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Short-Form Announcement: Lesaka Technologies, Inc. Reports First Quarter 2023 Results
Lesaka Technologies, Inc.
Registered in the state of Florida, USA
(IRS Employer Identification No. 98-0171860)
Nasdaq share code: LSAK
JSE share code: LSK
LEI: 529900J4IZMWV4RDEB07
ISIN: US64107N2062
(“Lesaka,” or the “Company”)
Short-Form Announcement: Lesaka Technologies, Inc. Reports First Quarter 2023 Results
JOHANNESBURG, November 9, 2022 – Lesaka (Nasdaq: LSAK; JSE: LSK) today released results for the first quarter ended
September 30, 2022 (“Q1 2023”).
Highlights:
Our revenue for Q1 2023 exceeds the upper end of our Q1 2023 guidance provided (on constant currency basis) and Segment
Adjusted EBITDA is at the upper end of our Q1 2023 guidance provided. The Connect acquisition outperformance continues and we
remain on track to achieve Consumer break-even.
Performance for Q1 2023
• Revenue of $124.8 million (ZAR 2.1 billion)1 in Q1 2023, compared to $34.5 million (ZAR 504 million) 1 for the quarter
ended September 30, 2021 (“Q1 2022”), increase driven by the inclusion of Connect for the full fiscal quarter.
• Segment Adjusted EBITDA for Q1 2023 improved to income of ZAR 111 million ($6.5 million) compared to a loss of ZAR
106 million ($7.3 million) in Q1 2022.
• Our operating loss of $4.7 million (ZAR 80 million)1 in Q1 2023 improved significantly from an operating loss of $11.2
million (ZAR 164 million)1 for Q1 2022.
• In our Merchant business, we continue to build a leading position in a growing and underserved market. Merchant Segment
Adjusted EBITDA for Q1 2023 increased to ZAR 135 million ($7.9 million) compared to ZAR 28 million ($1.9 million) in
Q1 2022 predominantly attributable to the inclusion of Connect. The Connect acquisition outperformance continues and the
strong underlying fundamentals that underpin this business remain unchanged.
• The good progress in transforming our Consumer business continues, with Consumer Segment Adjusted EBITDA for Q1
2023 improving to a loss of ZAR 24 million ($1.4 million) compared to a ZAR 137 million ($9.4 million) loss in Q1 2022.
• Along with the significant progress in right-sizing our Consumer cost base, the active Consumer account base grew by 13%
compared to Q1 2022, while transaction volumes and revenues improved.
o Revenue in our Consumer business increased to ZAR 257 million ($15 million) in Q1 2023 compared to ZAR 244
million ($16 million) in the sequential quarter, or Q4 2022, and ZAR 251 million ($17 million) in Q1 2022.
o Cost optimization initiatives and restructuring the operations of our Consumer business in 2022 translated into actual
cost saving of approximately ZAR 112 million ($6.5 million) in Q1 2023. Rightsizing of teams and operational
changes related to branch closures to shift from traditional bricks and mortar continues.
• Importantly, we believe that we remain on track to achieve Consumer break-even by quarter end December 31, 2022 (“Q2
2023”), as previously guided.
• We have commenced renegotiation of our lending facilities, to introduce greater flexibility and further increase liquidity for
treasury management.
“Our first quarter results demonstrate that Lesaka has progressed well in its journey of transitioning into a leading and profitable
Financial Technology company, a plan that commenced in earnest in Q2 of fiscal 2022. The strategic actions previously
communicated have translated into strong financial performance for the quarter compared to Q1 2022. Strong revenue growth and
improved profitability sets the tone for what is to come, Lesaka is well-positioned for growth. Importantly, in Q4 2022, we were able
to provide guidance for the first time since Lesaka’s transformation began, and we delivered results at the upper end of our guidance
on a constant currency basis in Q1 2023. Our principal focus continues to be growing our significantly expanded Merchant business
while also reaching breakeven in the Consumer business by the end of Q2 2023,” said Chris Meyer, Lesaka Group CEO.
1. The ZAR weakened 17% against the U.S. dollar during Q1 2023 if compared to Q1 2022, and 10% compared to the prior
quarter being Q4 2022. Translated at the average exchange rate of ZAR 17.13 to $1 for Q1 2023, ZAR14.61 to $1 for Q1
2022 and ZAR 15.56 to $1 for Q4 2022.
Summary Financial Metrics
Three months ended
Three months ended
Sep 30, Sep 30, Jun 30, Q1 ’23 vs Q1 ’23 vs Q1 ’23 vs Q1 ’23 vs
2022 2021 2022 Q1 ’22 Q4 ’22 Q1 ’22 Q4 ’22
(All figures in USD ‘000s except per USD ‘000’s
share data) (except per share data) % change in USD % change in ZAR
Revenue 124,786 34,504 121,789 262% 2% 324% 13%
GAAP operating loss (4,671) (11,225) (10,122) (58%) (54%) (51%) (49%)
Normalized EBITDA (loss) (1) 3,387 (9,778) 2,588 nm 31% nm 44%
GAAP loss per share ($) (0.17) (0.23) (0.25) (25%) (30%) (12%) (23%)
Fundamental loss per share ($)(1) (0.08) (0.22) (0.09) (64%) (11%) (57%) (2%)
Fully-diluted weighted average shares
(‘000’s) 62,445 56,809 61,619 10% 1% n/a n/a
Average period USD / ZAR exchange
rate 17.13 14.61 15.56 17% 10% n/a n/a
(1) Normalized EBITDA (loss), fundamental loss and fundamental loss per share are non-GAAP measures and are described below
under “Use of Non-GAAP Measures—Operating income before depreciation and amortization and Normalized EBITDA, and —
Fundamental net (loss) income and fundamental (loss) earnings per share.” See Attachment B for a reconciliation of GAAP operating
loss to EBITDA loss and Normalized EBITDA loss, and GAAP net loss to fundamental net loss and loss per share.
Factors impacting comparability of our Q1 2023 and Q1 2022 results
• Higher revenue: Our revenues increased 324% in ZAR, primarily due to the contribution from Connect and a moderate
increase in Consumer account fees, lending and insurance revenues, which was partially offset by a decrease in Merchant
hardware sales due to shipping delays;
• Lower operating losses: Operating losses decreased, delivering an improvement of 51% in ZAR compared with the prior
period primarily due to the contribution from Connect, and the implementation of various cost reduction initiatives in our
Consumer business, which was partially offset by an increase in acquisition related intangible asset amortization;
• Higher net interest charge: The net interest charge increased to $3.6 million (ZAR 62.0 million) from $0.4 million (ZAR 6.0
million) due to the additional borrowings incurred in order to fund the acquisition of Connect as well as the debt within the
Connect business itself; and
• Foreign exchange movements: The U.S. dollar was 17% stronger against the ZAR during the first quarter of fiscal 2023,
which impacted our reported results.
Results of Operations by Segment and Liquidity
Consumer
Segment revenue was $15.0 million in Q1 2023, up 2% compared with Q1 2022, and up 5% compared with Q4 2022 on a constant
currency basis. Segment revenue increased primarily due to higher lending and insurance revenues and higher account holder fees,
though this was partially offset by lower ATM transaction fees. The cost reduction initiatives we initiated in fiscal 2022 delivered a
significant reduction in our Consumer segment’s operating expenses which resulted in a significantly lower EBITDA loss compared
with fiscal 2022. Specifically, expenses associated with operating a mobile distribution network were discontinued in early fiscal
2022, and we have streamlined our fixed distribution network through reductions in certain expenses including employee-related
costs, security, guarding and premises costs. Our EBITDA loss margin (calculated as EBITDA loss divided by revenue) for Q1 2023
and 2022 was (9.3%) and (54.5%), respectively
Merchant
Segment revenue was $109.4 million in Q1 2023, up 651% compared with Q1 2022 and up 14% compared to Q4 2022 on a constant
currency basis. Segment revenue increased sixfold due to the inclusion of Connect which was partially offset by a decrease in
hardware sales due to shipping delays. The increase in segment EBITDA is primarily due to the inclusion of Connect, which was
partially offset by higher employee-related expenses. 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 EBITDA margins shown by the business. Our
EBITDA margin for Q1 2023 and 2022 was 7.2% and 11.3%, respectively.
Other
In ZAR, segment revenue increased modestly primarily due to an increase in hardware sales. EBITDA decreased as a result of an
allowance for doubtful debts created as well as inflationary increases in staff and other operating costs, which were at a higher
percentage increase than the increase in revenue.
Our EBITDA (loss) margin for the Other segment was 11.0% and 33.5% during Q1 fiscal 2023 and 2022, respectively.
Corporate/Eliminations
Our corporate expenses generally include acquisition-related intangible asset amortization; expenses incurred related to corporate
actions; expenditures related to compliance with the Sarbanes-Oxley Act of 2002; non-employee directors’ fees; Group CEO and
Group CFO compensation costs, certain employee and executive bonuses; legal fees; audit fees; directors and officer’s insurance
premiums; and elimination entries.
Our corporate expenses for fiscal 2023 increased compared with the prior period due to higher employee costs and an increase in
director and officer’s insurance premiums.
Cash flow and liquidity
As of September 30, 2022, our cash and cash equivalents were $30.1 million and comprised of U.S. dollar-denominated balances of
$9.2 million, ZAR-denominated balances of ZAR 346.8 million ($19.3 million), and other currency deposits, primarily Botswana
pula, of $1.7 million, all amounts translated at exchange rates applicable as of September 30, 2022. The decrease in our unrestricted
cash balances from June 30, 2022, was primarily due to utilization of cash reserves to fund our Consumer operations and an
investment in working capital in our Merchant operations, which was partially offset by the contribution from Connect.
Outlook
While we report our financial results in USD, we measure our operating performance in ZAR, and as such we provide our guidance
accordingly.
Q2 2023
We expect the following for Q2 2023:
• Revenue between ZAR 2.0 billion and ZAR 2.3 billion.
• Segment Adjusted EBITDA of between ZAR 157 million and ZAR 164 million.
o Merchant Segment Adjusted EBITDA of between ZAR 145 million and ZAR 150 million.
o Consumer Segment Adjusted EBITDA of between ZAR 12 million and ZAR 14 million.
• Group Costs normalized (previously referred to as Corporate/Eliminations) of approximately ZAR 41 million.
• Adjusted EBITDA of between ZAR 116 million and ZAR 123 million.
FY 2023
For the full year fiscal 2023, we are reaffirming the total Group guidance provided on September 19, 2022, however the segment
composition has changed slightly. We expect the following for the year ended June 2023:
• Revenue between ZAR 8.7 billion and ZAR 9.3 billion.
• Segment Adjusted EBITDA of between ZAR 645 million and ZAR 675 million.
o Merchant Segment Adjusted EBITDA of between ZAR 550 million and ZAR 565 million.
o Consumer Segment Adjusted EBITDA of between ZAR 95 million and ZAR 110 million.
• Group Costs normalized expected to be between ZAR 155 million to ZAR 165 million.
• Adjusted EBITDA of between ZAR 480 million and ZAR 525 million.
In providing our fiscal 2023 guidance on September 19, 2022, amounts reported in USD were translated to ZAR using the average rate
of exchange, of $1:ZAR 15.50 (as reported in the announcement).
Webcast and Conference Call
Lesaka will host a webcast and conference call to review results on November 9, 2022, at 8:00 a.m. Eastern Time.
The results webcast can be accessed by using the following link: https://url24.top/MeEva
Webcast ID: 838 8768 7101
Participants using the webcast will be able to ask questions by raising their hand and then asking the question “live.”
Conference call dial-in:
• US Toll-Free: + 1 312 626 6799 or +1 346 248 7799
• South Africa Toll-Free + 27 87 551 7702
Participants using the conference call dial-in will be unable to ask questions
A replay of the results presentation webcast will be available on the Lesaka investor relations website following the conclusion of the
live event.
Headline earnings (loss) per share (“HEPS”)
The inclusion of H(L)EPS in this press release is a requirement of our listing on the JSE. H(L)EPS basic and diluted is calculated
using net (loss) income which has been determined based on GAAP. Accordingly, this may differ to the headline (loss) earnings per
share calculation of other companies listed on the JSE as these companies may report their financial results under a different financial
reporting framework, including but not limited to, International Financial Reporting Standards.
The table below presents our HEPS for Q1 2023 and 2022:
Q1 2023 Q1 2022
Net loss used to calculate headline earnings (USD’000) .................................................... (9,984) (13,012)
Headline loss per share: ..................................................................................
Basic, in USD .......................................................................................... (0.16) (0.23)
Diluted, in USD ........................................................................................ (0.16) (0.23)
Short-form announcement
This short-form announcement is the responsibility of the Lesaka Board of Directors (“Board”) and the contents have been approved
by the Board on November 8, 2022. This short-form announcement released on SENS is a summary of the full announcement which is
available at https://senspdf.jse.co.za/documents/2022/JSE/ISSE/LSKE/Q1Res2023.pdf and has been published on Lesaka’s website at
www.lesakatech.com. This short-form announcement does not contain the complete or full announcement details. Any investment
decision by investors and/or shareholders should be based on consideration of the full announcement. The short-form announcement
has not been audited or reviewed by Lesaka’s external auditors. The full announcement is available upon request through enquiries
directed to either Lesaka’s investor relations contact at phillipe.welthagen@lesakatech.com or Lesaka’s media relations contact at
Janine@thenielsennetwork.com.
About Lesaka (www.lesakatech.com)
Lesaka Technologies, (Lesaka™) is a South African Fintech company that utilizes its proprietary banking and payment technologies
to deliver superior financial services solutions to merchants (B2B) and consumers (B2C) in Southern Africa. Lesaka’s mission is to
drive true financial inclusion for both merchant and consumer markets through offering affordable financial services to previously
underserved sectors of the economy. Lesaka offers cash management solutions, growth capital, card acquiring, bill payment
technologies and value-added services to formal and informal retail merchants as well as banking, lending, and insurance solutions to
consumers across Southern Africa. The Lesaka journey originally began as “Net1” in 1997 and later rebranded to Lesaka (2022), with
the acquisition of Connect. As Lesaka, the business continues to grow its systems and capabilities to deliver meaningful fintech-
enabled, innovative solutions for South Africa’s merchant and consumer markets.
Lesaka has a primary listing on NASDAQ (NasdaqGS: LSAK) and a secondary listing on the Johannesburg Stock Exchange (JSE:
LSK). Visit www.lesakatech.com for additional information about Lesaka Technologies (Lesaka™).
Forward-Looking Statements
This announcement contains forward-looking statements that involve known and unknown risks and uncertainties. A discussion of
various factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those
expressed in such forward-looking statements are included in our filings with the Securities and Exchange Commission. We undertake
no obligation to revise any of these statements to reflect future events.
Investor Relations Contact:
Phillipe Welthagen
Email : phillipe.welthagen@lesakatech.com
Mobile: +27 84 512 5393
ICR
Email: LesakaIR@icrinc.com
Media Relations Contact:
Janine Bester Gertzen
Email: Janine@thenielsennetwork.com
Johannesburg
November 9, 2022
Sponsor:
Rand Merchant Bank, a division of FirstRand Bank Limited
Date: 09-11-2022 07:05:00
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