance loans receivable
Microlending finance loans receivable 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
six months
, with the majority of loans
originated having a tenor of
six months
. The Company analyses this lending book as a single portfolio because the loans within the
portfolio have similar characteristics and management uses similar processes to monitor and assess the credit risk of the lending book.
Refer to Note 4 related to the Company risk management process related to these receivables.
The Company has operated this lending book for more than
five years
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 July 1, 2023 and September 30, 2023, was
6.50
%. The performing component (that is, outstanding loan payments
not in arrears) of the book exceeds more than
99
% of outstanding lending book as of September 30, 2023.
Merchant finance loans receivable
Merchant finance loans receivable related to the Company’s Merchant lending activities in South Africa whereby it provides
unsecured short-term loans to qualifying customers. Loans to customers have a tenor of up to
twelve months
, with the majority of
loans originated having a tenor of approximately
seven months
. The Company analyses this lending book as a single portfolio because
the loans within the portfolio have similar characteristics and management uses similar processes to monitor and assess the credit risk
of the lending book. Refer to Note 4 related to the Company risk management process related to these receivables.
12
2.
Accounts receivable, net and other receivables and finance loans receivable, net (continued)
Finance loans receivable, net (continued)
Allowance for credit losses (continued)
Microlending finance loans receivable (continued)
The Company has recently (in the past
two years
) commenced lending to merchant customers and uses historical default
experience over the lifetime of loans generated thus far in order to calculate a lifetime loss rate for the lending book. 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 July 1, 2023 and
September 30, 2023, was approximately
1.18
%. The performing component (that is, outstanding loan payments not in arrears), under-
performing component (that is, outstanding loan payments that are in arrears) and non-performing component (that is, outstanding
loans for which payments appeared to have ceased) of the book represents approximately
84
%,
11
% and
5
%, respectively, of the
outstanding lending book as of September 30, 2023.
3. Inventory
The Company’s inventory comprised the following categories as of September 30, 2023, and June 30, 2023:
September 30,
June 30,
2023
2023
Raw materials
$
2,642
$
2,819
Work-in-progress
230
30
Finished goods
24,882
24,488
$
27,754
$
27,337
As of September 30, 2023 and June 30, 2023, finished goods includes $
8.5
8.6
airtime inventory that was previously classified as finished goods subject to sale restrictions. In support of Cell C’s liquidity position
and pursuant to Cell C’s recapitalization process, the Company limited the resale of this airtime to its own distribution channels. On
September 30, 2022, Cell C concluded its recapitalization process and the Company and Cell C entered into an agreement under which
Cell C agreed to repurchase, from October 2023, up to ZAR
10
to be repurchased by Cell C is calculated as ZAR
10
The Company’s ability to sell this airtime has increased significantly since the acquisition of Connect because Connect is a significant
reseller of Cell C airtime. As a result, the Company has sold higher volumes of airtime through this channel than it did prior to the
Cell C recapitalization, however, continued sales at these volumes is dependent on prevailing conditions continuing in the airtime
market. If the Company is able to sell at least ZAR
10
not be required to repurchase any airtime from the Company during any specific month. The Company has agreed to notify Cell C
prior to selling any of this airtime, however, there is no restriction placed on the Company on the sale of the airtime.
13
4. 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.
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 are trending upwards and the Company expects
higher interest rates in the foreseeable future which will increase its cost of borrowing. 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. A significant
amount of judgment is required to assess the ultimate recoverability of these finance loan receivables, including ongoing evaluation
of the creditworthiness of each customer.
Merchant lending
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.
14
4. Fair value of financial instruments (continued)
Risk management (continued
Equity price and liquidity risk
Equity price risk relates to the risk of loss that the Company would incur as a result of the volatility in the exchange-traded price
of equity securities that it holds. The market price of these securities may fluctuate for a variety of reasons and, consequently, the
amount that the Company may obtain in a subsequent sale of these securities may significantly differ from the reported market value.
Equity liquidity risk relates to the risk of loss that the Company would incur as a result of the lack of liquidity on the exchange
on which those securities are listed. The Company may not be able to sell some or all of these securities at one time, or over an
extended period of time without influencing the exchange-traded price, or at all.
Financial instruments
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 unobservable inputs – investment in Cell C
The Company’s Level 3 asset represents an investment of
75,000,000
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 September 30, 2023 and June 30, 2023, respectively, and valued Cell C at $
0.0
0.0
of September 30, 2023, and June 30, 2023, 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
increased the marketability discount from
10
% to
20
% and the minority discount from
15
% to
24
% due to the reduction in the
Company’s shareholding percentage from
15
% to
5
% as well as current market conditions. The Company utilized the latest revised
business plan provided by Cell C management for the period ended December 31, 2025, for the September 30, 2023, and June 30,
2023, 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 September 30, 2023 and June 30, 2023:
Weighted Average Cost of Capital ("WACC"):
Between
20
% and
31
% over the period of the forecast
Long term growth rate:
4.5
% (
4.5
% as of June 30, 2023)
Marketability discount:
20
% (
20
% as of June 30, 2023)
Minority discount:
24
% (
24
% as of June 30, 2023)
Net adjusted external debt - September 30, 2023:
(1)
ZAR
8
0.4
Net adjusted external debt - June 30, 2023:
(2)
ZAR
8.1
0.4
(1) translated from ZAR to U.S. dollars at exchange rates applicable as of September 30, 2023.
(2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, 2023.
The following table presents the impact on the carrying value of the Company’s Cell C investment of a
1.0
% increase and
1.0
%
decrease in the WACC rate and the EBITDA margins respectively used in the Cell C valuation on September 30, 2023, all amounts
translated at exchange rates applicable as of September 30, 2023:
Sensitivity for fair value of Cell C investment
1.0% increase
1.00% decrease
WACC rate
$
-
$
621
EBITDA margin
$
1,954
$
-
The fair value of the Cell C shares as of September 30, 2023, represented
0
% of the Company’s total assets, including these
shares. The Company expects to hold these shares for an extended period of time and that there will be short-term equity price volatility
with respect to these shares particularly given that Cell C remains in a turnaround process.
15
4. Fair value of financial instruments (continued)
Financial instruments
Derivative transactions - Foreign exchange contracts
As part of the Company’s risk management strategy, the Company enters into derivative transactions to mitigate exposures to
foreign currencies using foreign exchange contracts. These foreign exchange contracts are over-the-counter derivative
transactions. Substantially all of the Company’s derivative exposures are with counterparties that have long-term credit ratings of “B”
(or equivalent) or better. The Company uses quoted prices in active markets for similar assets and liabilities to determine fair value
(Level 2). The Company has no derivatives that require fair value measurement under Level 1 or 3 of the fair value hierarchy.
The Company had
no
The following table presents the Company’s assets measured at fair value on a recurring basis as of September 30, 2023,
according to the fair value hierarchy:
Quoted Price in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Assets
Investment in Cell C
$
-
$
-
$
-
$
-
Related to insurance
business:
Cash, cash equivalents and
restricted cash (included
in other long-term assets)
251
-
-
251
Fixed maturity
investments (included in
cash and cash equivalents)
3,661
-
-
3,661
Foreign exchange
contracts
-
-
-
-
Total assets at fair value
$
3,912
$
-
$
-
$
3,912
The following table presents the Company’s assets measured at fair value on a recurring basis as of June 30, 2023, 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)
258
-
-
258
Fixed maturity investments
(included in cash and cash
equivalents)
3,119
-
-
3,119
Total assets at fair value
$
3,377
$
-
$
-
$
3,377
There have been
no
There was
no
3, during the three months ended September 30, 2023 and 2022.
16
4. Fair value of financial instruments (continued)
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 three months ended September 30, 2023:
Carrying value
Assets
Balance as of June 30, 2023
$
-
Foreign currency adjustment
(1)
-
Balance as of September 30, 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.
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 three months ended September 30, 2022:
Carrying value
Assets
Balance as of June 30, 2022
$
-
Foreign currency adjustment
(1)
-
Balance as of September 30, 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 5 for impairment charges
recorded during the reporting periods presented herein. The Company has
no
basis.
5. 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, 2023, 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 September 30, 2023, and June 30, 2023, was as
follows:
September 30,
June 30,
2023
2023
Finbond Group Limited (“Finbond”)
27.8
%
27.8
%
Sandulela Technology (Pty) Ltd ("Sandulela")
49.0
%
49.0
%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)
50.0
%
50.0
%
Finbond
As of September 30, 2023, the Company owned
220,523,358
27.8
% of its issued
and outstanding ordinary shares. Finbond is listed on the Johannesburg Stock Exchange (“JSE”) and its closing price on September
29, 2023, the last trading day of the month, was ZAR
0.41
of the Company’s holding in Finbond on September 30, 2023, was ZAR
90.4
4.8
applicable as of September 30, 2023).
17
5. Equity-accounted investments and other long-term assets (continued)
Equity-accounted investments (continued)
Finbond (continued)
August 2023 agreement to sell entire stake in Finbond
On August 10, 2023, the Company, through its wholly owned subsidiary Net1 Finance Holdings (Pty) Ltd, entered into an
agreement with Finbond to sell its remaining shareholding to Finbond for a cash consideration of ZAR
64.2
3.4
exchange rates applicable as of September 30, 2023), or ZAR
0.2911
including regulatory and shareholder approvals, and all conditions are required to be fulfilled on or before December 31, 2023,
otherwise the transaction will lapse.
Sale of Finbond shares during the three months ended September 2022
The Company sold
81,935
$
0.002
condensed consolidated statements of operations.
The following table presents the calculation of the loss on disposal of Finbond shares during the three months ended September
30, 2022:
Three months
ended September
30,
2022
Loss on disposal of Finbond shares:
Consideration received in cash
$
3
Less: carrying value of Finbond shares sold
(3)
Less: release of foreign currency translation reserve from accumulated other comprehensive loss
(2)
Add: release of stock-based compensation charge related to equity-accounted investment
-
Loss on sale of Finbond shares
$
(2)
Finbond impairments recorded during the three months ended September 30, 2023
As noted earlier, the Company has entered into an agreement to exit its position in Finbond and the Company considered this an
impairment indicator. The Company is required to include any foreign currency translation reserve and other equity account amounts
in its impairment assessment if it considers exiting an equity method investment. The Company performed an impairment assessment
of its holding in Finbond, including the foreign currency translation reserve and other equity account amounts, as of September 30,
2023. The Company recorded an impairment loss of $
1.2
difference between the determined fair value of the Company’s interest in Finbond and the Company’s carrying value, including the
foreign currency translation reserve (before the impairment). The Company used the price of ZAR
0.2911
2023 agreement referred to above to calculate the determined fair value for Finbond.
Finbond impairments recorded during the three months ended September 30, 2022
The Company considered the combination of the ongoing losses incurred and reported by Finbond and its lower share price as
impairment indicators. The Company performed an impairment assessment of its holding in Finbond as of September 30, 2022. The
Company recorded an impairment loss of $
1.1
temporary decrease in Finbond’s value, which represented the difference between the determined fair value of the Company’s interest
in Finbond and the Company’s carrying value (before the impairment). The Company observed continued limited trading in Finbond
shares on the JSE during the three months ended September 30, 2022, because a small number of shareholders owned approximately
80
% of its issued and outstanding shares between them. The Company calculated a fair value per share for Finbond by applying a
liquidity discount of
25
% to the September 30, 2022, Finbond closing price of ZAR
0.49
. The Company increased the liquidity discount
from
15
% (used in the previous impairment assessment) to
25
% as a result of the ongoing limited trading activity observed on the
JSE.
18
5. Equity-accounted investments and other long-term assets (continued)
Equity-accounted investments (continued)
Carbon
In September 2022, the Company, through its wholly-owned subsidiary, Net1 Applied Technologies Netherlands B.V. (“Net1
BV”), entered into a binding term sheet with the Etobicoke Limited (“Etobicoke”) to sell its entire interest, or
25
%, in Carbon to
Etobicoke for $
0.5
3.0
0.75
equity interest and the loan had a carrying value of $
0
Carbon shares purchased as security for the amounts outstanding under the binding term sheet.
The Company received $
0.25
(i) $
0.25
0.75
in March 2024. Both amounts are included in the caption accounts receivable, net and other receivables in the Company’s unaudited
condensed consolidated balance sheet as of September 30, 2023. The Company has allocated the $
0.25
the equity interest and will allocate the funds received first to the sale of the equity interest and then to the loans.
The Company currently believes that the fair value of the Carbon shares provided as security is $
0
the carrying value as of June 30, 2022, and has created an allowance for doubtful loans receivable related to the $
1.0
Etobicoke. The Company did not incur any significant transaction costs. The Company has included the gain of $
0.25
to the sale of the Carbon equity interest in the caption net gain on disposal of equity-accounted investments in the Company’s unaudited
condensed consolidated statements of operations.
The following table presents the calculation of the gain on disposal of Carbon in September 2022:
Three months
ended September
30,
2022
Gain on disposal of Carbon shares:
Consideration received in cash in September 2022
$
250
Less: carrying value of Carbon
-
Gain on disposal of Carbon shares:
(1)
$
250
(1) The Company does not expect to pay taxes related to the sale of Carbon because the base cost of its investment exceeds the
sales consideration received. The Company does not believe that it will be able to utilize the loss generated because Net1 BV does not
generate taxable income.
Summarized below is the movement in equity-accounted investments and loans provided to equity-accounted investments during
the three months ended September 30, 2023:
Finbond
Other
(1)
Total
Investment in equity
Balance as of June 30, 2023
$
3,040
$
131
$
3,171
Stock-based compensation
14
-
14
Comprehensive income:
(956)
40
(916)
Other comprehensive income
489
-
489
Equity accounted (loss) earnings
(1,445)
40
(1,405)
Share of net (loss) earnings
(278)
40
(238)
Impairment
(1,167)
-
(1,167)
Foreign currency adjustment
(2)
(14)
(2)
(16)
Balance as of September 30, 2023
$
2,084
$
169
$
2,253
(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.
19
5. 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 September 30, 2023, and June 30, 2023:
September 30,
June 30,
2023
2023
Total equity investments
$
76,297
$
76,297
Investment in
5
% of Cell C (June 30, 2023:
5
%) at fair value (Note 4)
-
-
Investment in
10
% of MobiKwik (June 30, 2023:
10
%)
(1)
76,297
76,297
Investment in
87.5
% of CPS (June 30, 2023:
87.5
%) at fair value
(1)(2)
-
-
Policy holder assets under investment contracts (Note 7)
251
257
Reinsurance assets under insurance contracts (Note 7)
1,274
1,040
Total other long-term assets
$
77,822
$
77,594
(1) The Company determined that MobiKwik 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.
Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to
maturity investments as of September 30, 2023:
Cost basis
Unrealized
holding
Unrealized
holding
Carrying
gains
losses
value
Equity securities:
Investment in MobiKwik
$
26,993
$
49,304
$
-
$
76,297
Investment in CPS
-
-
-
-
Held to maturity:
Investment in Cedar Cellular notes (Note 2)
-
-
-
-
Total
$
26,993
$
49,304
$
-
$
76,297
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, 2023:
Cost basis
Unrealized
holding
Unrealized
holding
Carrying
gains
losses
value
Equity securities:
Investment in MobiKwik
$
26,993
$
49,304
$
-
$
76,297
Investment in CPS
-
-
-
-
Held to maturity:
Investment in Cedar Cellular notes
-
-
-
-
Total
$
26,993
$
49,304
$
-
$
76,297
20
6. Goodwill and intangible assets, net
Goodwill
Summarized below is the movement in the carrying value of goodwill for the three months ended September 30, 2023:
Gross value
Accumulated
impairment
Carrying
value
Balance as of June 30, 2023
$
152,619
$
(18,876)
$
133,743
Foreign currency adjustment
(1)
(664)
60
(604)
Balance as of September 30, 2023
$
151,955
$
(18,816)
$
133,139
(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.
Goodwill has been allocated to the Company’s reportable segments as follows:
Consumer
Merchant
Carrying value
Balance as of June 30, 2023
$
-
$
133,743
$
133,743
Foreign currency adjustment
(1)
-
(604)
(604)
Balance as of September 30, 2023
$
-
$
133,139
$
133,139
(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 September 30, 2023, and June
30, 2023:
As of September 30, 2023
As of June 30, 2023
Gross
carrying
value
Accumulated
amortization
Net
carrying
value
Gross
carrying
value
Accumulated
amortization
Net
carrying
value
Finite-lived intangible assets:
Customer relationships
$
24,865
$
(12,005)
$
12,860
$
24,978
$
(11,565)
$
13,413
Software, integrated
platform and unpatented
technology
110,535
(16,419)
94,116
110,906
(13,711)
97,195
FTS patent
2,025
(2,025)
-
2,034
(2,034)
-
Brands and trademarks
13,789
(3,170)
10,619
13,852
(2,863)
10,989
Total finite-lived intangible
assets
$
151,214
$
(33,619)
$
117,595
$
151,770
$
(30,173)
$
121,597
Aggregate amortization expense on the finite-lived intangible assets for the three months ended September 30, 2023 and 2022,
was approximately $
3.6
4.0
years and thereafter, assuming exchange rates that prevailed on September 30, 2023, 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 2024 (three months ended September 30, 2023)
$
10,742
Fiscal 2025
14,327
Fiscal 2026
14,328
Fiscal 2027
14,274
Fiscal 2028
14,232
Thereafter
49,692
Total future estimated annual amortization expense
$
117,595
21
7. 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 three
months ended September 30, 2023:
Reinsurance
Assets
(1)
Insurance
contracts
(2)
Balance as of June 30, 2023
$
1,040
$
(1,600)
Increase in policy holder benefits under insurance contracts
378
(1,952)
Claims and decrease in policyholders’ benefits under insurance contracts
(136)
1,671
Foreign currency adjustment
(3)
(8)
10
Balance as of September 30, 2023
$
1,274
$
(1,871)
(1) Included in other long-term assets (refer to Note 5);
(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 three months
ended September 30, 2023:
Assets
(1)
Investment
contracts
(2)
Balance as of June 30, 2023
$
257
$
(241)
Increase in policy holder benefits under investment contracts
3
(3)
Foreign currency adjustment
(3)
(9)
1
Balance as of September 30, 2023
$
251
$
(243)
(1) Included in other long-term assets (refer to Note 5);
(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.
22
8. 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, 2023, for additional information regarding its borrowings.
South Africa
The amounts below have been translated at exchange rates applicable as of the dates specified. The 3-month Johannesburg
Interbank Agreed Rate (“JIBAR”) on September 30, 2023, was
8.33
%. The prime rate on September 30, 2023, was
11.75
%.
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 September 30, 2023, the Company’s had utilized ZAR
10.0
0.5
200
revolving credit facility. The interest rate on this facility as of September 30, 2023, was JIBAR plus
5.50
%.
Available short-term facility - Facility E
As of September 30, 2023, the aggregate amount of the Company’s short-term South African overdraft facility with RMB was
ZAR
1.4
74.0
0.4
19.8
of this overdraft facility. This overdraft facility may only be used to fund ATMs and therefore the overdraft utilized and converted to
cash to fund the Company’s ATMs is considered restricted cash. The interest rate on this facility is equal to the prime rate.
Connect Facilities, comprising long-term borrowings and a short-term facility
As of September 30, 2023, the Connect Facilities include (i) an overdraft facility (general banking facility) of ZAR
205.0
(of which ZAR
170.0
700.0
550.0
utilized); and (iv) an asset-backed facility of ZAR
200.0
152.5
CCC Revolving Credit Facility, comprising long-term borrowings
As of September 30, 2023, the amount of the CCC Revolving Credit Facility was ZAR
300.0
205.5
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
0.95
% per annum.
RMB facility, comprising indirect facilities
As of September 30, 2023, the aggregate amount of the Company’s short-term South African indirect credit facility with RMB
was ZAR
135.0
7.1
September 30, 2023 and June 30, 2023, the Company had utilized approximately ZAR
33.1
1.7
33.1
million ($
1.8
135.0
135.0
to enable the bank to issue guarantees, letters of credit and forward exchange contracts (refer to Note 19).
Nedbank facility, comprising short-term facilities
As of September 30, 2023, the aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited
was ZAR
156.6
8.3
156.6
8.3
million), which include guarantees, letters of credit and forward exchange contracts.
As of September 30, 2023 and June 30, 2023, the Company had utilized approximately ZAR
2.1
0.1
2.1
0.1
156.6
156.6
million) to enable the bank to issue guarantees, letters of credit and forward exchange contracts (refer to Note 19).
23
8. Borrowings (continued)
Movement in short-term credit facilities
Summarized below are the Company’s short-term facilities as of September 30, 2023, and the movement in the Company’s short-
term facilities from as of June 30, 2023 to as of September 30, 2023:
RMB
RMB
RMB
Nedbank
Facility E
Indirect
Connect
Facilities
Total
Short-term facilities available as of September 30, 2023
$
73,982
$
7,134
$
10,833
$
8,273
$
100,222
Overdraft
-
-
10,833
-
10,833
Overdraft restricted as to use for ATM funding only
73,982
-
-
-
73,982
Indirect and derivative facilities
-
7,134
-
8,273
15,407
Movement in utilized overdraft facilities:
Restricted as to use for ATM funding only
23,021
-
-
-
23,021
No restrictions as to use
-
-
9,025
-
9,025
Balance as of June 30, 2023
23,021
-
9,025
-
32,046
Utilized
59,574
-
-
-
59,574
Repaid
(62,793)
-
-
-
(62,793)
Foreign currency adjustment
(1)
(48)
-
(42)
-
(90)
Balance as of September 30, 2023
19,754
-
8,983
-
28,737
Restricted as to use for ATM funding only
19,754
-
-
-
19,754
No restrictions as to use
$
-
$
-
$
8,983
$
-
$
8,983
Interest rate as of September 30, 2023 (%)
(2)
11.75
-
11.65
-
Movement in utilized indirect and derivative facilities:
Balance as of June 30, 2023
$
-
$
1,757
$
-
$
112
$
1,869
Foreign currency adjustment
(1)
-
(8)
-
-
(8)
Balance as of September 30, 2023
$
-
$
1,749
$
-
$
112
$
1,861
(1) Represents the effects of the fluctuations between the ZAR and the U.S. dollar.
(2) Facility E interest set at prime and the Connect facility at prime less
0.10
%.
24
8. 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, 2023 to as of September
30, 2023:
Facilities
G & H
A&B
CCC
Asset
backed
Total
Included in current
$
-
$
-
$
-
$
3,663
$
3,663
Included in long-term
48,965
64,436
11,802
4,252
129,455
Opening balance as of June 30, 2023
48,965
64,436
11,802
7,915
133,118
Facilities utilized
1,372
-
-
1,099
2,471
Facilities repaid
(797)
-
(904)
(928)
(2,629)
Non-refundable fees paid
-
-
-
-
-
Non-refundable fees amortized
202
12
13
-
227
Capitalized interest
1,756
-
-
-
1,756
Capitalized interest repaid
(58)
-
-
-
(58)
Foreign currency adjustment
(1)
(297)
(293)
(50)
(28)
(668)
Closing balance as of September 30, 2023
51,143
64,155
10,861
8,058
134,217
Included in current
-
-
-
3,630
3,630
Included in long-term
51,143
64,155
10,861
4,428
130,587
Unamortized fees
(397)
(210)
(53)
-
(660)
Due within 2 years
-
-
-
3,179
3,179
Due within 3 years
51,540
4,954
10,914
1,142
68,550
Due within 4 years
-
7,596
-
104
7,700
Due within 5 years
$
-
$
51,815
$
-
$
3
$
51,818
Interest rates as of September 30, 2023 (%):
13.83
12.08
12.70
12.50
Base rate (%)
8.33
8.33
11.75
11.75
Margin (%)
5.50
3.75
0.95
0.75
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 calculated based on the 3-month JIBAR in effect from time to time plus a margin of,
from January 1, 2023: (i)
5.50
% for as long as the aggregate balance under the Facilities is greater than ZAR
800
4.25
%
if the aggregate balance under the Facilities is equal to or less than ZAR
800
350
2.50
%
if the aggregate balance under the Facilities is less than ZAR
350
(3) Interest on Facility A and Facility B is calculated based on JIBAR plus a margin, of
3.75
%, in effect from time to time.
(4) Interest is charged at prime plus
0.95
% per annum on the utilized balance.
(5) Interest is charged at prime plus
0.75
% 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 September 30, 2023 and 2022, was $
4.0
and $
2.7
30, 2023 and 2022, respectively, were $
0.2
0.2
K2020 and CCC facilities relates to borrowings utilized to fund a portion of the Company’s merchant finance loans receivable and
this interest expense of $
0.4
0.2
servicing and support on the condensed consolidated statement of operations for the three months ended September 30, 2023 and 2022.
25
9. Other payables
Summarized below is the breakdown of other payables as of September 30, 2023, and June 30, 2023:
September 30,
June 30,
2023
2023
Accruals
$
6,619
$
7,078
Provisions
3,282
7,429
Value -added tax payable
983
1,247
Payroll-related payables
2,125
1,038
Participating merchants' settlement obligation
39
39
Other
22,057
19,466
$
35,105
$
36,297
Other includes transactions-switching funds payable, deferred income, client deposits and other payables.
10. Capital structure
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 as of September 30, 2023 and 2022, respectively:
September 30,
September 30,
2023
2022
Number of shares, net of treasury:
Statement of changes in equity
63,638,912
62,522,384
Non-vested equity shares that have not vested as of end of period
2,527,492
2,518,546
Number of shares, net of treasury, excluding non-vested equity shares that have not
vested
61,111,420
60,003,838
11. Accumulated other comprehensive loss
The table below presents the change in accumulated other comprehensive loss per component during the three months ended
September 30, 2023:
Three months ended
September 30, 2023
Accumulated
foreign
currency
translation
reserve
Total
Balance as of July 1, 2023
$
(195,726)
$
(195,726)
Movement in foreign currency translation reserve related to equity-accounted
investment
489
489
Movement in foreign currency translation reserve
(844)
(844)
Balance as of September 30, 2023
$
(196,081)
$
(196,081)
26
11. Accumulated other comprehensive loss (continued)
The table below presents the change in accumulated other comprehensive loss per component during the three months ended
September 30, 2022:
Three months ended
September 30, 2022
Accumulated
foreign
currency
translation
reserve
Total
Balance as of July 1, 2022
$
(168,840)
$
(168,840)
Release of foreign currency translation reserve related to disposal of Finbond equity
securities
2
2
Movement in foreign currency translation reserve related to equity-accounted
investment
2,441
2,441
Movement in foreign currency translation reserve
(22,093)
(22,093)
Balance as of September 30, 2022
$
(188,490)
$
(188,490)
There were
no
September 30, 2023. During the three months ended September 30, 2022, the Company reclassified $
0.002
other comprehensive loss (accumulated foreign currency translation reserve) to net loss related to the disposal of shares in Finbond
(refer to Note 5).
12. 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, 2023.
Stock option and restricted stock activity
Options
The following table summarizes stock option activity for the three months ended September 30, 2023 and 2022:
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, 2023
673,274
4.37
5.14
239
1.67
Exercised
(6,793)
3.07
-
5
-
Forfeited
(175,776)
3.58
-
-
1.22
Outstanding - September 30, 2023
490,705
4.68
6.30
199
1.82
Outstanding - June 30, 2022
926,225
4.14
6.60
1,249
1.60
Exercised
(2,000)
3.07
-
1
-
Forfeited
-
-
-
-
-
Outstanding - September 30, 2022
924,225
4.14
6.36
226
1.60
No
ended September 30, 2023 and 2022, respectively, the Company received approximately $
0.02
0.006
exercise of
6,793
2,000
175,776
during the three months ended September 30, 2023.
No
2022.
27
12. Stock-based compensation
Stock option and restricted stock activity
Options
The following table presents stock options vested and expected to vest as of September 30, 2023:
Number of
shares
Weighted
average
exercise
price
($)
Weighted
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
($’000)
Vested and expecting to vest - September 30, 2023
490,705
4.68
6.30
199
These options have an exercise price range of $
3.01
11.23
.
The following table presents stock options that are exercisable as of September 30, 2023:
Number of
shares
Weighted
average
exercise
price
($)
Weighted
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
($’000)
Exercisable - September 30, 2023
341,317
5.05
5.77
121
No
new shares to satisfy stock option exercises.
Restricted stock
The following table summarizes restricted stock activity for the three months ended September 30, 2023 and 2022:
Number of
shares of
restricted
stock
Weighted
average
grant date
fair value
($’000)
Non-vested – June 30, 2023
2,614,419
11,869
Total vested
(78,800)
302
Forfeitures
(8,127)
32
Non-vested – September 30, 2023
2,527,492
11,475
Non-vested – June 30, 2022
2,385,267
11,879
Total Granted
212,080
1,167
Granted – July 2021
32,582
172
Granted – August 2021
179,498
995
Total vested
(78,801)
410
Vested – July 2022
(78,801)
410
Non-vested – September 30, 2022
2,518,546
12,568
28
12. Stock-based compensation (continued)
Stock option and restricted stock activity (continued)
Restricted stock (continued)
Grants
No
32,582
shares of restricted stock to employees which have time -based vesting conditions. The Company agreed to match, on a
one
-for-one
basis, an employee’s purchase of up to $
1.0
in August 2022, the Company granted
179,498
time-based vesting conditions.
In October 2023, the Company awarded
225,000
except if the executive officer is terminated for cause, in which case the award will be forfeited. The Company also awarded
310,916
shares of restricted stock to
three
and vest in full only on the date, if any, that the following conditions are satisfied: (1) a compounded annual
10
% appreciation in the
Company’s stock price off a base price of $
4.00
17, 2026, and (2) the recipient is employed by the Company on a full-time basis when the condition in (1) is met. If either of these
conditions is not satisfied, then none of the shares of restricted stock will vest and they will be forfeited. The Company’s closing price
on September 30, 2023, was $
3.90
.
The appreciation levels (times and price) and vesting percentages as of each period ended are as follows:
●
Prior to the first anniversary of the grant date:
0
%;
●
Fiscal 2025, the Company’s 30-day volume weighted-average stock price (“VWAP”) before November 17, 2024 is
approximately
1.10
4.40
4.00
:
33
%;
●
Fiscal 2026, the Company’s VWAP before November 17, 2025 is
1.21
4.84
4.00
:
67
%;
●
Fiscal 2027, the Company’s VWAP before November 1, 2026 is
1.33
5.32
) than $
4.00
:
100
%.
The Company also awarded
333,080
150
employees in October 2023, which are subject to the employees continued employment with the Company through the applicable
vesting dates.
The Company has not yet determined the fair value of these shares of restricted stock awarded in October 2023.
As fully 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, 2023, the Company granted
19,443
30, 2022 which were ineligible for transfer until the earlier of December 31, 2022, or the occurrence of the agreed event.
Vesting
In July 2023,
78,800
78,801
to Mr. Meyer vested and he elected for
35,460
shares. The
35,460
Forfeitures
During the three months ended September 30, 2023, employees forfeited
8,127
termination of employment with the Company.
No
30, 2022.
29
12. 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 September 30, 2023 and 2022, of
$
1.8
1.5
Total charge
Allocated to cost
of goods sold, IT
processing,
servicing and
support
Allocated to
selling, general
and
administration
Three months ended September 30, 2023
Stock-based compensation charge
$
1,768
$
-
$
1,768
Reversal of stock compensation charge related to stock
options and restricted stock forfeited
(9)
-
(9)
Total - three months ended September 30, 2023
$
1,759
$
-
$
1,759
Three months ended September 30, 2022
Stock-based compensation charge
$
1,462
$
-
$
1,462
Total - three months ended September 30, 2022
$
1,462
$
-
$
1,462
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 September 30, 2023, the total unrecognized compensation cost related to stock options was approximately $
0.1
which the Company expects to recognize over approximately
two years
. As of September 30, 2023, the total unrecognized
compensation cost related to restricted stock awards was approximately $
5.8
approximately
two years
.
As of September 30, 2023, and June 30, 2023, respectively, the Company recorded a deferred tax asset of approximately $
0.6
million and $
0.6
30, 2023, and June 30, 2023, respectively, the Company recorded a valuation allowance of approximately $
0.6
0.6
million, related to the deferred tax asset 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.
13. (Loss) Earnings per share
The Company has issued redeemable common stock which is redeemable at an amount other than fair value. Redemption of a
class of common stock at other than fair value increases or decreases the carrying amount of the redeemable common stock and is
reflected in basic earnings per share using the two-class method. There were
no
carrying value of the redeemable common stock during the three months ended September 30, 2023 and 2022. 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, 2023.
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 months ended September 30, 2023 and
2022, 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
41,809
210,530
30, 2023 and 2022, 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. 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, 2023.
30
13. (Loss) Earnings per share (continued)
The following table presents net loss attributable to Lesaka and the share data used in the basic and diluted loss per share
computations using the two-class method:
Three months ended
September 30,
2023
2022
(in thousands except
percent and
per share data)
Numerator:
Net loss attributable to Lesaka
$
(5,651)
$
(10,696)
Undistributed (loss) earnings
$
(5,651)
$
(10,696)
Percent allocated to common shareholders (Calculation 1)
96
96
Numerator for (loss) earnings per share: basic and diluted
(5,402)
(10,277)
Continuing
(5,402)
(10,277)
Denominator
Denominator for basic (loss) earnings per share:
Weighted-average common shares outstanding
60,990
59,996
Denominator for diluted (loss) earnings per share: adjusted weighted average
common shares outstanding and assuming conversion
60,990
59,996
(Loss) Earnings per share:
Basic
$
(0.09)
$
(0.17)
Diluted
$
(0.09)
$
(0.17)
(Calculation 1)
Basic weighted-average common shares outstanding (A)
60,990
59,996
Basic weighted-average common shares outstanding and unvested restricted shares
expected to vest (B)
63,805
62,445
Percent allocated to common shareholders (A) / (B)
96
96
Options to purchase
262,506
4.87
11.23
outstanding during the three months ended September 30, 2023, 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
324,619
4.87
11.23
the three months ended September 30, 2022, 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 September 30, 2023.
14. Supplemental cash flow information
The following table presents supplemental cash flow disclosures for the three months ended September 30, 2023 and 2022:
Three months ended
September 30,
2023
2022
Cash received from interest
$
445
$
409
Cash paid for interest
$
2,925
$
4,011
Cash paid for income taxes
$
604
$
677
31
14. Supplemental cash flow information (continued)
Leases
The following table presents supplemental cash flow disclosure related to leases for the three months ended September 30, 2023
and 2022:
Three months ended
September 30,
2023
2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
$
693
$
805
Right-of-use assets obtained in exchange for lease obligations
Operating leases
$
1,543
$
61
15. 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 September 30, 2023:
Merchant
Consumer
Total
Processing fees
$
28,760
$
5,733
$
34,493
South Africa
27,400
5,733
33,133
Rest of world
1,360
-
1,360
Technology products
2,037
19
2,056
South Africa
1,986
19
2,005
Rest of world
51
-
51
Telecom products and services
87,313
41
87,354
South Africa
82,559
41
82,600
Rest of world
4,754
-
4,754
Lending revenue
-
5,373
5,373
Interest from customers
1,520
-
1,520
Insurance revenue
-
2,611
2,611
Account holder fees
-
1,368
1,368
Other
879
435
1,314
South Africa
830
435
1,265
Rest of world
49
-
49
Total revenue, derived from the following geographic locations
120,509
15,580
136,089
South Africa
114,295
15,580
129,875
Rest of world
$
6,214
$
-
$
6,214
32
15. Revenue recognition (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 September 30, 2022:
Merchant
Consumer
Total
Processing fees
$
27,297
$
6,535
$
33,832
South Africa
26,028
6,535
32,563
Rest of world
1,269
-
1,269
Technology products
3,897
37
3,934
South Africa
3,830
37
3,867
Rest of world
67
-
67
Telecom products and services
76,120
-
76,120
South Africa
72,029
-
72,029
Rest of world
4,091
-
4,091
Lending revenue
-
4,711
4,711
Interest from customers
1,223
-
1,223
Insurance revenue
-
2,181
2,181
Account holder fees
-
1,411
1,411
Other
1,245
129
1,374
South Africa
1,201
129
1,330
Rest of world
44
-
44
Total revenue, derived from the following geographic locations
109,782
15,004
124,786
South Africa
104,311
15,004
119,315
Rest of world
$
5,471
$
-
$
5,471
33
16. 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
five years
. The Company also operates parts of its consumer business from locations which it leases for a period of less than
one year
. The Company’s operating lease expense during the three months ended September 30, 2023 and 2022 was $
0.7
$
0.8
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
September 30, 2023 and 2022, was $
0.9
1.1
The following table presents supplemental balance sheet disclosure related to the Company’s right-of-use assets and its operating
lease liabilities as of September 30, 2023 and June 30, 2023:
September 30,
June 30,
2023
2023
Right of use assets obtained in exchange for lease obligations:
Weighted average remaining lease term (years)
3.71
1.77
Weighted average discount rate (percent)
10.1
9.7
The maturities of the Company’s operating lease liabilities as of September 30, 2023, are presented below:
Maturities of operating lease liabilities
Year ended June 30,
2024 (excluding three months to September 30, 2023)
$
1,699
2025
1,638
2026
1,305
2027
1,239
2028
1,159
Thereafter
120
Total undiscounted operating lease liabilities
7,160
Less imputed interest
1,357
Total operating lease liabilities, included in
5,803
Operating lease liability - current
1,722
Operating lease liability - long-term
$
4,081
17. 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. A description of the Company’s operating segments is contained in
Note 21 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended
June 30, 2023.
The Company analyzes its business and operations in terms of
two
(1) Consumer Division (“Consumer”) and (2) Merchant Division (“Merchant ”).
34
17. Operating segments (continued)
Operating segments (continued)
The reconciliation of the reportable segment’s revenue to revenue from external customers for the three months ended September
30, 2023 and 2022, is as follows:
Revenue
Reportable
Segment
Inter-
segment
From
external
customers
Merchant
$
121,361
$
852
$
120,509
Consumer
15,580
-
15,580
Total for the three months ended September 30, 2023
$
136,941
$
852
$
136,089
Merchant
$
109,782
$
-
$
109,782
Consumer
15,004
-
15,004
Total for the three months ended September 30, 2022
$
124,786
$
-
$
124,786
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 does not allocate once-
off items, stock-based compensation charges, certain lease charges (“Lease adjustments”), 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, 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 represents 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. The Lease
adjustments reflect lease charges and 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 the Company’s loss before income tax expense.
The reconciliation of the reportable segments’ measures of profit or loss to loss before income tax expense for the three months
ended September 30, 2023 and 2022, is as follows:
Three months ended
September 30,
2023
2022
Reportable segments measure of profit or loss
$
10,541
$
6,499
Operating loss: Group costs
(1,822)
(2,300)
Once-off costs
(78)
(598)
Unrealized Loss FV for currency adjustments
(102)
-
Lease adjustments
(696)
(812)
Stock-based compensation charge adjustments
(1,759)
(1,462)
Depreciation and amortization
(5,856)
(5,998)
Reversal of allowance of EMI doubtful debt
250
-
Gain on disposal of equity-accounted investments
-
248
Interest income
449
411
Interest expense
(4,909)
(4,036)
Loss before income tax expense
$
(3,982)
$
(8,048)
35
17. Operating segments (continued)
Operating segments (continued)
The following tables summarize segment information that is prepared in accordance with GAAP for the three months ended
September 30, 2023 and 2022:
Three months ended
September 30,
2023
2022
Revenues
Merchant
$
121,361
$
109,782
Consumer
15,580
15,004
Total reportable segment revenue
136,941
124,786
Segment Adjusted EBITDA
Merchant
(1)
8,061
7,893
Consumer
(1)
2,480
(1,394)
Total Segment Adjusted EBITDA
10,541
6,499
Depreciation and amortization
Merchant
2,078
1,825
Consumer
169
245
Subtotal: Operating segments
2,247
2,070
Group costs
3,609
3,928
Total
5,856
5,998
Expenditures for long-lived assets
Merchant
2,763
3,873
Consumer
46
628
Subtotal: Operating segments
2,809
4,501
Group costs
-
-
Total
$
2,809
$
4,501
(1) Segment Adjusted EBITDA for Merchant includes retrenchment costs of $
0.2
4.6
includes retrenchment costs of $
0.1
1.5
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.
18. 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 months ended September 30, 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.
For the three months ended September 30, 2022, 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.
36
18. Income tax (continued)
Uncertain tax positions (continued)
The Company had
no
Company had
no
no
t expect changes related
to its unrecognized tax benefits will have a significant impact on its results of operations or financial position in the next 12 months.
The Company has
no
in the U.S. federal jurisdiction. As of September 30, 2023, 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, 2019. 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.
19. Commitments and contingencies
Guarantees
The South African Revenue Service and certain of the Company’s customers, suppliers and other business partners have asked
the Company to provide them with guarantees, including standby letters of credit, issued by South African banks. The Company is
required to procure these guarantees for these third parties to operate its business.
RMB has issued guarantees to these third parties amounting to ZAR
33.1
1.7
applicable as of September 30, 2023) thereby utilizing part of the Company’s short-term facilities. The Company pays commission of
between
3.42
% per annum to
3.44
% per annum of the face value of these guarantees and does not recover any of the commission from
third parties.
Nedbank has issued guarantees to these third parties amounting to ZAR
2.1
0.1
applicable as of September 30, 2023) thereby utilizing part of the Company’s short-term facilities. The Company pays commission of
between
0.47
% per annum to
1.84
% per annum of the face value of these guarantees and does not recover any of the commission from
third parties.
The Company has not recognized any obligation related to these guarantees in its consolidated balance sheet as of September 30,
2023. The maximum potential amount that the Company could pay under these guarantees is ZAR
35.2
1.9
at exchange rates applicable as of September 30, 2023). As discussed in Note 8, the Company has ceded and pledged certain bank
accounts to Nedbank as security for the guarantees issued by them with an aggregate value of ZAR
2.1
0.1
at exchange rates applicable as of September 30, 2023). The guarantees have reduced the amount available under its indirect and
derivative facilities in the Company’s short-term credit facilities described in Note 8.
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.
37
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, 2023,
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, 2023. 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 completely and with the
understanding that our actual future results, levels of activity, performance and achievements may be materially different from what
we expect. We qualify all of our forward-looking statements by these cautionary statements.
Recent Developments
We experienced continued improvement in our financial performance in the first quarter of fiscal 2024 as a result of positive
operational momentum in both of our Merchant and Consumer divisions.
Revenue of $136.1 million (ZAR 2.5 billion) was at the upper end of our revenue guidance despite prevailing negative
macroeconomic and socio-political conditions in South Africa.
We reached an important milestone this quarter, with operating income turning positive to $0.2 million (ZAR 4.2 million),
compared with an operating loss of $4.7 million (ZAR 80.0 million) during the first quarter of fiscal 2023. We delivered Group
Adjusted EBITDA, a non-GAAP measure, of ZAR 162.5 million ($8.7 million) this quarter, compared to Group Adjusted EBITDA
of ZAR 71.9 million ($4.2 million) in fiscal 2023. The continued resilience of our business model in a challenging environment for
our merchant and consumer customers demonstrates the value they place on our services.
Our mission at Lesaka is to enable merchants to compete and grow, and to improve the lives of South Africa’s grant beneficiaries
by providing access to innovative financial technology and value creating solutions. We achieve this through our vision to build and
operate the leading full-service fintech platform in Southern Africa, offering cash management, payment processing, Value Added
Services (“VAS”), capital and financial services to merchants and underserved consumers.
Merchant Division
The year-on-year growth achieved by our Merchant Division is supported by the robust secular trends underpinning financial
inclusion, cash management and digitalization for micro, small and medium enterprises (“MSMEs”), especially in the informal markets
of South Africa, where we have a leading market position.
38
Performance in our Merchant division has been driven by:
●
Kazang, our VAS and supplier payments business, continues to see adoption by MSMEs in the informal sector, with a 34%
year-on-year growth in the number of devices deployed. We had approximately 77,000 devices deployed as of September 30,
2023, compared to approximately 57,000 devices one year ago. We experienced a slight slowdown in net device growth
during our current quarter, growing by just over 2,000 devices.
o
The reason for the slight slowdown in net growth is attributed to a more selective device placement strategy that
followed the six month period to March 31, 2023, during which we installed a significant number of devices at
informal merchants to support their supplier payments to three major FMCG companies in South Africa. Following
that accelerated roll out program we have prioritised deployment at merchants where we can sell more products and
services through the channel and earn higher margins. Therefore, during the fourth quarter of fiscal 2023 and the
first quarter of fiscal 2024 we focused on optimising this new fleet and removing sub-optimal devices.
o
As communicated in the fourth quarter of fiscal 2023, our product mix for VAS sales has changed with low-margin
money transfers reducing significantly, currently approximately 5% of VAS throughput is money transfers,
compared to approximately 30% a year ago. The impact on overall profitability has not been material.
●
We provide card acquiring solutions in the informal sector via Kazang Pay and in the formal sector we provide this service
through Card Connect. Card-enabled POS devices increased to approximately 46,600 as of September 30, 2023, compared
to approximately 27,700 a year ago, a growth of 68% in deployed devices;
●
Our Merchant Credit offering includes Capital Connect in the formal market and Kazang Pay Advance in the informal market.
We disbursed ZAR 196 million during this quarter, compared to approximately ZAR 226 million in the comparable period
last year, representing a 13% decrease. In the formal market we continue to see demand for our merchant credit offering but
as previously disclosed, we experienced a slight pullback in credit extension in this business since March 2023 as we tightened
our credit criteria in response to the higher interest rate and inflationary pressures in the South African economy. In the
informal market, as we innovate and execute quickly in the Merchant Division, we have decided the current Kazang Pay
Advance credit product is not suitable to continue with, especially in the high interest rate environment, and have suspended
it, while we explore other options with respect to our Kazang Pay Advance offering. Overall, Kazang Pay Advance has
generated positive returns despite recent losses incurred being greater than expected. A reduction in origination of new loans,
loan book and disbursements is primarily a result of the decision to suspend Kazang Pay Advance during the period but was
also partially impacted by the slight pull back in credit extension in Capital Connect.
●
Our automated cash management offering, Cash Connect, effectively puts the “bank” in approximately 4,400 merchants’
stores, compared to approximately 4,200 merchants’ stores a year ago. Cash Connect is a provider of robust cash vaults in
the formal sector and is building a presence in the informal sector. Cash Connect enables our merchant customer base to
significantly mitigate their operational risks pertaining to cash management and security. Our new ATM recycler is generating
strong interest, and this business has been transferred to our Merchant Division, where it has been fully integrated into our
Cash Connect proposition as an alternative to vaults for our merchant customers.
Consumer Division
Over the past five quarters we have consistently referenced the three levers underpinning our strategy of returning the Consumer
Division to profitability – (i) growing active EasyPay Everywhere (“EPE”) account numbers, (ii) increasing average revenue per user
(“ARPU”) through cross-selling and (iii) cost optimization.
The progress on our three key initiatives is as follows:
●
Driving customer acquisition
o
Our total active EPE transactional account base stood at more than 1.3 million at the end of September 2023, of
which more than 1.1 million (or more than 85%) are permanent grant recipients. The balance comprises Social Relief
of Distress (“SRD”) grant recipients, which was introduced during the COVID pandemic and extended in calendar
2023.
o
Our priority is to grow our permanent grant recipient customers base, where we can build deeper relationships by
offering other 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. Gross EPE account activations, for the permanent base, during our
current quarter showed significant improvement due to various strategic initiatives. We achieved approximately
76,000 gross account activations in the first quarter, compared to approximately 45,000 in the first quarter of fiscal
2023. After adjusting for account churn, net active account growth for the quarter was approximately 42,000
accounts, compared to approximately 2,700 in first quarter of fiscal 2023
39
●
Progress on cross selling
EasyPay Loans
o
We originated approximately 222,000 loans during the quarter with our consumer loan book, before allowances,
increasing 20% to ZAR 423 million as at September 30, 2023, compared to ZAR 351 million as of September 30,
2022.
o
We have not amended our credit scoring or other lending criteria to grow our Consumer lending book.
o
The loan conversion rate continues to improve following the implementation of a number of targeted consumer
lending campaigns during the current quarter.
o
The portfolio loss ratio, calculated as the loans written off during the period as a percentage of the total loan book,
remains flat at approximately 6% on an annualized basis, compared to the fourth quarter of fiscal 2023.
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 more than 30% of our active permanent grant account base
as of September 30, 2023, compared to below 25% as of September 30, 2022. Approximately 37,500 new policies
were written in the quarter, compared to approximately 25,000 in the comparable period in fiscal 2023. The total
number of active policies has grown by 34% to approximately 359,000 policies as of September 30, 2023, compared
to September 30, 2022.
ARPU
o
ARPU for our permanent client base has increased to above ZAR 83 for the first quarter of fiscal 2024, from
approximately ZAR 74 in the first quarter of fiscal 2023.
Economic Environment and Impact of loadshedding
Overall, we have seen no significant change in the operating environment during the quarter. The trading environment remains
challenging in South Africa with interest rates, inflation and unemployment remaining at elevated levels. These factors are
compounded by daily power cuts (known as load-shedding in South Africa), although we did see a reduction in load shedding during
this quarter. Power disruptions adversely impact our customers, especially in our Merchant Division, where they lose valuable trading
hours if they do not have access to alternative power supplies and back-up facilities to process electronic payments and value-added
services. The negative impact is, however, to some extent mitigated as our customer base is geographically diversified, and the
rotational nature of load-shedding results in localized power cuts over shorter time periods, allowing merchants to make up for lost
trading hours.
Notwithstanding the challenging operating environment, our Merchant and Consumer Divisions continue to demonstrate the
resilience of our business model, which is firmly underpinned by the relevance and value of our offering to our target market.
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, 2023:
●
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.
40
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 September 30, 2023
Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting
pronouncements not yet adopted as of September 30, 2023, 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
Year ended
September 30,
June 30,
2023
2022
2023
ZAR : $ average exchange rate
18.6457
17.0201
17.7641
Highest ZAR : $ rate during period
19.2202
18.0545
19.7558
Lowest ZAR : $ rate during period
17.6278
16.2035
16.2034
Rate at end of period
18.9236
18.0126
18.8376
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 months ended September 30, 2023 and 2022, 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
Year ended
Table 2
September 30,
June 30,
2023
2022
2023
Income and expense items: $1 = ZAR
18.7088
17.1307
17.9400
Balance sheet items: $1 = ZAR
18.9236
18.0126
18.8376
41
We have translated the results of operations and operating segment information for the three months ended September 30, 2023,
provided in the tables below using the actual average exchange rates per month (i.e. for each of July 2023, August 2023, and September
2023) 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 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 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.
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 17 to those statements. Our chief operating decision maker is our Group
Chief Executive Officer 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, certain lease charges (“Lease adjustments”), 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 represents
non-recurring expense items, including costs related to acquisitions and transactions consummated or ultimately not pursued. The
Lease adjustments reflect lease charges and 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.
Group Adjusted EBITDA represents Segment Adjusted EBITDA after deducting group costs. Refer also “Results of
Operations—Use of Non-GAAP Measures” below.
Fiscal 2024 and 2023 includes Connect for the entire quarter.
We analyze our business and operations in terms of two inter-related but independent operating segments: (1) Merchant Division
and (2) Consumer Division. 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.
First quarter of fiscal 2024 compared to first quarter of fiscal 2023
The following factors had a significant impact on our results of operations during the first quarter of fiscal 2024 as compared with
the same period in the prior year:
●
Higher revenue:
Our revenues increased 19% in ZAR, primarily due to an increase in low margin prepaid airtime sales and
other value added services, as well as higher transaction, insurance and lending revenues, which was partially offset by lower
hardware sales revenue in our POS hardware distribution business given the lumpy nature of bulk sales;
●
Operating income generated:
Operating income was achieved following years of operating losses as a result of the various
cost reduction initiatives in Consumer implemented in prior periods as well as the contribution from Connect;
●
Higher net interest charge:
62.1 million) primarily due to higher interest rates; and
●
Foreign exchange movements:
compared to the prior period, which adversely impacted our U.S. dollar reported results.
42
Consolidated overall results of operations
This discussion is based on the amounts prepared in accordance with U.S. GAAP.
The following tables show the changes in the items comprising our statements of operations, both in U.S. dollars and in ZAR:
Table 3
In United States Dollars
Three months ended September 30,
2023
2022
%
$ ’000
$ ’000
change
Revenue
136,089
124,786
9%
Cost of goods sold, IT processing, servicing and support
107,490
100,528
7%
Selling, general and administration
22,515
22,931
(2%)
Depreciation and amortization
5,856
5,998
(2%)
Operating income (loss)
228
(4,671)
nm
Reversal of allowance of EMI doubtful debt receivable
250
-
nm
Net gain on disposal of equity-accounted investments
-
248
nm
Interest income
449
411
9%
Interest expense
4,909
4,036
22%
Loss before income tax expense
(3,982)
(8,048)
(51%)
Income tax expense
264
31
752%
Net loss before loss from equity-accounted investments
(4,246)
(8,079)
(47%)
Loss from equity-accounted investments
1,405
2,617
(46%)
Net loss attributable to us
(5,651)
(10,696)
(47%)
Table 4
In South African Rand
Three months ended September 30,
2023
2022
%
ZAR ’000
ZAR ’000
change
Revenue
2,537,659
2,137,671
19%
Cost of goods sold, IT processing, servicing and support
2,004,465
1,722,115
16%
Selling, general and administration
419,861
392,824
7%
Depreciation and amortization
109,166
102,749
6%
Operating income (loss)
4,167
(80,017)
nm
Reversal of allowance of EMI doubtful debt receivable
4,741
-
nm
Net gain on disposal of equity-accounted investments
-
4,248
nm
Interest income
8,368
7,041
19%
Interest expense
91,429
69,140
32%
Loss before income tax expense
(74,153)
(137,868)
(46%)
Income tax expense
4,825
532
807%
Net loss before loss from equity-accounted investments
(78,978)
(138,400)
(43%)
Loss from equity-accounted investments
26,657
44,831
(41%)
Net loss attributable to us
(105,635)
(183,231)
(42%)
Revenue increased by $11.3 million (ZAR 0.4 billion), or 9.1% (in ZAR, 18.7%), primarily due to the increase in low margin
prepaid airtime sales and other value-added services, as well as higher transaction, insurance and lending revenues, which was partially
offset by lower hardware sales revenue in our POS hardware distribution business given the lumpy nature of bulk sales.
Cost of goods sold, IT processing, servicing and support increased by $7.0 million (ZAR 0.3 billion), or 6.9% (in ZAR, 16.4%),
primarily due to the increase in low margin prepaid airtime sales, which were partially offset by the benefits of various cost reduction
initiatives in Consumer and lower insurance-related claims.
Selling, general and administration expenses decreased by $0.4 million, or 1.8%, and in ZAR increased by ZAR 27.0 million, or
6.9%. In ZAR, the increase was primarily due to higher employee-related expenses related to the expansion of our senior management
team, the year-over-year impact of inflationary increases on employee-related expenses and the inclusion of expenses related to
Connect’s operations, which were partially offset by the benefits of various cost reduction initiatives in Consumer.
Depreciation and amortization expense decreased by $0.1 million, or 2.4% , and in ZAR increased by ZAR 6.4 million or 6.2%.
In the ZAR, the increase was due to an increase in depreciation expense related to additional POS devices deployed.
Our operating income (loss) margin for the first quarter of fiscal 2024 and 2023 was 0.2% and (3.7%), respectively. We discuss
the components of operating loss margin under “—Results of operations by operating segment.”
43
We did not record any changes in the fair value of equity interests in MobiKwik and Cell C during the first quarter of fiscal 2024
or 2023, respectively. We continue to carry our investment in Cell C at $0 (zero). Refer to Note 4 for the methodology and inputs used
in the fair value calculation for Cell C.
We recorded a gain of $0.3 million related to the disposal of our entire interest in Carbon during the first quarter of fiscal 2023.
Refer to Note 5 to our unaudited condensed consolidated financial statements for additional information regarding this disposal.
Interest on surplus cash increased to $0.4 million (ZAR 8.4 million) from $0.4 million (ZAR 7.0 million), primarily due to higher
interest rates.
Interest expense increased to $4.9 million (ZAR 91.4 million) from $4.0 million (ZAR 69.1 million), primarily as a result of
higher overall interest rates and higher overall borrowings during the first quarter of fiscal 2024 compared with 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 during the latter half of fiscal 2023.
Fiscal 2024 tax expense was $(0.3) million (ZAR (4.8) million) compared to $0.0 million (ZAR 0.5 million) in fiscal 2023. Our
effective tax rate for fiscal 2024 was impacted by the tax expense recorded by our profitable South African operations, a deferred tax
benefit related to acquisition-related intangible asset amortization, non-deductible expenses, the on-going losses incurred by certain
of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding
net operating losses incurred by these entities.
Our effective tax rate for fiscal 2023 was impacted by 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 quarter and its annual
results during our fourth quarter. The table below presents the relative (loss) earnings from our equity-accounted investments:
Table 5
Three months ended September 30,
2023
2022
$ %
$ ’000
$ ’000
change
Finbond
(1,445)
(2,631)
(45%)
Share of net loss
(278)
(1,521)
(82%)
Impairment
(1,167)
(1,110)
5%
Other
40
14
186%
Total loss from equity-accounted investments
(1,405)
(2,617)
(46%)
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 September 30,
2023
% of
2022
% of
% change
Operating Segment
$ ’000
total
$ ’000
total
Consolidated revenue:
Merchant
121,361
89%
109,782
88%
11%
Consumer
15,580
11%
15,004
12%
4%
Subtotal: Operating segments
136,941
100%
124,786
100%
10%
Eliminations
(852)
-
-
-
nm
Total consolidated revenue
136,089
100%
124,786
100%
9%
Segment Adjusted EBITDA:
Merchant
(1)
8,061
92%
7,893
188%
2%
Consumer
(1)
2,480
28%
(1,394)
(33%)
nm
Group costs
(1,822)
(21%)
(2,300)
(55%)
(21%)
Group Adjusted EBITDA (non-GAAP)
(2)
8,719
100%
4,199
100%
108%
(1) Segment Adjusted EBITDA for Merchant includes retrenchments costs of $0.2 million and Consumer includes retrenchment
costs of $0.1 million for the three months ended September 30, 2023.
(2) Group Adjusted EBITDA is a non-GAAP measure, refer to reconciliation below at “—Results of Operations—Use of Non-
GAAP Measures”.
44
Table 7
In South African Rand
Three months ended September 30,
2023
% of
2022
% of
% change
Operating Segment
ZAR ’000
total
ZAR ’000
total
Consolidated revenue:
Merchant
2,263,001
89%
1,880,642
88%
20%
Consumer
290,629
11%
257,029
12%
13%
Subtotal: Operating segments
2,553,630
100%
2,137,671
100%
19%
Eliminations
(15,971)
-
-
-
nm
Total consolidated revenue
2,537,659
100%
2,137,671
100%
19%
Segment Adjusted EBITDA:
Merchant
(1)
150,181
92%
135,212
188%
11%
Consumer
(1)
46,302
28%
(23,880)
(33%)
nm
Group costs
(33,980)
(21%)
(39,400)
(55%)
(14%)
Group Adjusted EBITDA (non-GAAP)
(2)
162,503
100%
71,932
100%
126%
(1) Segment Adjusted EBITDA for Merchant includes retrenchments costs of ZAR 4.6 million and Consumer includes
retrenchment costs of ZAR 1.5 million for the three months ended September 30, 2023.
(2) Group Adjusted EBITDA is a non-GAAP measure, refer to reconciliation below at “—Results of Operations—Use of Non-
GAAP Measures”.
Merchant
Segment revenue increased due to the increase in low margin prepaid airtime sales and other value-added services, which was
partially offset by lower hardware sales revenue given the lumpy nature of bulk sales. The increase in Segment Adjusted EBITDA is
primarily due to the higher sales activity, which was partially offset by lower hardware sales. Connect records a significant proportion
of its airtime sales in revenue and cost of sales, while only earning a relatively small margin. This significantly depresses the Segment
Adjusted EBITDA margins shown by the business.
Our Segment Adjusted EBITDA margin (calculated as Segment Adjusted EBITDA divided by revenue) for the first quarter of
fiscal 2024 and 2023 was 6.6% and 7.2%, respectively.
Consumer
Segment revenue increased primarily due to more transaction fees generated from the higher EPE account holders base, higher
insurance revenues, and an increase in lending revenue as a result of an increase in loan originations. This increase in revenue, together
with the cost reduction initiatives initiated in fiscal 2022 and through fiscal 2023, have translated into a turnaround in the Consumer
Division and the realization of sustained positive Segment Adjusted EBITDA for four consecutive quarters.
Our Segment Adjusted EBITDA (loss) margin for the first quarter of fiscal 2024 and 2023 was 15.9% and (9.3%), respectively.
Group costs
Our group costs primarily include employee related costs in relation to employees specifically hired for group roles and costs
related directly to managing the US-listed entity; expenditures related to compliance with the Sarbanes-Oxley Act of 2002; non-
employee directors’ fees; legal fees; group and US-listed related audit fees; and directors’ and officers’ insurance premiums.
Our group costs for fiscal 2024 decreased compared with the prior period due to lower external audit, legal and consulting fees
and lower provision for executive bonuses, which was partially offset by higher employee costs.
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.
45
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, gain related to fair value adjustments to currency
options), (earnings) loss from equity-accounted investments, stock-based compensation charges, lease adjustments and once-off items.
Lease adjustments reflect lease charges and once-off items represents non-recurring expense items, including costs related to
acquisitions and transactions consummated or ultimately not pursued.
The table below presents the reconciliation between GAAP net loss attributable to Lesaka to Group Adjusted EBITDA:
Table 8
Three months ended
September 30,
2023
2022
$ ’000
$ ’000
Loss attributable to Lesaka - GAAP
(5,651)
(10,696)
(Earnings) loss from equity accounted investments
1,405
2,617
Net loss before (earnings) loss from equity-accounted investments
(4,246)
(8,079)
Income tax (benefit) expense
264
31
Loss before income tax expense
(3,982)
(8,048)
Interest expense
4,909
4,036
Interest income
(449)
(411)
Reversal of allowance for doubtful EMI loan receivable
(250)
-
Net gain on disposal of equity-accounted investment
-
(248)
Operating income (loss)
228
(4,671)
PPA amortization (amortization of acquired intangible assets)
3,608
3,928
Depreciation and amortization
2,248
2,070
Stock-based compensation charges
1,759
1,462
Lease adjustments
696
812
Once-off items
(1)
78
598
Unrealized Loss FV for currency adjustments
102
-
Group Adjusted EBITDA - Non-GAAP
8,719
4,199
(1) The table below presents the components of once-off items for the periods presented:
Table 9
Three months ended
September 30,
2023
2022
$ ’000
$ ’000
Transaction costs
78
203
Expenses incurred related to closure of legacy businesses
-
395
Total once-off items
78
598
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 2022 we incurred significant transaction costs related to the acquisition of Connect over a
number of quarters, and the transactions are generally non-recurring.
Expenses incurred related to close of legacy businesses represents 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 September 30, 2023, our cash and cash equivalents were $35.1 million and comprised of U.S. dollar-denominated balances
of $2.2 million, ZAR-denominated balances of ZAR 586.7 million ($31.0 million), and other currency deposits, primarily Botswana
pula, of $1.9 million, all amounts translated at exchange rates applicable as of September 30, 2023. The increase in our unrestricted
cash balances from June 30, 2023, was primarily due to a positive contribution from our Merchant and Consumer operations, which
was partially offset by the utilization of cash reserves to fund certain scheduled repayments of our borrowings, purchase ATMs and
safe assets, and to make an investment in working capital.
46
We generally invest any surplus cash held by our South African operations in overnight call accounts that we maintain at South
African banking institutions, and any surplus cash held by our non-South African companies in U.S. dollar-denominated money market
accounts.
Historically, we have financed most of our operations, research and development, working capital, and capital expenditures, as
well as acquisitions and strategic investments, through internally generated cash and our financing facilities. When considering
whether to borrow under our financing facilities, we consider the cost of capital, cost of financing, opportunity cost of utilizing surplus
cash and availability of tax efficient structures to moderate financing costs. 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 safe assets. Refer to Note 12 to our consolidated financial statements for the year ended June 30, 2023, for additional
information related to our borrowings.
Available short-term borrowings
Summarized below are our short-term facilities available and utilized as of September 30, 2023:
Table 10
RMB Facility E
RMB Indirect
RMB Connect
Nedbank
$ ’000
ZAR ’000
$ ’000
ZAR ’000
$ ’000
ZAR ’000
$ ’000
ZAR ’000
Total short-term facilities
available, comprising:
Overdraft
-
-
-
-
10,833
205,008
-
-
Overdraft restricted as to
use
(1)
73,982
1,400,014
-
-
-
-
-
-
Total overdraft
73,982
1,400,014
-
-
10,833
205,008
-
-
Indirect and derivative
facilities
(2)
-
-
7,134
134,992
-
-
8,273
156,552
Total short-term
facilities available
73,982
1,400,014
7,134
134,992
10,833
205,008
8,273
156,552
Utilized short-term
facilities:
Overdraft
-
-
-
-
8,983
169,981
-
-
Overdraft restricted as to
use
(1)
19,754
373,811
-
-
-
-
-
-
Indirect and derivative
facilities
(2)
-
-
1,749
33,100
-
-
112
2,119
Total short-term
facilities available
19,754
373,811
1,749
33,100
8,983
169,981
112
2,119
Interest rate, based on
South African prime rate
11.75%
11.65%
(1) Overdraft may only be used to fund ATMs and upon utilization is considered restricted cash.
(2) 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 2.5 billion ($134.2 million translated at exchange rates as of
September 30, 2023) as described in Note 8. 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 used this revolving credit
facility during the three months ended September 30, 2023, and ZAR 10.0 million was drawn as of September 30, 2023, with the
remaining balance available for utilization in the future. In contemplation of the Connect transaction, Connect obtained total facilities
of approximately 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 September 30, 2023, 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.
47
Restricted cash
We have credit facilities with RMB in order to access cash to fund our ATMs in South Africa. Our cash, cash equivalents and
restricted cash presented in our consolidated statement of cash flows as of September 30, 2023, includes restricted cash of
approximately $19.8 million related to cash withdrawn from our debt facility 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 on our consolidated balance sheet.
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 September 30, 2023, includes restricted cash of approximately $0.1 million that has been ceded and
pledged.
Cash flows from operating activities
First quarter
Net cash provided by operating activities during the first quarter of fiscal 2024 was $3.4 million (ZAR 63.1 million) compared
to net cash used in operating activities of $7.7 million (ZAR 131.2 million) during the first quarter of fiscal 2023. Excluding the impact
of income taxes, our cash provided by operating activities during the first quarter of fiscal 2024 was positively impacted by the
contribution from Merchant and Consumer, which was partially offset by growth in our consumer and merchant finance loans
receivable books and temporary working capital movements within our merchant business as a result of quarter-end transaction
processing activities closing on a Saturday and settled in the following week.
During the first quarter of fiscal 2024, we paid first provisional South African tax payments of $0.6 million (ZAR 10.9 million)
related to our 2023 tax year. During the first quarter of fiscal 2023, we paid first provisional South African tax payments of $0.5
million (ZAR 8.2 million) related to our 2023 tax year, and additional second provisional South African tax payments of $0.2 million
(ZAR 3.4 million) related to our 2022 tax year.
Taxes paid during the first quarter of fiscal 2024 and 2023 were as follows:
Table 11
Three months ended September 30,
2023
2022
2023
2022
$
$
ZAR
ZAR
‘000
‘000
‘000
‘000
First provisional payments
-
492
-
8,216
Second provisional payments
-
191
-
3,371
Taxation paid related to prior years
572
-
10,859
-
Tax refund received
(31)
(57)
(640)
(970)
Total South African taxes paid
541
626
10,219
10,617
Foreign taxes paid
63
51
1,196
886
Total tax paid
604
677
11,415
11,503
Cash flows from investing activities
First quarter
Cash used in investing activities for the first quarter of fiscal 2024 included capital expenditures of $2.8 million (ZAR 52.6
million), primarily due to the acquisition of safe assets and POS devices.
Cash used in investing activities for the first quarter of fiscal 2023 included capital expenditures of $4.5 million (ZAR 77.1
million), primarily due to the acquisition of safe assets, POS devices and computer equipment. During the first quarter of fiscal 2023,
we received proceeds $0.25 million related to the first tranche (of two) from the disposal of our entire interest in Carbon. The second
tranche, of $0.25 million, was received in October 2023.
48
Cash flows from financing activities
First quarter
During the first quarter of fiscal 2024, we utilized approximately $59.6 million from our South African overdraft facilities to
fund our ATMs and our cash management business through Connect, and repaid $62.8 million of those facilities. We utilized
approximately $2.5 million of our long-term borrowings to fund the acquisition of certain capital expenditures and for working capital
requirements. We repaid approximately $2.6 million of long-term borrowings in accordance with our repayment schedule as well as
to settle a portion of our revolving credit facility utilized.
During the first quarter of fiscal 2023, we utilized approximately $146.1 million from our South African overdraft facilities to
fund our ATMs and our cash management business through Connect, and repaid $136.9 million of those facilities. We utilized
approximately $1.1 million of our long-term borrowings to fund our merchant finance loans receivable business and to fund the
acquisition of certain capital expenditures. We repaid approximately $1.6 million of long-term borrowings in accordance with our
repayment schedule. We paid $0.2 million to repurchase shares from an employee in order for the employee 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 second quarter of fiscal 2024 to primarily include spending for acquisition of POS devices,
safe assets, computer software, computer and office equipment, as well as for our ATM infrastructure and branch network in South
Africa. Our capital expenditures for the first quarter of fiscal 2024 and 2023 are discussed under “—Liquidity and Capital Resources—
Cash flows from investing activities.” All of our capital expenditures for the past three fiscal years were funded through internally
generated funds, or, following the Connect acquisition, our asset-backed borrowing arrangement. We had outstanding capital
commitments as of September 30, 2023, of $0.7 million. We expect to fund these expenditures through internally generated funds and
available facilities.
49
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In addition to the tables below, see Note 4 to the unaudited condensed consolidated financial statements for a discussion of
market risk.
We have short and long-term borrowings in South Africa which attract interest at rates that fluctuate based on changes in the
South African prime and 3-month JIBAR interest rates. The following table illustrates the effect on our annual expected interest charge,
translated at exchange rates applicable as of September 30, 2023, as a result of changes in the South African prime and 3-month JIBAR
interest rates, using our outstanding short and long-term borrowings as of September 30, 2023. The effect of a hypothetical 1% (i.e.
100 basis points) increase and a 1% decrease in the interest rates applicable to the borrowings as of September 30, 2023, are shown.
The selected 1% hypothetical change does not reflect what could be considered the best- or worst-case scenarios.
Table 12
As of September 30, 2023
Annual expected
interest charge
($ ’000)
Hypothetical
change in
interest rates
Estimated annual
expected interest
charge after
hypothetical change
in interest rates
($ ’000)
Interest on South African borrowings
20,667
1%
22,304
(1%)
19,033
50
Item 4. Controls and Procedures
Under the supervision and with the participation of our management, including our group chief executive officer 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 September 30, 2023. Management recognizes that
any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their
objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Based on this evaluation, the group chief executive officer and the group chief financial officer concluded that our
disclosure controls and procedures were effective as of September 30, 2023.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting during the fiscal quarter ended September 30,
2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
51
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, 2023, 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. 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, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
52
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
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
53
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 November 7, 2023.
LESAKA TECHNOLOGIES, INC.
By: /s/ Chris G.B. Meyer
Chris G.B. Meyer
Group Chief Executive Officer
By: /s/ Naeem E. Kola
Naeem E. Kola
Group Chief Financial Officer, Treasurer and Secretary