Wrap Text
Lesaka Reports Q3 2023 Results – Continued improvement in performance further evidences successful turnaround
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”)
Lesaka Reports Q3 2023 Results – Continued improvement in performance further evidences successful turnaround
JOHANNESBURG, May 10, 2023 – Lesaka (Nasdaq: LSAK; JSE: LSK) today released results for the third quarter ended March 31,
2023 (“Q3 2023”)
Performance Highlights for Q3 2023:
- Revenue of $134.0 million (ZAR 2.4 billion)1 in Q3 2023, compared to $35.2 million (ZAR 549.8 million) 1 for the quarter
ended March 31, 2022 (“Q3 2022”), with the 381% increase largely as a result of the inclusion and continued outperformance
of the Connect Group (including Kazang) and momentum in the successful turnaround of the Consumer Division.
- Net loss attributable to Lesaka of $5.8 million (ZAR 104.4 million)1 in Q3 2023, compared to $3.3 million (ZAR 51.9
million)1 in Q3 2022. Operating income (loss) before PPA amortization and net interest, a non-GAAP measure and
reconciled in Attachment B included in the full announcement, was income of $1.9 million (ZAR 34.0 million)1 in Q3 2023,
compared to a loss of $9.4 million (ZAR 146.8 million) 1 in Q3 2022, and excludes amortization of acquired intangible assets
of $3.7 million (ZAR 67.3 million) in Q3 2023, compared with $0.015 million (ZAR 0.3 million) in Q3 2022.
- Group Adjusted EBITDA of $7.6 million (ZAR 137.1 million) 1, within guidance, and a significant improvement compared to
the Q3 2022 reported Group Adjusted EBITDA loss of $7.2 million (ZAR 112.7 million)1.
- Continued operating improvement demonstrated by further narrowing the operating loss to $1.9 million (ZAR 33.2 million) 1
in Q3 2023, representing an 81% improvement from an operating loss of $9.4 million (ZAR 147.1 million)1 reported for Q3
2022.
- Continued outperformance from the Merchant Division, exceeding guidance and delivering Segment Adjusted EBITDA of
$8.3 million (ZAR 148.7 million)1 in Q3 2023. Growth and momentum are expected to continue as the Merchant Division
continues to extend its footprint across South Africa’s widely untapped informal market.
- Successful turnaround of the Consumer Division from a significant loss-making position into a positive Segment Adjusted
EBITDA contributor to the Group. The Consumer Division reported a second consecutive quarter of profitability delivering
Segment Adjusted EBITDA of $1.6 million (ZAR 29.6 million) 1 in Q3 2023, compared to a loss, before the Q3 2022
reorganization costs, of $0.8 million (ZAR 13.5 million) 1 in Q3 2022. With the divisional turnaround largely complete, the
Consumer Division is focused on more targeted interventions to grow the EPE account base and enhance its loan and
insurance cross-sell initiatives.
- Continued momentum in achieving positive net cash generated by operating activities2 of $7.4 million (ZAR 133.0 million)
in Q3 2023, compared to an outflow of $5.2 million (ZAR 81.3 million) in Q3 2022.
- Guidance for fiscal 2023 re-affirmed.
Lesaka Group CEO Chris Meyer said: “Another quarter of growth and profitability for Lesaka driven by the transformational
acquisition of the Connect Group in our Merchant Division and the successful turnaround in our Consumer Division, despite the
persistently challenging economic environment. Lesaka is well positioned to benefit from the exponential secular demand for
innovative fintech solutions that are transforming South Africa’s highly cash-driven informal economy.
In our Merchant Division we are committed to enabling small merchants to compete and grow by providing access to innovative
financial technology and value-creating solutions. In our Consumer Division our mission is to improve the lives of South Africa’s
grant beneficiaries by providing affordable access to essential financial services.
The continued digitalization of South Africa’s informal economy serves as a durable catalyst for our business but ultimately our
success is built on the success of our customers.”
1. Translated at an average exchange rate of ZAR 17.93 to $1 for Q3 2023, ZAR 15.61 to $1 for Q3 2022 and ZAR 17.52 to $1
for Q2 2023. The ZAR weakened 15% against the U.S. dollar during Q3 2023 when compared to Q3 2022 and 2% when
compared to the prior sequential quarter (Q2 2023).
2. Cash generated by operating activities before working capital and net interest paid.
Summary Financial Metrics
Three months ended
Three months ended
Mar 31, Mar 31, Dec 31, Q3 ’23 vs Q3 ’23 vs Q3 ’23 vs Q3 ’23 vs
2023 2022 2022 Q3 ’22 Q2 ’23 Q3 ’22 Q2 ’23
(All figures in USD ‘000s except per USD ‘000’s
share data) (except per share data) % change in USD % change in ZAR
Revenue 133,968 35,202 136,068 281% (2%) 337% 1%
GAAP operating loss (1,853) (9,421) (2,192) (80%) (15%) (77%) (13%)
Net loss attributable to Lesaka (5,820) (3,327) (6,649) 75% (12%) 101% (10%)
GAAP loss per share ($) (0.09) (0.06) (0.11) 58% (14%) 82% (12%)
Group Adjusted EBITDA (loss) (1) 7,646 (7,219) 7,442 nm 3% nm 5%
Fundamental loss per share ($)(1) (0.02) (0.05) (0.01) (60%) 100% (54%) 105%
Fully-diluted weighted average shares
(‘000’s) 63,854 57,791 62,763 10% 2% n/a n/a
Average period USD / ZAR exchange
rate 17.93 15.61 17.52 15% 2% n/a n/a
Nine months ended
Nine months ended
Mar 31, Mar 31, F2023 vs F2023 vs
2023 2022 F2022 F2022
USD ‘000’s % change % change
(All figures in USD ‘000s except per share data) (except per share data) in USD in ZAR
Revenue 394,822 100,820 292% 355%
GAAP operating loss (8,716) (30,073) (71%) (66%)
Net loss attributable to Lesaka (23,165) (28,727) (19%) (6%)
GAAP loss per share ($) (0.37) (0.50) (27%) (15%)
Group Adjusted EBITDA (loss)(1) 19,287 (21,511) nm nm
Fundamental loss per share ($)(1) (0.11) (0.40) (73%) (68%)
Fully-diluted weighted average shares (‘000’s) 62,913 57,322 10% n/a
Average period USD / ZAR exchange rate 17.40 14.99 16% n/a
(1) Group Adjusted EBITDA (loss), fundamental loss and fundamental loss per share are non-GAAP measures and described in the
full announcement under “Use of Non-GAAP Measures—Group Adjusted EBITDA, and —Fundamental net loss and fundamental
loss per share.” See Attachment B included in the full announcement for a reconciliation of GAAP net loss attributable to Lesaka to
Group Adjusted EBITDA loss, and GAAP net loss to fundamental net loss and loss per share.
Factors Impacting Comparability of Q3 2023 and Q3 2022 Results
- Higher revenue: Revenues increased 337% in ZAR, primarily due to the contribution from the Connect Group (“Connect”)
in our Merchant Division, and an increase in account fees and insurance revenues in our Consumer Division, which was
partially offset by lower hardware sales revenue in our POS hardware distribution business given the lumpy nature of bulk
sales.
- Lower operating losses: Operating losses decreased, delivering an improvement of 77% in ZAR compared with the Q3 2022
primarily due to the contribution from Connect, and the implementation of various cost reduction initiatives in the Consumer
Division, which was partially offset by an increase in acquisition related intangible asset amortization.
- Higher net interest charge: The net interest charge increased to ZAR 80.1 million from net interest received of ZAR 1.1
million due to the additional borrowings incurred in order to fund the acquisition of Connect as well as the debt acquired
within the Connect Group itself.
- Foreign exchange movements: The U.S. dollar was 15% stronger against the ZAR during Q3 2023 compared to Q3 2022,
which negatively impacted our U.S. dollar denominated reported results.
Results of Operations by Segment and Liquidity
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”). We do not allocate once-off items, stock-based compensation charges, certain lease charges, depreciation and
amortization, impairment of goodwill or other intangible assets, other items (including gains or losses on disposal of investments, fair
value adjustments to equity securities, fair value adjustments to currency options), interest income, interest expense, income tax
expense or loss from equity-accounted investments to our reportable segments. See Attachment B for a reconciliation of GAAP net
income before tax to Segment Adjusted EBITDA.
Merchant
Merchant Division revenue was $118.1 million in Q3 2023, up 622% compared with Q3 2022 on a constant currency basis. Segment
revenue increased due to the contribution from Connect, which was partially offset by lower hardware sales revenue given the lumpy
nature of bulk sales. The increase in EBITDA is primarily due to the inclusion of Connect, which was partially offset by lower
hardware sales. Our EBITDA (loss) margin (calculated as EBITDA (loss) divided by revenue) for Q3 2023 and 2022 was 7.0% and
7.6%, respectively.
Consumer
Consumer Division revenue was $15.9 million in Q3 2023, 3% lower compared with Q3 2022 due to currency impacts. On a constant
currency basis Segment revenue increased 11% compared to Q3 2022 and 5% compared to Q2 2023. Segment revenue increased
primarily due to higher insurance revenues, higher revenue from account holder fees given the increase in number of accounts and
modest lending revenue growth. We embarked on a retrenchment process during Q3 2022 and recorded an expense of $5.9 million
which is included in the EBITDA loss for that period. The cost reduction initiatives we initiated in fiscal 2022 delivered a significant
reduction in the Consumer Division’s operating expenses which resulted in a positive Segment Adjusted EBITDA contribution
compared with a Segment Adjusted EBITDA loss in Q3 2022. Specifically, Q2 2022 included expenses associated with discontinuing
a mobile distribution network, and since then we have streamlined our branch network through reductions in certain expenses
including employee-related costs, security, guarding and premises costs. Our EBITDA margin for Q3 2023 and 2022 was 10.4% and
(40.9%), respectively.
Group costs
Our group costs for fiscal 2023 increased compared with the prior period due to higher employee costs and an increase in directors’
and officers’ insurance premiums. 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.
Cash flow and liquidity
As of March 31, 2023, our cash and cash equivalents were $49.4 million and comprised of U.S. dollar-denominated balances of $7.4
million, ZAR-denominated balances of ZAR 713.4 million ($40.1 million), and other currency deposits, primarily Botswana pula, of
$1.9 million, with all amounts translated at exchange rates applicable as of March 31, 2023. The increase in our unrestricted cash
balances from June 30, 2022, was primarily due to the utilization of our available borrowings and a positive contribution from
Connect, which was partially offset by the utilization of cash reserves to fund certain scheduled repayments of borrowings, purchase
ATMs and safe assets, and to make an investment in working capital in our Consumer and Merchant operations.
Outlook for FY 2023
While we report our financial results in USD, we measure our operating performance in ZAR, and as such we provide our guidance
accordingly.
For the full fiscal year 2023, we are reaffirming the total Group guidance provided on February 7, 2023 (except as otherwise noted
below). We expect the following for the year ended June 2023:
- Revenue between ZAR 8.7 billion and ZAR 9.3 billion.
- Merchant Segment Adjusted EBITDA of between ZAR 580 million and ZAR 595 million (previously between ZAR 550
million and ZAR 565 million).
- Consumer Segment Adjusted EBITDA of between ZAR 65 million and ZAR 80 million (previously between ZAR 95 million
and ZAR 110 million).
- Group costs normalized expected to be between (ZAR 165 million) to (ZAR 150 million).
- Group Adjusted EBITDA of between ZAR 480 million and ZAR 525 million.
Management has provided its outlook regarding Merchant Segment Adjusted EBITDA, Consumer Segment Adjusted EBITDA, Group
costs normalized and Group Adjusted EBITDA, each which is a non-GAAP financial measure and excludes certain charges.
Management has not reconciled these non-GAAP financial measures to the corresponding GAAP financial measure because guidance
for the various reconciling items is not provided. Management is unable to provide guidance for these reconciling items because they
cannot determine their probable significance, as certain items are outside of the company's control and cannot be reasonably predicted
since these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial
measures is not available without unreasonable effort.
Earnings Presentation for Q3 2023 Results
Our earnings presentation for Q3 2023 will be posted to the Investor Relations page of our website prior to our earnings call.
Webcast and Conference Call
Lesaka will host a webcast and conference call to review results on May 10, 2023, at 8:00 a.m. Eastern Time which is 2:00 p.m. South
Africa Standard Time (“SAST”). A replay of the results presentation webcast will be available on the Lesaka investor relations
website following the conclusion of the live event.
Webcast Details
- The results webcast can be accessed by using the following link: https://bit.ly/40ZGkQ3
- Webcast ID: 893 3353 7703
- 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: +1 386 347 5053 or +1 507 473 4847
- South Africa Toll-Free + 27 87 551 7702
- Participants using the conference call dial-in will be unable to ask questions.
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 Q3 2023 and 2022:
Q3 Q3
2023 2022
Net (loss) income used to calculate headline earnings (USD’000).................................... (5,595) (4,503)
Headline (loss) earnings per share: ...............................................................
Basic, in USD .................................................................................. (0.09) (0.08)
Diluted, in USD ................................................................................ (0.09) (0.08)
The table below presents our HEPS for fiscal 2023 and 2022:
2023 2022
Net loss used to calculate headline earnings (USD’000) ............................................ (22,198) (30,774)
Headline loss per share: ..........................................................................
Basic, in USD .................................................................................. (0.35) (0.54)
Diluted, in USD ................................................................................ (0.35) (0.54)
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 May 9, 2023. This short-form announcement released on SENS is a summary of the full announcement which is
available at https://senspdf.jse.co.za/documents/2023/JSE/ISSE/LSKE/Q3Res2023.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.
Change in accountants for fiscal 2024 as a result of South African mandatory audit firm rotation
KPMG Inc. (“KPMG”) in South Africa has been engaged as our certifying accountant beginning July 1, 2023, the first day of our
2024 fiscal year in compliance with South African mandatory audit firm rotation rules. Deloitte & Touche in South Africa
(“Deloitte”), our current independent registered public accounting firm, will be dismissed effective upon the completion of Deloitte's
audit of our consolidated financial statements for the year ended June 30, 2023. Our Audit Committee embarked on a competitive
bidding process to identify, evaluate and appoint a new independent accountant as its certifying accountant in South Africa to audit
our consolidated annual financial statements for the year ended June 30, 2024. Deloitte and KPMG are both registered with the Public
Company Accounting Oversight Board in the US, and both are also registered with the Independent Regulatory Board for Auditors
(“IRBA”), the South African auditor regulator. As prescribed by the IRBA, public interest entities with auditors registered with the
IRBA are required to comply with mandatory audit firm rotation requirements which limits the period for which a registered auditor
can serve as a company’s auditor to no more than 10 years. We are therefore required to comply with these mandatory audit firm
rotation rules which necessitates a change to our certifying accountants for the year ended June 30, 2024.
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 press release contains certain statements that may be considered forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements
are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. Such
statements may be identified by their use of terms or phrases such as “expects,” “estimates,” “projects,” “believes,” “anticipates,”
“plans,” “could,” “would,” “may,” “will,” “intends,” “outlook,” “focus,” “seek,” “potential,” “mission,” “continue,” “goal,” “target,”
“objective,” derivations thereof, and similar terms and phrases. Forward-looking statements are based upon the current beliefs and
expectations of our management and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified,
which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the
forward-looking statements. In this press release, statements relating to future financial results and future financing and business
opportunities are forward-looking statements. Additional information concerning factors that could cause actual events or results to
differ materially from those in any forward-looking statement is contained in the company's Form 10-K for the fiscal year ended June
30, 2022, as filed with the SEC, as well as other documents we have filed or will file with the SEC. We assume no obligation to
update the information in this press release, to revise any forward-looking statements or to update the reasons actual results could
differ materially from those anticipated in forward-looking statements.
Investor Relations Contact:
Phillipe Welthagen
Email: phillipe.welthagen@lesakatech.com
Mobile: +27 84 512 5393
FNK IR:
Rob Fink / Matt Chesler, CFA
Email: lsak@fnkir.com
Media Relations Contact:
Janine Bester Gertzen
Email: Janine@thenielsennetwork.com
Johannesburg
May 10, 2023
Sponsor:
Rand Merchant Bank, a division of FirstRand Bank Limited
Date: 10-05-2023 07:05:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
