Wrap Text
Lesaka continues strong growth trajectory and achieves upper end of revenue guidance
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 continues strong growth trajectory and achieves upper end of revenue guidance
JOHANNESBURG, November 8, 2023 – Lesaka (Nasdaq: LSAK; JSE: LSK) today released results for the first quarter ended
September 30, 2023 ("Q1 2024").
Performance Highlights for Q1 2024:
- Revenue of $136.1 million (ZAR 2.5 billion)1 in Q1 2024, compared to $124.8 million (ZAR 2.1 billion) 1 for the first quarter
ended September 30, 2022 ("Q1 2023"). In South African Rand ("ZAR") revenue grew 19%, driven by strong year-on-year
growth in both the Merchant and Consumer Divisions.
- A return to operating profitability with an operating income of $0.2 million (ZAR 4.2 million) for the quarter, improving from
an operating loss of $4.7 million (ZAR 80.0 million) in Q1 2023, driven by the turnaround in the Consumer Division and
growth in the Merchant Division.
- The net loss continued to narrow, at $5.7 million (ZAR 105.6 million) 1. This compares to a net loss of $10.7 million (ZAR
183.2 million)1 in Q1 2023 and represents a 42% improvement in ZAR.
- Group Adjusted EBITDA, a non-GAAP measure and reconciled in Attachment B, of $8.7 million (ZAR 162.5 million) 1
representing an improvement of 108% compared to the Q1 2023 Group Adjusted EBITDA of $4.2 million (ZAR 71.9 million)1.
In ZAR Group Adjusted EBITDA increased by 126%.
- Continued year-on-year growth in profitability in the Merchant Division, delivering Segment Adjusted EBITDA of $8.1 million
(ZAR 150.2 million)1 in Q1 2024 compared to $7.9 million (ZAR 135.2 million) in Q1 2023, an increase of 11% in ZAR. The
outlook remains positive as the Merchant business extends its footprint in Southern Africa's informal market.
- The Consumer Division reported its fourth consecutive quarter of profitability, delivering Segment Adjusted EBITDA of $2.5
million (ZAR 46.6 million)1 in Q1 2024, compared to a loss of $1.4 million (ZAR 23.9 million)1 in Q1 2023. With the divisional
turnaround complete, initiatives to grow the Consumer Division are yielding positive results with revenue increasing 13% in
ZAR, off a reduced cost base and in a challenging operating environment.
- Continued momentum in achieving positive net cash provided by operating activities of $3.4 million (ZAR 63.2 million) in Q1
2024, compared to net cash used in operating activities of $7.7 million (ZAR 131.2 million) in Q1 2023.
- Guidance for fiscal 2024 re-affirmed.
Lesaka Group CEO Chris Meyer said: "It has been yet another encouraging quarter for us. We achieved a major milestone by returning
to profitability at an operating level for the quarter."
Mr. Meyer added, "In a tough economic environment the continued growth in all our key revenue drivers demonstrates the resilience
of our business model and the relevance of our services to our customers. We will continue to innovate and extend the positive impact
we are having on the lives of South Africa's small merchants and grant beneficiaries as the digitalization trend in the informal
economy continues."
(1) Average exchange rates applicable for the quarter: ZAR 18.71 to $1 for Q1 2024, ZAR 17.13 to $1 for Q1 2023 and ZAR 18.74 to
$1 for Q4 2023. The ZAR weakened 9.2% against the U.S. dollar during Q1 2024 when compared to Q1 2023 and (0.2%) when compared
to the prior sequential quarter (Q4 2023).
Summary Financial Metrics
Three months ended
Three months ended
Sep 30, Sep 30, Jun 30, Q1 '24 vs Q1 '24 vs Q1 '24 vs Q1 '24 vs
2023 2022 2023 Q1 '23 Q4 '23 Q1 '23 Q4 '23
(All figures in USD '000s except per USD '000's
share data) (except per share data) % change in USD % change in ZAR
Revenue 136,089 124,786 133,149 9% 2% 19% 2%
GAAP operating income (loss) 228 (4,671) (6,631) nm nm nm nm
Net loss attributable to Lesaka (5,651) (10,696) (11,909) (47%) (53%) (42%) (53%)
GAAP loss per share ($) (0.09) (0.17) (0.19) (48%) (53%) (44%) (53%)
(1)
Group Adjusted EBITDA 8,719 4,199 8,449 108% 3% 127% 3%
Fundamental loss per share ($)(1) - (0.08) (0.04) nm nm nm nm
Fully-diluted weighted average shares
('000's) 63,805 62,445 63,805 2% - n/a n/a
Average period USD / ZAR exchange
rate 18.71 17.13 18.74 9% (0%) n/a n/a
(1) Group Adjusted EBITDA, fundamental loss and fundamental loss per share are non-GAAP measures and are described below 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, and GAAP net loss to fundamental net loss and loss per share.
Factors Impacting Comparability of Q1 2024 and Q1 2023 Results
- 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: The net interest charge increased to $4.5 million (ZAR 83.1 million) from $3.6 million (ZAR 62.1
million) primarily due to higher interest rates; and
- Foreign exchange movements: The U.S. dollar was 9% stronger against the ZAR during Q1 2024 compared to the prior period,
which adversely impacted our U.S. dollar 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 Group Adjusted EBITDA.
Merchant
Merchant Division revenue was $121.4 million in Q1 2024, up 21% compared to Q1 2023 in ZAR. 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 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 Q1 2024 and Q1
2023 was 6.6% and 7.2%, respectively.
Consumer
Consumer Division revenue was $15.6 million in Q1 2024, 13% higher in ZAR compared to Q1 2023 and. 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 Q1 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
Q1 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.
Cash flow and liquidity
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.
Outlook for the Second Quarter 2024 ("Q2 2024") and Full Fiscal Year 2024 ("FY 2024")
While we report our financial results in USD, we measure our operating performance in ZAR, and as such we provide our guidance
accordingly.
For Q2 2024, the quarter ending December 31, 2023, we expect:
- Revenue between ZAR 2.65 billion and ZAR 2.75 billion.
- Group Adjusted EBITDA between ZAR 170 million and ZAR 180 million.
We re-affirm our outlook for FY 2024, the year ending June 30, 2024. We expect:
- Revenue between ZAR 10.7 billion and ZAR 11.7 billion.
- Group Adjusted EBITDA between ZAR 680 million and ZAR 740 million.
Management has provided its outlook regarding Group Adjusted EBITDA, which is a non-GAAP financial measure and excludes certain
charges. Management has not reconciled this non-GAAP financial measure 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 measure is not available without unreasonable effort.
Earnings Presentation for Q1 2024 Results
Our earnings presentation for Q1 2024 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 November 8, 2023, at 8:00 a.m. Eastern Time which is 3:00 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/48M4stP
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: +1 253 215 8782 or +1 301 715 8592
- South Africa Toll-Free: + 27 87 551 7702 or +27 87 550 3946
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 results announcement 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 2024 and 2023:
Q1 Q1
2024 2023
Net loss used to calculate headline earnings (USD'000) ....................................................... (4,484) (9,984)
Headline (loss) earnings per share:........................................................................................
Basic, in USD .................................................................................................................. (0.07) (0.16)
Diluted, in USD ............................................................................................................... (0.07) (0.16)
Results announcement released in the US and unaudited condensed consolidated financial statements
The results announcement released in the U.S. and our unaudited condensed consolidated financial statements are available at
https://senspdf.jse.co.za/documents/2023/JSE/ISSE/LSKE/Q1Res2024.pdf and have been published on Lesaka's website at
www.lesakatech.com. Any investment decision by investors and/or shareholders should be based on consideration of the U.S. results
announcement and its recently published unaudited condensed consolidated financial statements. The U.S. results announcement and
our unaudited condensed consolidated financial statements are 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 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 our Form 10-K for the fiscal year ended June 30, 2023, 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
November 8, 2023
Sponsor:
Rand Merchant Bank, a division of FirstRand Bank Limited
Date: 08-11-2023 07:05:00
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