EDGAR 10-K Filing

Company CIK: 1041514
Filing Year: 2025
Filename: 1041514_10-K_2025_0001562762-25-000245.json

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ITEM 1. BUSINESS
ITEM 1.
BUSINESS
Overview
Lesaka enables underserviced consumers and businesses in the southern
cone of Africa to manage their daily financial activities
in a better way, improving
people's lives and increasing financial inclusion in the markets in which
we operate. We
have developed a
unique ecosystem of communities that provides:
(1) over 2 million consumers with specialized
banking, credit, insurance and payout
solutions
to
help
them
manage
their
evolving
financial
needs;
(2)
over
125,000
merchants
of
all
sizes
with
payment
acceptance
solutions to facilitate
their daily commercial
activities more efficiently
and effectively; and
(3) over 750
enterprises with proprietary
network capabilities to facilitate payments between consumers and businesses
in a fast and secure manner.
We bring these communities
together within the Lesaka ecosystem by enabling them to engage and transact with each other in a
better, more
convenient and safe
manner.
For example, we
offer bill payment
solutions to consumers,
merchants and enterprises
by:
(1) connecting over
620 enterprise service
providers to our
proprietary biller network
so that
they can
offer their customers
a convenient
channel to
pay their
respective bills;
(2) enabling
over 95,000
merchants to
offer our
Alternative Digital
Products (“ADP”)
at their
locations and then digitizing any cash payments they receive through one of our cloud-connected cash vaults or recycling the cash via
an ATM
that we
may place
in their
store to
drive foot-traffic;
and (3)
offering consumers
the convenience
of paying
their bills
at a
nearby merchant
where they may
already shop frequently,
using cash withdrawn
from one of
our ATMs
or paying with
a debit card
linked to
a digital-bank
account that
we provided
to them
to deposit
and manage
the funds
from their
employer payrolls
or welfare
grants from the South African government.
To
build
and
maintain
our
valuable
and
growing
ecosystem,
we
have
over
3,500
employees
operating
on
the ground
in
five
countries, including
South Africa
(our primary
market), Namibia,
Botswana, Zambia,
and Kenya,
and we
have the
ability to
reach
deeper and more broadly into adjacent markets through a variety of strategic
partnerships. This enables us to target and serve a market
with approximately 250
million people and an
estimated serviceable addressable
market of approximately
$12 billion in net
revenue
by 2030 according to reports by Global Data Analytics, McKinsey & Company,
BDO, Genesis Analytics, the International Monetary
Fund,
the
Population
Reference
Bureau
and
internal
management
estimates.
According
to
a
report
by
Boston
Consulting
Group,
favorable secular tailwinds, have helped position
Africa as the fastest
growing fintech market globally, that projects growth in the total
African fintech revenue pool to grow by 13 times between 2021 and 2030,
as illustrated below.
Our Strategy
To
build our unique ecosystem
and capture this large
and attractive market opportunity,
we developed a 5-phase
strategy to win
and serve customers across a diversified range of channels and markets. These
phases include:
1.
Address
-
First,
we
develop
or
acquire
a
platform
to
address and
serve
the
specialized
financial
needs
of
a
specific
customer
segment.
Today,
we
have
three
core
platforms
allocated
to
each
of
our
reported
business
segments
(or
divisions), Consumer, Merchant and
Enterprise;
2.
Position
- Second,
we position
ourselves in
the market
to gain
access to
data that
gives us
valuable
insights into
our
customer
base.
We
develop
solutions
that
enable
us
to
learn
from
the
flow
of
funds
and
financial
behaviours
in
our
customers daily
lives to better
understand their
needs. For
example, our banking
solutions enable us
to see the
sources
and frequency of
consumer income deposits
as well as
their spending
behaviours, while our
merchant solutions enable
us to see a merchant’s cash flows and selected
spending such as inventory purchases and supplier payments;
3.
Develop
- Third,
we develop
and foster
differentiation
in the
market by
combining financial,
software and
hardware
technologies to create
integrated, end-to-end fintech
solutions that have superior
functionality and convenience
relative
to
available
alternatives.
Competitor
offerings
are
typically
provided
by
(i)
legacy
banks
with
poor
track
records
of
customer
service for
the underserviced,
(ii) government
entities, such
as the
post office,
with limited
capabilities and
R&D budgets to invest in
solutions, or (iii) a fragmented
universe of single-solution vendors
who provide more narrow
services, forcing a customer to spend more and manage multiple relationships
to meet their end-to-end needs;
4.
Combine
-
Fourth,
we
combine
our
data-driven
insights
with
our
suite
of
solutions
to
sell,
cross-sell
and
serve
our
customers
in an
advantaged way.
We
use the
advantages
embedded
in our
strategy
to (i)
drive
client acquisition
and
retention with targeted offers that may
best meet their needs, (ii) bundle or cross-sell new solutions that may be suitable
for their evolving financial journeys, (iii) underwrite and manage risk effectively;
and
5.
Consolidate
- Fifth, we
identify and execute
on attractive consolidation
opportunities with potential
revenue synergies
to grow our customer
base, extend our capabilities
and expand our ecosystem
into new areas,
and potential cost synergies
to scale our ecosystem and improve our operating efficiencies. For example, in fiscal 2025 we closed and are
integrating
two acquisitions
which expanded
our customer
base, broadened
our suite
of solutions,
and provided
additional cross-
selling opportunities, including:
a.
Adumo
-
a
payments
and
commerce
enablement
platform
that
provides
payment
processing
and
integrated
software
solutions
to
approximately
29,000
active
merchants
(as
of
June
30,
2025)
in
a
variety
of
business
verticals across
South
Africa,
Namibia,
Botswana and
Kenya.
This acquisition
has enabled
us to
extend
our
reach
into
larger
merchants
with
more
sophisticated
point-of-sale
(“POS”)
software
needs.
Adumo
was
integrated into our
Merchant Segment and has
contributed to our fiscal
2025 financial results since
October 1,
2024.
b.
Recharger
- a
prepaid electricity
platform
that provides
submetering administration
and payment
processing
solutions to
an installed
base of
over 500,000
registered prepaid
electricity meters
across South
Africa. This
acquisition has
enabled us
to enter
the private
utilities market
and extend
our payment
solutions into
a large,
new
customer
base.
Recharger
was integrated
into our
Enterprise
Segment
and has
contributed
to our
fiscal
2025 financial results since March 3, 2025.
Our Go-
To
-Market Model
To
go-to-market,
we created
a proprietary
business model
to reach,
engage and
serve our
Merchant, Consumer
and Enterprise
Segments’ customers over time. The five elements of our go-to-market model
include:
1.
Wide-Breadth of Solutions
- We
have a large and
growing suite of solutions
that we sell to
our customers at different
stages of
their financial
journeys using
a
Land and
Expand
approach.
We
start by
offering
critical financial
services
needed
to
win
a
customer
relationship
at
a
relatively
stable
customer
acquisition
cost
(“CAC”).
These
include
our
government grant and bill payment solutions for consumers, and our card acquiring and cash management solutions for
merchants. Then we offer a growing range of complementary services to expand our share of wallet, bundling or cross-
selling complementary
or adjacent
services as
a customer’s
needs grow.
We
believe this
increases the
lifetime value
(“LTV”) of our customer base with very
little incremental CAC, increasing
our LTV/CAC ratio and compounding value
over time. We
organize our solutions across our
customers’ financial lifecycles including: (1)
Receive Money
,
Manage
Money
,
Borrow Money
, and
Protect Assets
for our consumers,
and (2)
Accept Payments
,
Manage Money
,
Grow Revenue,
and
Access Capital
for our merchants.
2.
Differentiated Reach in the Market
- Instead of relying on online sales or using expensive bank branches, we reach our
customers
close
to
where
they
live
or
close
to government
offices
that
disburse
grant
payments
by
deploying
on-the
ground
sales teams
and
low-cost retail
offices,
or hubs.
Our salespeople
are
trained
to engage
in-person and
educate
customers on the value and advantages of our solutions in a friendly
and respectful manner.
3.
A Digital Engagement
Approach
- After our
initial sale, we want
to utilize technology
to engage more
efficiently and
effectively
with our
customers, so
we train
and steer
them to
use our
digital apps
to manage
and grow
their financial
services over time.
We have developed a variety
of digital apps
for our customers
to use when
engaging with our
different
solutions including a digital banking app for
our consumers and a payments management account app
for our merchants.
4.
Proprietary Access to Data
- We leverage our
solutions to gain access to data that provides us with unique insights
into our customers, which we use to serve them more effectively.
For example, we can often see the timing, amount
and frequency of a consumer’s income deposits and how
they spend their money and pay their bills. We
believe this is
rare in Africa, particularly among the underserviced,
and provides a competitive advantage in the market.
5.
Leading Brand Value
- Based on our market
penetration and length of time
in the market, we have established
several
strong brands and brand equity in the market across our three business segments and different product lines. We
believe
these brands are valuable touch points, with which
to evolve a unified leading brand, that
helps us attract new customers,
build trust, and facilitate the roll-out and adoption of new solutions over
time.
Our Business Segments
We
go-to- market
and operate
through three
business segments
including our
Merchant Segment
(“Merchant”), our
Consumer
Segment (“Consumer”) and our Enterprise Segment (“Enterprise”).
1.
Our Merchant Segment
Our Merchant Market
We
serve
merchants
of all
sizes, ranging
from micro
-merchants
to
small-to-medium
merchants.
Currently,
we
serve over
125,000 merchants across Southern Africa, of which more than 100,000 merchants are in South Africa. Approximately 95,000 of
the merchants
are micro
merchants who
range from
local kiosks
and spaza
shops (corner
stores) to
sole proprietors,
including
taverns, marketplaces and
the businesses and suppliers
that serve them.
These merchants typically
have lower payment
volume,
and a lower proportion of merchants accepting digital payments given
a larger dominance of cash in rural areas. However,
as the
secular
shift
from
cash
to
digital payments
continues
to
progress, we
believe
these
merchants
will increase
adopt
new digital
payment
solutions and
complementary services.
Approximately 30,000
of the
merchants are
small-to-medium merchants,
who
are larger and
more formal businesses.
They can range
from small local retailers
to merchants with
multi-lane stores, franchises
and online storefronts.
These merchants are
more professional
businesses with sophisticated
business needs with
a greater need
for more advanced business solutions that can help them run and grow their
businesses more efficiently.
Our Merchant Solutions
Our merchant solutions serve merchants of all sizes offering a wide breadth of capabilities across their financial lifecycles to
help them
Accept Payments
,
Manage Money
,
Grow Revenue,
and
Access Capital
, as illustrated below.
Our Merchant solutions and products comprise:
●
Merchant acquiring:
Merchant acquiring solutions for micro-merchants and small-to-medium
sized merchants.
●
Software:
Integrated POS software and hardware to the hospitality industry.
●
Cash:
Cash management
and digitalization
solutions helps
merchants manage
their money
and effectively
“puts the
bank” in
micro-merchants’
and small-to-medium
sized businesses’
stores. We
provide
them with
digital accounts
so
merchants can track their deposits and supplier payment services to order
and pay for more inventory.
●
Lending:
Access to capital to
small-to-medium merchants by providing small
cash advances or business
credit utilizing
our proprietary visibility into their business activity.
●
ADP
:
This
solution
comprises
categories
including
prepaid
solutions
(airtime,
data,
electricity
and
gaming),
bill
payments,
International
Money
Transfers
(“IMT”)
and
supplier
enabled
payments.
Our
supplier
enabled
payments
product suite has specifically been developed for the micro-merchants.
Merchant Competitive Landscape and Market Share
We estimate an addressable revenue
pool of approximately of $2.8 billion of which we believe we have approximately 7.0%
market
share
of
the
revenue
in
the
market
(according
to
Global
Data
Analytics
2024,
Genesis Analytics
2024,
South African
Reserve Bank
Interchange
Rate 2021,
IFC MSME
Opportunity in
South Africa
2019, Electrum
Value
Added Services
in South
Africa 2020, peer company public quarterly results from
2024 and management’s
best estimates).
A key
component
of
our
strategy
is to
differentiate
ourselves
by
being
a
customer-led
provider
rather
than
a
product-led
company by
evolving our
product offerings
to meet
the various
needs of
our customers,
being merchants.
While the
rest of
the
industry is highly fragmented with companies providing 1-2 products on their platforms, we have positioned ourselves to provide
an integrated suite of solutions for merchants. No single competitor offers the range of solutions we provide in the market. In this
respect
we
face
a
different
competitive
environment
dependent
on
the
specific
product.
For
example,
while
traditional
South
African banks
may dominate
the core
merchant acquiring
market, they
do not
offer software
or alternative
digital products
for
which we face a different universe of competitors.
2.
Our Consumer Segment
Our Consumer Market
Through
our
Consumer
Division
we
focus
on
individuals
who
have
historically
been
excluded
from
traditional
financial
services.
Our
products
are
designed
for
consumers
at
the
lower
socioeconomic
end
of
the
market
within
Living
Standards
Measures
(“LSMs”)
to
6,
which
comprises
approximately
million
people
as
of
(according
to
a
report
by
Genesis
Analytics). LSM is a
research tool used
in South Africa
to segment the population
based on living
standards rather than
income
alone. It considers factors like access
to services and durable goods (for
example electricity, running water, appliances) to classify
consumers into different groups, typically from LSM 1 (lowest)
to LSM 10 (highest).
There are approximately 12.1
million permanent grant beneficiaries
in South Africa, in
addition approximately 9.0 million
people
receive a Social Relief of Distress
(“SRD”) grant each month (according
to the South African Social Security
Agency (“SASSA”) as
of June
30, 2025).
As of
the date of
this Annual
Report, we have
approximately 2.1
million active
consumer customers
comprising
1.9 million
grant beneficiaries
(approximately 90%
permanent grant
beneficiaries and
the balance
SRD grant
beneficiaries) and
0.2
million
EasyPay
Payouts
cardholders.
We
believe
that
for
those
consumers
receiving
welfare
grants
from
the
South
African
government, there are no other providers able to provide a transactional account, lending and insurance product under one ecosystem.
Our proposition has a unique ‘last mile’ service and
distribution model whereby we go to the rural
and peri urban geographies across
the country
to bring our
services to the
customer.
Through digitally enabled
onboarding, we can
open accounts
and issue a
physical
card at the point of application.
Our Consumer Solutions
Our consumer
solutions serve
to provide
a wide breadth
of banking,
credit and
insurance capabilities
across their
financial
lifecycles to help them
Receive Money
,
Manage Money
,
Borrow Money
, and
Protect Assets
, as illustrated below.
Our Consumer product offering is targeted at underserviced
South African consumers, and includes:
●
Transactional accounts:
Low-cost EasyPay Everywhere (“EPE”) transactional bank
account with access to
banking via
card, mobile application,
web integration and
unstructured supplementary
service data (“USSD”).
To
contextualize the
value of USSD
for our consumers
- consumers often
have no data
nor access to
WiFi, so USSD is
a very effective channel
for them. USSD
is a communication
protocol used by
mobile phones to
interact with a
mobile network operator’s system,
including real-time
interaction (no
need for
internet) and
works on
any mobile
phone, including
basic feature
phones.
Consumers can manage and
use the funds
they receive with a
complementary debit card and
a mobile app, through
which
they can withdraw cash at ATMs,
make purchases at points of sale, and pay bills. This helps us build a relationship with
our consumers and cross-sell additional financial services over time.
●
Lending:
We
utilize
our
access to
data on
money
flowing
in and
out of
our consumers’
deposit
accounts
to provide
access to
short-term, unsecured
personal loans
to qualifying
EPE consumers.
For many
of our
consumers, we
provide
their first-time access to regulated credit.
●
Insurance:
We
help
our
EPE
consumers
protect
their
assets
with
our
funeral
insurance
offering,
leveraging
our
relationship with our consumers, and access to data.
●
Payouts:
Secure payout solutions
for consumers, being
corporate employees who
receive work-related payments
from
their employers (South African businesses) through us.
Consumer Competitive Landscape and Market Share
The consumer
market we
address today
is focused
on South
African grant
beneficiaries and
other payout
cardholders. We
estimate an
addressable revenue
pool of
approximately $1.4
billion of
which
we believe
we have
approximately
6.5% market
share of the
revenue in the market
(according to SASSA grant data
and management’s best estimates in 2024).
We have a different
subset of competitors depending on the product
offering. While banks are the principal competitors for
transactional accounts, the
lending market is dominated by micro-finance companies and the insurance
market by insurance companies.
3.
Enterprise Segment
Our Enterprise Market
Our Enterprise
Division serves more
than 750 Enterprise
clients with large
ecosystems of billpayers,
tenants, employees or
constituents. The
Enterprise Division
is focused
on providing
strategic and
targeted
solutions that
facilitate payments
between
consumers and businesses. Our target
market primarily focuses on our network
of more than 620 billers across
South Africa and
over 100
corporate clients.
We
have deep
integrations across
municipal councils,
utility providers,
banks and
mobile operators
who leverage our technology to create readily scalable solutions.
Our Enterprise Solutions
Instead of a
financial lifecycle, our
enterprise solutions organized
by platforms which
provide hardware, software
and services
to different constituents,
as illustrated below.
Our Enterprise product offering is focused across three core verticals
and includes:
●
ADP:
By providing
the integration
technology to
enable any
customer in
South Africa
to purchase
a prepaid
solution
(e.g. airtime, electricity
or gaming) and/or
pay a bill
through channels such
as retailer distribution
networks and online
banking apps.
●
Utilities:
Provides a convenient
platform for tenants
to purchase and
top-up their prepaid
electricity meters which
enables
landlords
to
manage
the
electricity
usage
of
each
of
their
tenants
without
the
postpaid
risk.
This
was
incorporated
following our acquisition of Recharger in March 2025 and is a low
churn annuity-based revenue model.
●
Payments:
Houses the
proprietary payment
technology of
the Group,
particularly the
payment switch
enabling us
to
insource components
of the
payments value
chain to
create greater
efficiencies
and reduce
third party
dependencies.
Ancillary
security
and
tokenization
services
are
also
offered
to
enterprise
clients.
This
solution
remains
a
modest
contributor to the Enterprise Division’s
revenue.
Enterprise Competitive Landscape and Market Share
We
estimate an
addressable revenue
pool of
approximately of
$200 million
of which
we believe
we have
approximately
10.0% market share of the revenue in the market
(according to South African Local Government Association 2024, Statista 2024,
South African Treasury
2024, Grand View Research
2024 and management’s
best estimates. Bill payments is a representation of
the non-bank bill collection market in South Africa).
Like
our
Merchant
Division and
Consumer
Division,
we
have
competitors
within
each of
our
core products,
however
no
specific competitor participating across the integrated suite of products,
offered in our Enterprise Division.
Human Capital Resources
Over
the
last
few
years
we
have
built
a
diverse
team
of
high-caliber
individuals,
from
different
organizations,
to
form
our
leadership group. This
leadership group is
deeply committed to
building a high-performance
culture that is
based on our core
values
and a commitment to the care and development of our people.
Lesaka’s Core Values:
•
Entrepreneurial spirit;
•
Integrity;
•
Collective wisdom;
•
Ownership; and
•
A bias to action.
These are
our values
that underpin
our mission
to enable
Merchants
to compete
and grow,
and for
our Consumer
customers,
which comprise
mainly grant
beneficiaries,
to improve
their lives,
by providing
innovative financial
technology and
value-creating
solutions.
Employee training and skills development
We strongly believe that learning
is an ongoing process and that the majority of learning is in the doing. As such, while we offer
a range of formal
programs (as listed further
below), more importantly,
we continue to encourage
a culture of learning
in everything
that we do.
Sustainable
employee
training
and
development
programs
impact
employee
retention,
and
we
believe
that
our
investment
in
employee development contributes
to high performance and
high employee engagement
as well as a strong pipeline
of talent for key
and
critical roles
This
increases loyalty,
which
will in
turn contribute
to employee
retention.
We
offer
the following
development
programs to enhance employee performance and skills:
•
training programs;
•
leadership development programs;
•
unemployed and employed learnerships;
•
internships;
•
financial assistance to pursue further studies and obtain formal qualifications;
•
other in-house and cross-functional training to aid with career advancement;
and
•
succession planning - training interventions to address scarce and critical skills.
Equal opportunity
Having an inclusive
and diverse workforce
which reflects our
economically active population
and society in
general, is crucial
for helping the organization attract and retain talent and is important
for long-term organizational success. Our human capital team
in
partnership with
our leaders
drive recruiting
and retaining
a talented
and diverse
workforce with
special focus
on hiring
previously
disadvantaged
groups whenever
possible. We
are
committed
to
hiring
qualified
candidates without
regard
to
their
personal
status,
while
taking
into
account
the
unique
circumstances
affecting
our
operations
in
South
Africa
and
the
need
to
uplift
previously
disadvantaged groups. This commitment extends to all levels of
our organization, including within senior management
and our board
of directors.
As of June 30, 2025, the composition of our workforce was:
•
53% female and 47% male;
•
42% between 18 and 34 years old, 53% between 35 and 54 years old, and 5% over
55 years old; and
•
66% Black, 9% two or more races, 10% Indian and 15% White.
We have no
female named executive officer.
We
continue
to strive
to build
a more
inclusive workforce
and to
enhance our
pay structures
by taking
measures to
eliminate
potential remuneration discrimination
and to help close gender pay gaps
to progress towards gender equality
at work. We
have taken
positive strides towards a rewards philosophy that rewards high performance
and focuses on equal pay for work of equal value.
Employee compensation programs
We
are committed
to
ensuring
that
all
our
employees
are
paid
fair
and
competitive
remuneration. To
that
end,
we
offer the
following to our employees:
•
Access to a comprehensive medical, dental, and vision plan that our employees
have the option to join;
•
Access to a defined contribution retirement plan that our employees have
the option to join;
•
Paid sick, study, annual
and family responsibility leave;
•
Maternity benefits;
•
Life and disability insurance coverage;
•
Financial aid to fund tertiary education for children of employees;
•
Employee assistance programs; and
•
Product discounts.
Annual
increases
and
incentive
compensation
are
based
on
merit,
which
is
communicated
to
employees
at
onboarding
and
documented as part of our annual remuneration review process.
Our number
of employees
allocated
on a
segmental
and
group
basis as
of the
years ended
June 30,
2025,
2024 and
2023,
is
presented in the table below:
Number of employees
Consumer
(1)
1,542
1,333
1,306
Merchant
(1)
1,957
1,059
Enterprise
(1)
Total segments
3,712
2,522
2,296
Group
(1)
Total
3,728
2,531
2,303
(1) Consumer includes one executive officer for
each of fiscal 2024 and 2023. Merchant includes one executive officer
for each
of fiscal 2024 and 2023. Group includes five executive officers for fiscal 2025, and two executive
officers for each of fiscal 2024 and
2023.
On a
functional basis,
as of June
30, 2025, five
of our
employees were
our named
executive officers,
1,567 were
employed in
sales and marketing, 703 were employed in finance and
administration, 432 were employed in information technology and 1,021 were
employed in operations.
Health and safety laws and regulations
We
are
subject
to various
South
African
laws and
regulations
that regulate
the health
and
safety of
our
South African-based
workforce, including
those laws monitored
by the
South African
Department of
Employment and
Labour which
stipulates the
legal
framework within
which we
need to
function. This
framework comprises
the Occupational
Health and
Safety Act,
Act 85
of 1993
(“OHSA”),
the
Compensation
for
Occupational
Injuries
and
Diseases
Act,
Act
of
(“COIDA”),
the
Basic
Conditions
of
Employment Act,
Act 75
of 1997
(“BCEA”) and
the Labour
Relations Act,
Act 66
of 1995
(“LRA”). Compliance
with COVID-19
regulations remains
regulated by the
National Institute of
Occupational Health (“NIOH”),
and the Occupational
Health Surveillance
System
(“OHSS”),
the
Centre
for
Scientific
Industrial
Research
(“CSIR”)
and
the
National
Institute
for
Communicable
Diseases
(“NICD”).
We
have
implemented
and regularly
update human
capital-related
policies that
are designed
to ensure compliance
with
applicable South African laws and regulations.
Our Executive Officers
The table below presents our executive officers, their
ages and their titles:
Name
Age
Title
Ali Mazanderani
Executive Chairman and Director
Dan L. Smith
Group Chief Financial Officer and Director
Naeem E. Kola
Group Chief Operating Officer and Director
Lincoln C. Mali
Chief Executive Officer: Southern Africa and Director
Steven J. Heilbron
Head of Corporate Development and Director
Ali Mazanderani
has been our Executive
Chairman since February 1,
2024. He is a fintech
investor and entrepreneur.
He is the
co-founder
and
chairman
of Teya,
a pan-European
fintech. He
is also
a non-executive
director
on the
board of
several companies
including Thunes (Singapore based
private fintech), Kushki (Latin
American payments company) and
is the president
of The European
Digital Payments Industry Alliance
(EDPIA). He was previously
on the board of
several other leading payments
companies globally
including
StoneCo
(Nasdaq:
STNE)
in
Brazil
and
Network
International
Holdings
Plc
(LSE:NETW)
in
the
Middle
East.
He
was
formerly a Partner at Actis, a London-based emerging market private equity firm, where
he led multiple landmark fintech investments
globally. Prior to his career at Actis, Mr.
Mazanderani advised private equity and corporate clients for OC&C Strategy Consultants in
London
and
served
as
lead
strategy
consultant
for
First
National
Bank
based
in
Johannesburg.
He
holds
postgraduate
degrees
in
Economics from
the University of
Pretoria, Oxford University
and the London
School of Economics,
an MBA from
INSEAD and a
Masters in Business Law from the University of St Gallen.
Dan
L.
Smith
has
been
our
Group
Chief
Financial
Officer
since
October
1,
2024.
He
has
held
various
roles
in
the
financial
services sectors
in South
Africa and
the United
Kingdom. Mr.
Smith is
a director
of ADvTECH
Limited (JSE:
ADH). He
founded
DLS Advisors in
2020 and
was its CEO
until joining
VCP in
2021, where
he was employed
until September
2024. Prior
to that, he
was
employed
by
Standard
Bank
South
Africa
for
a
number
of
years
where
he
accumulated
vast
corporate
finance
experience,
including heading the Mergers &
Acquisitions investment banking team.
He holds a
Bachelor of Commerce, a
Bachelor of Accounting
and a Higher Diploma
in Taxation
Law from the University
of Witwatersrand
and is a Chartered
Accountant (SA). He is
a Graduate
of
the
Oxford
Fintech
Programme
from
the
Saïd
Business
School,
University
of
Oxford.
He
also
has
an
Advanced
Valuation
Techniques certificat
ion from the Gordon Institute of Business Science and a Diploma in Strategic Client Management from the UCT
Graduate School of Business.
Naeem E. Kol
a has been
our Group Chief
Operating Officer since October
1, 2024, and
was previously our
Group Chief Financial
Officer from March 1, 2022 until September 30, 2024. Mr. Kola has progressively held senior finance roles in Dubai, most notably
as
Chief Financial Officer of the Emerging
Markets Payments Group (“EMP”), a high-growth
fintech business that grew materially and
successfully concluded and integrated
five acquisitions during
Mr. Kola’s six-year tenure as Chief
Financial Officer. Prior to becoming
Chief Financial Officer, Mr. Kola
was Senior Vice President
for Investments, Strategy
and Business Planning
at Network International.
Since the acquisition
of EMP by
Network International in
2017, Mr.
Kola had been an
Operations Director and
Strategic Advisor to
the emerging market private equity firm
Actis, where he again focused on fintech businesses.
He is a qualified Chartered Accountant
(SA) and a member of the South African Institute of Chartered Accountants.
Lincoln
C.
Mali
has
been
our
Chief
Executive
Officer:
Southern
Africa
since
May
1,
2021.
Mr.
Mali
is
a
financial
services
executive with over 25 years in the
industry. Until April 2021, he was the Head of Group
Card and Payments at Standard Bank
Group,
having
served
in many
different
roles within
that organization
since 2001.
Mr.
Mali chaired
the board
of directors
of Diners
Club
South Africa
until April
2021, and
was a
member of
the Central
and Eastern
Europe, Middle
East and
Africa Business
Council for
Visa.
Mr.
Mali holds
Bachelor of
Arts (BA)
and Bachelor
of Laws
(LLB) degrees
from Rhodes
University,
an MBA
from Henley
Management College, various diplomas and attended an Advanced
Management Program at Harvard Business School.
Steven J.
Heilbron
joined us following
the acquisition
of Connect
in 2022. Mr.
Heilbron has two
decades of
financial services
experience,
having
spent
years
working
for
Investec
in
South
Africa
and
the
UK,
where
he
served
as
Global
Head
of
Private
Banking and Joint Chief Executive
Officer of Investec Bank plc.
He led a private
consortium that acquired Cash
Connect Management
Solutions (Pty) Ltd
(“CCMS”) in 2013.
Mr. Heilbron
has presided over
significant organic
growth in the
rebranded Connect Group,
as well as
spearheading the successful
acquisition and integration of
Kazang and EFTpos
acquired from the
Paycorp Group in
February
2020. He is a member of the South African Institute of Chartered Accountants
.
Financial Information about Geographical Areas and Operating
Segments
Refer
to
Note
to
our
audited
consolidated
financial
statements
included
in
this
Annual
Report
contains
detailed
financial
information about our operating segments for fiscal 2025, 2024 and 2023. Revenues based on the geographic location from which the
sale originated and geographic location where long-lived assets are held for the years ended June 30, are presented in the table below:
Revenue
(1)
Long lived assets
$'000
$'000
$'000
$'000
$'000
$'000
South Africa
624,846
537,594
505,558
392,098
286,700
300,104
India (MobiKwik)
-
-
-
-
76,297
76,297
Rest of the world
34,855
26,628
22,413
3,055
2,548
2,197
Total
659,701
564,222
527,971
395,153
365,545
378,598
(1)
Refer to
Note 16
to our
audited consolidated
financial statements
included
in this
Annual Report
which contains
detailed
financial information about our revenue for fiscal 2025, 2024
and 2023.
Corporate history
Lesaka was incorporated
in Florida in
May 1997 as
Net 1
UEPS Technologies, Inc. and
changed its name
to Lesaka Technologies,
Inc. on May 12, 2022. In 2004, Lesaka acquired Net1 Applied Technology
Holdings Limited (“Aplitec”), a public company listed on
the Johannesburg
Stock Exchange
(“JSE”). In
2005, Lesaka
completed an
initial public
offering
and listed
on the
NASDAQ Stock
Market. In
2008, Lesaka
listed on
the JSE
in a
secondary listing,
which enabled
the former
Aplitec shareholders
(as well
as South
African residents generally) to hold Lesaka common stock directly.
Available information
We maintain a website at www.
lesakatech.com. Our Annual Report, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, and amendments to those reports, as well as our proxy statements, are available free of charge through the “SEC filings” portion
of our website,
as soon as
reasonably practicable after
they are filed
with the SEC.
The information contained
on, or accessible
through,
our website is not incorporated into this Annual Report.
The SEC
maintains a
website at
www.sec.gov
that contains
reports, proxy
and information
statements, and
other information
regarding issuers that file electronically with the SEC.

---

ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
OUR OPERATIONS
AND FINANCIAL
RESULTS
ARE SUBJECT
TO VARIOUS
RISKS AND
UNCERTAINTIES,
INCLUDING
THOSE
DESCRIBED
BELOW,
THAT
COULD
ADVERSELY
AFFECT
OUR
BUSINESS,
FINANCIAL
CONDITION, RESULTS
OF OPERATIONS,
CASH FLOWS, AND THE TRADING PRICE OF OUR COMMON STOC
K
Risks Relating to Our Business
To achieve our mission, our
strategy is to
build and operate
the leading South
African full service
fintech
platform offering cash
management, payment and
financial services. Our
future success, and
our ability to
return
to
profitability
and
positive
cash
flow
is
substantially
dependent
on
our
ability
to
complete
the
implementation of this strategy successfully.
Our board conducted an extensive
review of our business strategy
and operations in July 2020,
and decided to focus on
our South
African
operations
and
other
business
opportunities
in
South
Africa
and,
to
a
lesser
extent,
the
rest
of
the
African
continent.
The
restructuring
of
the
consumer
business
and
acquisition
of
Connect
were
integral
parts
of
the
strategy
to
return
the
business
to
profitability
and
positive
cash
flow.
We
have
made
significant
progress
on
both
of
these
initiatives,
including
the
acquisitions
of
Adumo
and
Recharger,
and
the
proposed
acquisition
of
Bank
Zero
(which
remains
subject
to
the
fulfilment
or
waiver
of
various
conditions
precedent),
however
we
cannot
assure
you
that
we
will
be
able
to
complete
our
strategy
successfully
and
return
to
profitability and positive cash flow.
Even if we do return to profitability, achieving net income does not necessarily
ensure positive cash flows. Future periods of net
losses
from
operations
could
result
in
negative
cash
flow
and
may
hamper
ongoing
operations
or
prevent
us
from
sustaining
or
expanding our business. We cannot assure you that we will achieve, sustain or increase profitability in the future and if we do not, our
business will be materially and adversely affected.
We
have a
significant amount
of indebtedness that
requires us
to comply with
restrictive and financial
covenants. If we are unable to comply with these
covenants, we could default on this debt, which would have
a material adverse effect on our business and financial condition.
As of June 30,
2025, we had
aggregate borrowings outstanding
of ZAR 3.6 billion
($200.8 million translated
at exchange rates
as of June 30, 2025). We partially funded certain of
our recent acquisitions through South
African bank borrowings. We, together with
Lesaka SA
and the majority
of Lesaka SA’s directly and indirectly wholly-owned
subsidiaries, have agreed
to guarantee the
obligations
of
Lesaka
SA
and
of
the
other
borrowers
under
the
certain
of
the
borrowings
to
the
lenders.
Certain
of
these
borrowings
contain
customary covenants which include a
requirement for Lesaka SA
to maintain specified Net
Debt to EBITDA and
Interest Cover Ratios
(as defined in
the lending agreements) and
restricts the ability
of Lesaka SA,
and certain of
its subsidiaries to
make certain distributions
with respect
to their
capital stock,
prepay other
debt, encumber
their assets,
incur additional
indebtedness, make
investment above
specified levels, engage in certain business combinations and engage in
other corporate activities.
The borrowings through our merchant lending operations, through Cash
Connect Capital (Pty) Ltd (“CCC”) and K2020 Connect
(Pty) Ltd (“K2020”),
include a ZAR 400
million revolving credit
facility agreement. This
facility contains customary
covenants that
require
the borrowing
parties to
collectively
maintain
a specified
capital adequacy
ratio, restrict
the ability
of the
entities
to make
certain distributions with respect to
their capital stock, encumber their assets,
incur additional indebtedness, make investments, engage
in certain business combinations and engage in other corporate activities.
These security arrangements and covenants may
reduce our operating flexibility or
our ability to engage in
other transactions that
may
be
beneficial
to
us.
If
we
are
unable
to
comply
with
the
covenants,
we
could
be
in
default
and
the
indebtedness
could
be
accelerated. If this were to occur, we might not be able to obtain waivers of default or to refinance the debt with another lender and as
a result, our business, financial condition and stock price would suffer.
Failure to complete, or delays in completing, the
Bank Zero acquisition, could materially and adversely
affect our results of operations and stock price.
The
completion
of the
Bank
Zero
acquisition
is subject
to
a
number
of
conditions
precedent,
including
receipt
of
regulatory
approvals and certain third-party consents. Some of these conditions are
outside our control.
To
complete
the
acquisition,
we
must
make
certain
filings
with,
and
obtain
certain
consents
and
approvals
from,
various
governmental and regulatory authorities.
The regulatory approval processes may
take a lengthy period of time to complete,
and there
can be no assurance
as to the outcome
of the approval processes,
including the undertakings
and conditions that
may be required
for
approval, or whether the regulatory approvals will be obtained at all.
In addition,
the completion
of the
acquisition is
conditional
on, among
other things,
no action
or circumstance
occurring that
would result in a material adverse effect on the Bank Zero’s
business operations or financial results.
We cannot
provide any assurance regarding if or
when all conditions precedent to the acquisition
will be satisfied or waived. If,
for any reason, the acquisition is
not completed, or its completion is
materially delayed and/or the transaction agreement is terminated,
the market price of our common stock may be materially and adversely
affected.
In addition, if the acquisition is not completed for any reason, there are risks that (i) the announcement of the acquisition and (ii)
the dedication
of management’s
attention and other
of our resources
to the completion
thereof, could have
a negative impact
on our
relationships with our stakeholders
and could have a material
adverse effect on
our current and future operations,
financial condition
and prospects.
We may not realize some or all of the anticipated benefits
from the Bank Zero acquisition or
we may fail
to realize
some or
all of
the expected
benefits of
certain recently
integrated acquisitions,
including Adumo
and Recharger
Even
if
we
complete
the
Bank
Zero
acquisition,
we
may
experience
unforeseen
events,
changes
or
circumstances
that
may
adversely affect us. For
example, we may
incur unexpected costs,
charges or expenses resulting
from the transaction,
including charges
to
future
earnings
if
Bank
Zero’s
business
does
not
perform
as
expected.
Our
expectations
regarding
Bank
Zero’s
business
and
prospects
may not
be realized,
including
as a
result of
changes in
the financial
condition of
the markets
that Bank
Zero serves.
In
addition, there are risks associated with Bank Zero’s product and service offerings or
results of operations, including the risk of failing
to comply with certain regulatory rules required to operate its business.
Further,
there
are numerous
challenges, risks
and
costs involved
with integrating
the operations
of Bank
Zero with
ours. For
example, integrating
Bank Zero
into our
company will
require significant
attention from
our senior
management which
may divert
their attention from our day-to-day business. The difficulties of
integration may also be increased by cultural differences between our
two organizations and the necessity of retaining and integrating
personnel, including Bank Zero’s
key employees.
During fiscal
2025 we
closed the
acquisitions of
Adumo and
Recharger and
have integrated
their businesses
into our
ours. As
these businesses have only been
recently integrated in our business
there is a risk
that we may fail to
realize some or all
of the expected
benefits from these acquisitions.
Our Sarbanes-Oxley
Act of
2002 (“Sarbanes”)
management certification
and auditor
attestation regarding
the effectiveness
of
our internal control over
financial reporting as of
June 30, 2025, excludes
the operations of
Adumo and Recharger as these
transactions
were only closed during fiscal 2025. The requirement to evaluate and report on our internal
controls also applies to companies that we
acquire,
including
Bank
Zero.
As
a
group
of
South
African
private
companies
prior
to
acquisition,
Adumo,
and
more
recently
Recharger,
were not required to comply with Sarbanes prior
to the time we acquired them. The integration
of Adumo, Recharger and
Bank
Zero
into our
internal
control
over
financial
reporting would
be
expected
to require
significant
time
and
resources
from
our
management and other
personnel and is
expected to increase our
compliance costs. If
we fail to successfully
integrate the operations
of Adumo,
Recharger and
Bank Zero
into our
internal control
over financial
reporting, our
internal control
over financial
reporting
may not be effective.
As such, if some or
all of the aforementioned
risks materialize, our ability to
successfully integrate Bank Zero’s
operations into
our business
and realize
the associated
benefits of
that acquisition
could be
adversely impacted.
This could
lead to
the recording
of
material impairments, and as a result, our financial condition, results of
operations, cash flows and stock price could suffer.
We may undertake acquisitions
that could
increase our
costs or
liabilities or
be disruptive
to our
business.
Acquisitions are
an integral part
of our new
growth strategy
as we seek
to expand our
business and deploy
our technologies
in
new markets
in Southern
Africa. However,
we may
not be
able to
locate suitable
acquisition
candidates at
prices that
we consider
appropriate.
If
we
do
identify an
appropriate
acquisition
candidate,
we
may
not be
able to
successfully
negotiate
the
terms
of
the
transaction, finance it
or, if the
transaction occurs, integrate the
new business into
our existing business.
These transactions may
require
debt financing or additional equity financing, resulting in additional leverage
or dilution of ownership.
Acquisitions of businesses
or other material
operations and the
integration of these
acquisitions or their
businesses will require
significant attention
from members
of our senior
management team,
which may
divert their
attention from
our day-to-day
business.
The difficulties
of integration
may be
increased by
the necessity
of integrating
personnel with
disparate business
backgrounds
and
combining
different
corporate cultures.
We
also may
not be
able to
retain key
employees or
customers
of an
acquired business
or
realize
cost
efficiencies
or
synergies
or
other
benefits
that
we
anticipated
when
selecting
our
acquisition
candidates.
Acquisition
candidates may have liabilities or adverse operating issues that we fail to
discover through due diligence prior to the acquisition.
We
may
need
to record
write-downs
from future
impairments of
goodwill or
other intangible
assets, which
could reduce
our
future reported earnings.
Geopolitical conflicts,
including the
conflict between
Russia and
Ukraine and
in the
Middle East,
may
adversely affect our business and results of operations.
The current conflicts between Russia and Ukraine, and in the Middle East are creating substantial uncertainty about the future of
the global economy.
Countries across the globe have instituted sanctions and other penalties
against Russia. The retaliatory measures
that have been taken, and
could be taken in the future,
by the U.S., NATO,
and other countries have created
global security concerns
that could
result in broader
European military
and political conflicts
and otherwise
have a substantial
impact on
regional and
global
economies, any or all of which could adversely affect our business.
While the broader consequences are uncertain at this time, the continuation
and/or escalation of the conflicts, along with any
expansion of the conflict to surrounding areas, create a number of risks that could
adversely impact our business, including:
•
Increased inflation and significant volatility in the macroeconomic environment;
•
Disruptions to our technology infrastructure, including through
cyberattacks, ransom attacks or cyber-intrusion;
•
Adverse changes in international trade policies and relations;
•
Disruptions in global supply chains; and
•
Constraints, volatility or disruption in the credit and capital markets.
All of these risks could materially
and adversely affect our business
and results of operations. We
are continuing to monitor the
situation in Ukraine, the Middle East and globally and assessing the potential
impact on our business.
A prolonged economic
slowdown or lengthy
or severe recession
in South Africa
or elsewhere could
harm
our operations.
A prolonged economic
downturn or recession
in South Africa
could materially
impact our results
from operations, particularly
in light
of electricity
disruptions, a
significantly weak
USD/ ZAR
exchange rate
compared with
previous periods,
and our
strategic
decision to focus on
our South African operations. Economic
confidence in South Africa, our
main operating environment, is
currently
low and, as
a result, the
risk of a
prolonged economic downturn
is increased, which
could have a
negative impact on
merchants and
retailers; mobile
phone operators;
our account
holders; the level
of transactions
we process; the
take-up of
the financial
services we
offer
and
the ability
of our
customers
to
repay our
loans or
to
pay
their insurance
premiums.
If financial
institutions
and
retailers
experience decreased demand for their products
and services, our hardware, software, related
technology sales and processing revenue
could decrease.
Any economic slowdown may be further exacerbated by the
recently imposed trade tariffs on South Africa by the
U.S. While the
South African government
intends to negotiate the
reduction of the
30% tariff hike,
it is uncertain
as to whether the
planned attempt
to negotiate will result
in the desired outcome.
It is therefore necessary to
consider the macroeconomic
effect of the tariff
hike in the
context of
the South
African economy
which may
ultimately have
a ripple effect
on our operations
as our client
consists of,
but are
not limited
to, merchants,
retailers, mobile
phone operators
and account
holders. We
are unable
to quantify
the impact
of the
tariff
hike on our business and results of operations.
Our
ability
to fund
our ATM
network
requires that
we
continue
to have
access to
an
agreement
with
African Bank to provide liquidity to operate our ATM network.
The operational
maintenance
of our
ATM
network,
along with
an increase
in our
consumer
banking
client base,
necessitates
access to large amounts
of cash to stock the
ATMs
and maintain uninterrupted service
levels. In September 2024,
we entered into an
arrangement with African Bank Limited (“African Bank”) and certain cash-in-transit service
providers to fund our ATMs.
Under this
arrangement, African Bank will use its cash resources to fund our ATMs
and it is specifically recorded that the cash in our ATMs
are
African Bank’s
property.
Therefore, as
we have
not utilized
a facility
to obtain
the cash,
and do
not own
or control
the cash
for an
extended period of time, we do not record
cash or cash equivalents and borrowings in our
consolidated statement of financial position.
Cash withdrawn from our ATMs by our EPE customers and other consumers are settled through the interbank settlement system from
the ATM
users bank account to African Bank’s
bank accounts. We pay
African Bank a monthly fee for the service provided which is
calculated based on the cumulative
daily outstanding balance of cash
utilized multiplied by the South
African prime interest rate less
1%. We
are exposed to
the risk of
cash lost while
it is in
our ATMs
(i.e. from theft)
and are required
to repay African
Bank for any
shortages.
We
may not
be able
to extend
the terms
of the
arrangement with
African Bank
and certain
cash-in-transit service
providers to
fund our ATMs
on commercially reasonable
terms or at all. Our
ability to continue the
uninterrupted operation of our
ATM
network
will be adversely
impacted by our
failure to
renew these arrangements,
any adverse change
to the terms
of these arrangements,
or a
significant reduction in the amounts provided under these arrangements. We
may also suffer reputational damage if our service levels
are negatively impacted due to the unavailability of cash.
Our
consumer
microlending
loan
book
and
merchant
lending
book
expose
us
to
credit
risk
and
our
allowance for doubtful finance loans receivable may not be sufficient to absorb future write-offs.
All of our microfinance loans made are for a period of nine months or less and all of our merchant
lending is for a period of less
than
months.
We
have
created
an
allowance
for
doubtful
finance
loans
receivable
related
to
these
books.
When
creating
the
allowance, management considered factors including the period
of the finance loan outstanding,
creditworthiness of the customers and
the past payment
history of the borrower.
We
consider this policy
to be appropriate
as it takes into
account factors such
as historical
bad debts, current
economic trends and
changes in our customer
payment patterns. However,
additional allowances may
be required
should the ability of our customers to make
payments when due deteriorate in the future. A
significant amount of judgment is required
to assess the ultimate recoverability of these microfinance loan receivables.
We may face competition from other
companies that offer innovative
payment technologies and payment
processing,
which
could
result
in
the
loss
of
our
existing
business
and
adversely
impact
our
ability
to
successfully market additional products and services.
Our primary competitors in
the payment processing
market include other independent
processors, as well
as financial institutions,
independent
sales
organizations,
new
digital
and
fintech
entrants
and,
potentially
card
networks.
Many
of
our
competitors
are
companies who
are larger
than we
are and
have greater
financial and
operational resources
than we
have. These
factors may
allow
them to offer better pricing
terms or incentives to customers, which
could result in a loss of our potential
or current customers and/or
force us to lower our prices. Either of these actions could have a significant effect
on our revenues and earnings.
Our
future
success
will
depend
in
part
on
our
ability
to
attract,
integrate,
retain
and
incentivize
key
personnel
and
a
sufficient
number
of
skilled
employees,
particularly
in
the
technical,
sales
and
senior
management areas.
We believe our management team has the right experience
and skills to execute on our strategy. However,
in order to succeed in
our product
development and
marketing efforts,
we may
need to identify
and attract new
qualified technical
and sales personne
l, as
well as motivate and retain our
existing employees. As a result, an
inability to hire and retain such
employees would adversely affect
our ability to
achieve our strategic
goals and maintain
our technological relevance.
We may face difficulty in
assimilating, transitioning
and integrating
newly-hired
personnel or
management of
any future
acquisitions into
our existing
management team,
and this
may
adversely affect
our business. Competitors
may attempt
to recruit
our top
management and
employees. In
order to
attract and retain
personnel in
a competitive
marketplace, we
must provide
competitive pay
packages, including
cash and equity
-based compensation
and
the
volatility
in
our
stock
price
may
from
time
to
time
adversely
affect
our
ability
to
recruit
or retain
employees.
We
do
not
maintain
any
“key
person”
life
insurance
policies.
If
we
fail
to
attract,
integrate,
retain
and
incentivize
key
personnel
and
skilled
employees, our ability to manage and grow our
business could be harmed and our product
development and marketing activities could
be negatively affected.
Cybersecurity breaches and other system disruptions pose a significant threat to business operations.
As a fintech organization reliant on digital infrastructure, we
are highly susceptible to cybersecurity incidents involving sensitive
data
such
as personally
identifiable
information
(“PII”),
payment
card
information
(“PCI”),
and
proprietary
business records.
Our
exposure
includes
the
risk
of data
breaches,
ransomware,
denial-of-service
attacks,
and
unauthorised
system
access.
Although
we
follow the National Institute
of Standards and
Technology (“NIST”) Cybersecurity Framework in our
security controls, evolving cyber
threats
mean
no
system
is
invulnerable.
A
successful
cybersecurity
breach
could
result
in
financial
losses,
regulatory
penalties,
reputational
damage,
operational interruptions,
and legal
consequences. Prolonged
or frequent
breaches or
system disruptions
may
diminish
customer
trust, potentially
leading
customers
to
consider
our
systems
unreliable,
which
could
impact
adoption
and
harm
brand reputation.
Addressing breaches
or system disruptions
can significantly
strain staff
resources and delay
new service launches.
Furthermore, if customers rely on
our products for critical transactions,
a breach could disrupt their
businesses and lead to claims
for
compensation. Even if unsuccessful, this type of claim could be time-consuming
and costly for us to address.
Although certain of our systems
have been designed to reduce
downtime in the event of
outages or catastrophic occurrences, they
remain vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunication
failures, terrorist attacks,
computer viruses, computer denial-of-service attacks and similar events. Some of
our systems are not fully
redundant, and our disaster
recovery planning may not be sufficient for all eventualities.
Protection against fraud is of key
importance to the purchasers and end
users of our solutions. We
incorporate security features,
including encryption
software, biometric
identification and
secure hardware,
into our solutions
to protect
against fraud in
electronic
transactions and to provide for the privacy and integrity of
cardholder data. Our solutions and systems may be vulnerable to
breaches
in security due to
defects in the security mechanisms,
the operating system, applications
or the hardware platform
as well as through
risk introduced
into our
environment through
third party
suppliers, which
the group
relies heavily
on. Security
vulnerabilities could
jeopardize the security of
information transmitted using our solutions.
If the security of our
solutions is compromised, our
reputation
and marketplace acceptance of
our solutions may be
adversely affected, which would cause
our business to
suffer, and we may become
subject to damages claims. We
have not yet experienced any significant security breaches affecting
our business.
Despite
robust
measures,
unforeseen
cyber
incidents
or natural
disasters
could
trigger
lengthy
service
interruptions.
Existing
business interruption insurance may not adequately compensate for losses stemming
from cybersecurity failures.
Defending
our
intellectual
property
rights
or
defending
ourselves
in
infringement
suits
that
may
be
brought against us is expensive and time-consuming and may not be successful.
Litigation to enforce our trademarks or other intellectual property rights or
to protect our trade secrets could result in substantial
costs
and
may
not
be
successful.
Any
loss
of,
or
inability
to
protect,
intellectual
property
in
our
technology
could
diminish
our
competitive
advantage and
also seriously
harm our
business. In
addition,
the laws
of certain
foreign
countries may
not protect
our
intellectual property rights to the same extent as do the laws in countries where we currently have protection. Our means of protecting
our intellectual property rights in countries where we currently have protection, or any other country in which we operate, may not be
adequate to
fully protect
our intellectual
property rights.
Similarly,
if third
parties claim
that we
infringe their
intellectual property
rights, we
may be
required to
incur significant
costs and
devote substantial
resources to
the defense
of such
claims, to
discontinue
using and
selling any
infringing technology
and services,
to expend
resources to
develop non-infringing
technology or
to purchase
licenses or pay royalties
for other technology.
In addition, if we
are unsuccessful in
defending any such third-party
claims, we could
suffer costly judgments and injunctions that
could materially adversely affect our business,
results of operations or financial
condition.
We
may incur
material losses
in connection
with our
movement of
cash through
our infrastructure
in
South Africa.
In our merchant
business we collect
and process large
volumes of cash
from our customers,
assuming the
risk of loss
from the
moment that cash is
deposited into our vaults.
We are then responsible for its
collection and transportation to
processing centers, which
we outsource to various cash-in-transit service providers. These services extend
across all areas of South Africa.
South Africa suffers
from high levels
of crime and
in particular cash-in-transit
heists. We
cannot insure against
certain risks of
loss or theft
of cash from
our delivery and
collection vehicles, and
we will therefore
bear the full
cost of certain
uninsured losses
or
theft in connection with
the cash handling process
Such losses could materially
and adversely affect our financial
condition, cash flows
and results
of operations.
We
have not
incurred any
material losses
resulting from
cash distribution
in recent
years, but
there is
no
assurance that we will not incur any such material losses in the future.
We depend upon third-party suppliers, making us vulnerable to supply shortages and price fluctuations,
which could harm our business.
We
obtain our
smart cards,
ATMs,
electronic payment
and POS
devices, components
for our
vaults, components
to repair
the
ISV (independent
software vendor)
division’s
POS hardware, and
the other hardware
we use in
our business from
a limited number
of suppliers, and
do not manufacture
this equipment ourselves.
We generally do not have
long-term agreements with
our manufacturers
or component suppliers.
If our suppliers
become unwilling or
unable to provide
us with adequate
supplies of parts
or products when
we need them,
or if they
increase their prices,
we may not
be able to
find alternative
sources in a
timely manner
and could be
faced
with a critical shortage. This
could harm our ability to meet customer
demand and cause our revenues
to decline. Even if we are
able
to secure alternative sources in a timely manner,
our costs could increase as a result of supply or geopolitical shocks, which
may lead
to an
increase in
the prices
of goods
and services
from third
parties. A
supply interruption,
such as
the previous
global shortage
of
semiconductors, or
an increase
in demand
beyond current
suppliers’ capabilities
could harm
our ability
to distribute
our equipment
and thus to
acquire new customers
who use our
technology. Any
interruption in the
supply of the
hardware necessary to
operate our
technology, or our inability to obtain substitute equipment at acceptable prices in a
timely manner, could impair our ability to meet the
demand of our customers, which would have an adverse effect on
our business.
Our EasyPay Insurance business exposes us to risks typically experienced by life assurance companies.
EasyPay Insurance Limited (“EasyPay Insurance”)
is a life insurance company and exposes us to risks typically
experienced by
life assurance companies.
Some of these
risks include the
extent to which
we are able
to continue to
reinsure our risks
at acceptable
costs, reinsurer
counterparty risk,
maintaining regulatory
capital adequacy,
solvency and
liquidity requirements,
our ability
to price
our insurance
products appropriately,
the risk
that actual
claims experience
may exceed
our estimates,
the ability
to recover
policy
premiums from our customers and the
competitiveness of the South African insurance
market. If we are
unable to maintain our desired
level of reinsurance
at prices that
we consider acceptable,
we would have
to either accept an
increase in our
risk exposure or
reduce
our insurance writings. If our reinsurers are unable to meet their commitments to us in a timely manner, or at all, we may be unable to
discharge our
obligations under our
insurance contracts. As
such, we are
exposed to counterparty
risk, including credit
risk, of these
reinsurers.
Our
product
pricing
includes
long-term
assumptions
regarding
investment
returns,
mortality,
morbidity,
persistency
and
operating
costs
and
expenses
of
the
business.
Using
the
wrong
assumptions
to
price
our
insurance
products
could
materially
and
adversely affect our financial
position, results of
operations and cash flows.
If our actual
claims experience is
higher than our
estimates,
our financial position, results of
operations and cash flows could be
adversely affected. Finally,
the South African insurance industry
is
highly
competitive.
Many
of
our
competitors
are
well-established,
represented
nationally
and
market
similar
products
and
we
therefore may not be able to effectively penetrate the South
African insurance market.
Risks Relating to Operating in South Africa and Other Foreign Markets
Operating in
Southern and East
Africa, both
emerging markets, subjects
us to
greater risks than
those
we would face if we operated in more developed markets.
Emerging markets such as
Southern Africa are subject
to greater risks
than more developed markets.
While we focus
our business
primarily
on
emerging
markets
because
that
is
where
we
perceive
the
greatest
opportunities
to
market
our
products
and
services
successfully, the
political, economic and market conditions
in these markets present risks that
could make it more difficult
to operate
our business successfully.
Some of these risks include:
•
Political, legal and economic instability,
including higher rates of inflation and currency fluctuations;
•
High levels of corruption, including bribery of public officials;
•
Loss due to civil strife, acts of war or terrorism, guerrilla activities and insurrection;
•
A
lack
of
well-developed
legal
systems
which
could
make
it
difficult
for
us
to
enforce
our
intellectual
property
and
contractual rights;
•
Logistical, utilities (including electricity and water supply) and communications
challenges;
•
Potential
adverse
changes
in
laws
and
regulatory
practices,
including
import
and
export
license
requirements
and
restrictions, tariffs, legal structures and tax laws;
•
Difficulties in staffing and managing operations
and ensuring the safety of our employees;
•
Restrictions on the right to convert or repatriate currency or export assets;
•
Greater risk of uncollectible accounts and longer collection cycles;
•
Indigenization and empowerment programs;
•
Exposure to liability under the UK Bribery Act; and
•
Exposure to
liability under
U.S. securities
and foreign
trade laws,
including the
Foreign Corrupt
Practices Act,
or FCPA,
and regulations established by the U.S. Department of Treasury’s
Office of Foreign Assets Control, or OFAC.
If
we
do
not
achieve
applicable
Broad-Based
Black
Economic
Empowerment
objectives in
our
South
African businesses, we
may be subject
to fines and
we risk losing
our government and/or
private contracts.
In addition,
it is
possible that
we may
be required
to increase
the Black
shareholding of
our company
in a
manner that
could dilute
your ownership
and/or change
the companies
from which
we purchase
goods or
procure services (to companies with a better BEE Status Level).
The legislative framework for the promotion of Broad-Based Black Economic Empowerment (“BEE”) in South Africa has been
established through
the Broad-Based
Black Economic
Empowerment
Act, No.
53 of
2003, as
amended from
time to
time, and
the
Amended
BEE
Codes
of
Good
Practice,
2013,
or
BEE
Codes,
and
any
sector-specific
codes
of
good
practice,
or
Sector
Codes,
published pursuant
thereto. Sector
Codes are
fully binding
between and
among businesses
operating in
a sector
for which
a Sector
Code has been
published. Achievement
of BEE objectives
is measured by
a scorecard which
establishes a weighting
for the various
elements. Scorecards
are independently
reviewed by
accredited BEE
verification agencies
which issue
a verification
certificate that
presents an
entity’s
BEE Status
Level. This
BEE verification
process must
be conducted
on an
annual basis,
and the
resultant BEE
verification certificate is only valid for a
period of 12 months from
the date of issue. Under
our consolidated scorecard, which includes
all South African businesses, we currently hold a BEE Status Level 2.
Two
of our
South African
businesses, being
EasyPay Financial
Services (Pty)
Ltd (“EP
FS”) and
EasyPay Insurance
Limited,
are
subject
to
the
Amended
Financial
Sector
Code,
or
the
FS
Sector
Code,
and
all
other
businesses
are
consolidated
under
the
Department
of Trade
and Industry
(DTI)
Generic
Codes. The
FS Sector
Code have
been amended
and aligned
with the
new BEE
Codes and
were promulgated
in December
2017. Licensing
and/or regulatory
authorities overseeing
these South African
businesses
may set minimum adherence
requirements to BEE
standards as a
condition for an
operating license to
trade. The minimum
requirement
under the Financial Sector
Code is Level 8. We
currently have a BEE
Status Level 5 for
EP FS and BEE Status
Level 4 for EasyPay
Insurance.
The BEE scorecard includes
a component relating to management
control, which serves to determine
the participation of Black
people in the board, as
well as at various
levels of management within a
measured entity (including, inter alia,
Executive Management,
Senior Management,
Middle Management
and Junior
Management). The
BEE Codes
and/or Sector
Codes define
the terms
"Senior
Management", "Middle
Management" and
"Junior Management"
as those occupational
categories as determined
in accordance
with
the
Employment
Equity
Regulations,
with
specific
emphasis
on
improving
participation
in
proportion
to
the
demographics
of
the
Economically
Active
Population
of
South
Africa,
as published
by
Statistics South
Africa,
from
time
to
time.
Employment
Equity
legislation seeks to
drive the alignment
of the workforce
with the racial
composition of the
economically active population
of South
Africa
and
accelerate
the
achievement
of
employment
equity
targets,
introducing
monetary
fines
for
non-compliance
with
the
Employment Equity legislation and misrepresented submissions. Annexure EEA9 to the Employment
Equity Regulations sets out the
various occupational levels which are determined in accordance with the relevant grading systems applied by the measured entity and
referred to in said Annexure.
During fiscal 2025, we made cash contributions to 36 community-based organizations and enterprises to enable them to
promote
growth
and strengthen
their capacity
to develop
innovative platforms
or provide
services to
the markets
they
serve. We
were also
involved in disaster relief efforts for 275 families who were affected by disasters such as
floods, cyclones and fires. We also advanced
digital transformation in over 80 high schools by donating over 3,800 mobile devices. On November 14,
2024, our shareholders voted
on and approved the funding and issuance of 2,490,000 shares
of our common stock to the Lesaka ESOP
Trust. The Lesaka Employee
Share Ownership
Plan (“ESOP”)
is designed
to create
alignment with
our long-term
growth objectives.
The Lesaka
ESOP Trust
is
also expected to advance our transformation initiatives and plays an important
role in improving our BEE Status Level.
However, it
is possible that these
and other actions
may not be sufficient
to enable us to
achieve the applicable
BEE objectives
set out for specific financial years. In that event, in order to maintain competitiveness in the South African marketplace, we may have
to seek to
increase compliance through other means,
including by selling or
placing additional shares
of Lesaka or
of our South African
subsidiaries to Black
South Africans (either directly
or indirectly), over
and above what has already
been approved, and/or
changing
to suppliers that
have higher BEE Status
Levels. Such sales
or placements of
shares could have a
dilutive impact on
your ownership
interest, which could cause the market price of our stock to decline.
We expect
that our BEE Status Level
will be important in order
for us to remain
competitive in the South
African marketplace.
We continually seek
ways to improve our BEE Status Level, especially the ownership (so-called “equity”) and procurement elements
thereof.
We
may not be
able to effectively
and efficiently
manage the disruption
to our operations
as a result
of
erratic electricity supply in
South Africa, which could
adversely affect our, financial position, cash flows
and
future growth.
Our businesses in
South Africa are
dependent on electricity
generated and supplied
by the state-owned
utility,
Eskom, in order
to operate, and,
in recent years, Eskom
has been unable to
consistently generate and
supply the amount of
electricity required by
the
South
African
economy
which
has
resulted
in
significant
and
often
unpredictable
electricity
supply
disruptions.
Eskom
has
implemented
a number
of short-
and
long-term
mitigation
plans
to
correct
these
issues, but
supply
disruptions
continued
to occur
regularly and with no predictability, although consistency of electricity supply has improved significantly since April 2024. As part of
our
business continuity
programs, we
have
installed back-up
diesel generators
in order
for
us to
continue
to operate
our
core data
processing
facilities
in
the
event
of
intermittent
disruptions
to
our
electricity
supply.
We
have
to
perform
regular
monitoring
and
maintenance of these
generators and also
source and manage
diesel fuel levels.
We
may also be
required to replace
these generators
on a more frequent basis due to the additional burden placed on them.
Our results of operations, financial position, cash flows
and future growth could be adversely affected if Eskom is
unable to raise
sufficient funding to operate
and/or commission new electricity-generating
power stations in accordance with its
plans, or at all, or if
we are unable to effectively and efficiently test, maintain,
source fuel for, and replace, our generators.
Fluctuations in
the value
of the
South African
rand have
had, and
will continue
to have,
a significant
impact
on
our
reported
results
of
operations,
which
may
make
it
difficult
to
evaluate
our
business
performance between reporting periods and may also adversely affect our stock price.
The South
African rand,
or ZAR,
is the
primary operating
currency for
our business
operations while
our financial
results are
reported in U.S. dollars. Therefore, any depreciation in
the ZAR against the U.S. dollar, would negatively impact
our reported revenue
and net
income. The
U.S. dollar/ZAR
exchange rate
has historically
been volatile
and we
expect this
volatility to
continue (refer
to
Item
7 - “Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations-Currency
Exchange
Rate
Information.”).
Due
to
the
significant
fluctuation
in
the
value
of
the
ZAR
and
its
impact
on
our
reported
results,
you
may
find
it
difficult to
compare our results
of operations between
financial reporting periods
even though we
provide supplemental information
about our
results of
operations determined
on a
ZAR basis.
Similarly,
depreciation in
the ZAR
may negatively
impact the
prices at
which our stock trades.
We generally do not engage in any currency hedging
transactions intended to reduce the
effect of fluctuations in foreign currency
exchange rates on our results of
operations, other than economic hedging
using forward contracts relating to
our inventory purchases
which are settled in U.S.
dollars or euros. We
cannot guarantee that we will
enter into hedging transactions
in the future or,
if we do,
that these transactions will successfully protect us against currency fluctuations.
South Africa’s
high levels of
poverty, unemployment
and crime may
increase our costs
and impair our
ability to maintain a qualified workforce.
While South Africa has a highly developed financial and legal infrastructure, it also has high levels of crime and unemployment,
relative to peer
countries in Africa
and other emerging
economies, and there
are significant differences
in the level
of economic and
social development among its people,
with large parts of the population,
particularly in rural areas, having limited
access to adequate
education, healthcare, housing and other
basic services, including water
and electricity. In addition, South Africa has
a high prevalence
of
HIV/AIDS
and
tuberculosis,
the
impact
of
which
may
be
exacerbated
in
the
short-term
by
the
discontinuation
of
the
U.S.
government’s funding of certain HIV/AIDS
research and outreach programs.
Government policies
aimed at
alleviating and
redressing the
disadvantages suffered
by the majority
of citizens
under previous
governments may
increase our
costs and
reduce our
profitability,
all of
which could
negatively affect
our business.
These problems
may prompt
emigration of
skilled workers,
hinder investment
into South
Africa and
impede economic
growth. As
a result,
we may
have difficulties attracting and retaining qualified employees
.
The
economy
of
South
Africa
is
exposed
to
high
rates
of
inflation,
interest
and
corporate
tax,
which
could
increase
our
operating
costs
and
thereby
reduce
our
profitability.
Furthermore,
the
South
African
government requires additional
income to fund
future government
expenditures and may
be required,
among
other things, to
increase existing income
tax rates, including
the corporate income tax
rate, amend existing
tax legislation or introduce additional taxes.
The economy of
South Africa in the
past has been, and
in the future may
continue to be, characterized
by rates of inflation
and
interest that
are substantially
higher than
those prevailing
in the United
States and
other highly-developed
economies. High
rates of
inflation could increase our South African-based costs and decrease our operating margins. High interest rates increase the cost of our
debt financing, though conversely, they also
increase the amount
of income we
earn on any
cash balances. The
South African corporate
income tax rate, of 27%, is higher than the
U.S. federal income tax rate, of 21%. Any increase
in the effective South African corporate
income tax rate would adversely impact our profitability and cash flow generation.
Risks Relating to Government Regulation
We
are required to
comply with
certain laws
and regulations, including
economic and trade
sanctions,
which could adversely impact our future growth.
We
are
subject
to U.S.
and
other
trade
controls,
economic sanctions
and
similar
laws and
regulations,
including
those in
the
jurisdictions
where
we
operate.
Our
failure
to
comply
with
these
laws
and
regulations
could
subject
us
to
civil,
criminal
and
administrative
penalties
and
harm
our
reputation.
These
laws and
regulations
place
restrictions
on
our
operations,
trade
practices,
partners
and
investment
decisions.
In particular,
our operations
are subject
to U.S.
and
foreign
trade
control laws
and
regulations,
including various export controls and economic sanctions programs, such as those administered by OFAC. We monitor compliance in
accordance with
the 10
principles as
set out
in the
United Nations
Global Compact
Principles, the
Organisation
for Economic
Co-
operation and
Development recommendations
relating to
corruption, and
the International
Labor Organization
Protocol in
terms of
certain of the items to be
monitored. As a result of doing business
in foreign countries and with foreign
partners, we are exposed to a
heightened risk of violating trade control laws as well as sanctions regulations.
Violations
of
trade
control
laws and
sanctions
regulations
are
punishable
by civil
penalties,
including
fines,
denial
of export
privileges,
injunctions,
asset seizures,
debarment
from
government
contracts
and revocations
or restrictions
of licenses,
as
well
as
criminal fines and imprisonment.
We have
developed policies and procedures as
part of a company-wide compliance
program that is
designed to
assist our compliance
with applicable
U.S. and international
trade control laws
and regulations,
including trade controls
and sanctions programs administered
by OFAC,
and provide regular training
to our employees to create awareness
about the risks of
violations of trade
control laws and
sanctions regulations and
to ensure compliance
with these laws
and regulations.
However, there
can be no assurance that all of our employees, consultants,
partners, agents or other associated persons will not act in violation
of our
policies and these laws and regulations, or that our policies and
procedures will effectively prevent us from violating these regulations
in every transaction
in which we
may engage, or
provide a defense
to any alleged
violation. In particular,
we may be
held liable for
the actions that our
local, strategic or joint venture
partners take inside or outside
of the United States, even
though our partners may
not be
subject to
these laws.
Such a
violation, even
if our
policies prohibit
it, could
materially and
adversely affect
our reputation,
business,
results
of
operations
and
financial
condition.
Any
expansion
into
developing
countries,
and
our
development
of
new
partnerships and joint venture relationships, could increase the risk
of OFAC violations in the
future.
In addition,
our payment
processing and
financial services
activities are
subject to
extensive regulation.
Compliance with
the
requirements under the various
regulatory regimes may cause
us to incur significant
additional costs and failure
to comply with such
requirements could result in the shutdown of
the non-complying facility, the imposition of liens, fines and/or civil or
criminal liability.
We
are
required
to
comply
with
anti-corruption
laws
and
regulations,
including
the
FCPA
and
UK
Bribery Act, in the
jurisdictions in which we
operate our business, which could
adversely impact our future
growth.
The FCPA prohibits
us from providing anything of value to foreign
officials for the purposes of obtaining or retaining business,
or
securing
any
improper
business
advantage,
and
requires
us
to
keep
books
and
records
that
accurately
and
fairly
reflect
our
transactions.
As part
of
our
business,
we
may
deal
with
state-owned
business
enterprises,
the
employees
of
which
are
considered
foreign
officials
for
purposes of
the FCPA.
The UK
Bribery
Act includes
provisions
that extend
beyond bribery
of foreign
public
officials and also apply to
transactions with individuals not employed
by a government and
the act is also
more onerous than the FCPA
in a number of other respects, including
jurisdiction, non-exemption of facilitation
payments and penalties. Some of the international
locations in which we operate or have investments lack a developed
legal system and have higher than normal levels of corruption.
Any
failure
by
us
to
adopt
appropriate
compliance
procedures
and
ensure
that
our
employees,
agents
and
business
partners
comply with
the anti-corruption
laws and
regulations could
subject us
to substantial
penalties, and
the requirement
that we
comply
with these laws could
put us at a
competitive disadvantage against
companies that are not
required to comply.
For example, in many
emerging
markets,
there
may be
significant
levels
of official
corruption,
and
thus, bribery
of public
officials
may
be
a comm
only
accepted cost
of doing
business. Our
refusal to
engage in
illegal behavior,
such as
paying bribes,
may result
in us not
being able
to
obtain business that we
might otherwise have been able
to secure or possibly
even result in unlawful,
selective or arbitrary action being
taken against us.
Violations of anti-corruption laws and regulations are punishable by civil penalties, including fines, as well as criminal fines and
imprisonment. We
have developed policies
and procedures as part
of a company-wide
compliance program that
is designed to assist
our compliance with applicable U.S.,
South African and other international
anti-corruption laws and regulations,
and provide regular
training to our
employees to comply
with these laws
and regulations. However,
there can be
no assurance that
all of our
employees,
consultants, partners, agents or other associated persons will not take actions in violation of our policies or
these laws and regulations,
or that our
policies and procedures
will effectively prevent
us from violating
these regulations in every
transaction in which
we may
engage, or
provide a defense
to any alleged
violation. In
particular,
we may be
held liable for
the actions
that our
local, strategic
or
joint venture
partners take inside
or outside
of the United
States, even though
our partners may
not be subject
to these
laws. Such a
violation,
even
if
our
policies
prohibit
it,
could
materially
and
adversely
affect
our
reputation,
business,
results
of
operations
and
financial condition.
We
do not
have a South
African banking license
and, therefore, we
provide our EPE
solution through
an arrangement with
a third-party bank,
which limits our
control over this
business and the
economic benefit
we derive from it.
If this arrangement were
to terminate, we would
not be able to operate
our EPE business
without alternate means
of access to
a banking license.
We are also required to comply
with the requirements
of payment schemes,
including VISA and
Mastercard. Furthermore, we
provide certain of
our services under
partnerships
with
South
African
banks.
We
will
be
unable
to
provide
our
payments
and
card-acquiring
businesses if we fail
to comply with payment
scheme rules, and/or fail
to maintain certain regulatory
licenses
and registrations, and/ or if
we were unable to
continue to partner with
South African banks to
provide our
payments and card acquiring services.
The
South
African
retail
banking
market
is
highly
regulated.
Under
current
law
and
regulations,
our
EasyPay
Everywhere
(“EPE”) business activities require
us to be registered as
a bank in South Africa
or to have access to an
existing banking license.
We
are not currently so registered, but we have an
agreement with African Bank Limited, that enables us
to implement our EPE program
in compliance with the
relevant laws and regulations.
If this agreement were
to be terminated, we
would not be able
to operate these
services unless we were able to obtain access to a banking license
through alternate means. Furthermore, we have to comply
with the
South
African
Financial
Intelligence
Centre Act,
and money
laundering and
terrorist financing
control
regulations,
when
we
open new
bank accounts
for our
customers and
when they
transact.
Failure to
effectively
implement
and monitor
responses
to the
legislation and regulations may result in significant fines or prosecution of
African Bank and ourselves.
The South African Financial Advisory and Intermediary Services Act, 2002, requires persons who act as intermediaries between
financial product suppliers and consumers in South Africa to register as financial service providers. EasyPay Insurance was granted
a
Financial Service Provider (“FSP”) license
on June 9, 2015, and
EP FS was
granted a FSP license
on July 11, 2017. If
our FSP licenses
are withdrawn or suspended, we may be stopped from continuing our financial services businesses in South Africa unless we are able
to enter into a representative arrangement with a third party
FSP.
Furthermore, the
proposed Conduct
of Financial
Institutions (“COFI”)
Bill will
overhaul the
current regulatory
and legislative
framework by replacing
the rules-based approach
with an
outcomes-driven and principles-based
model, and the
adoption of
an activity-
based licensing regime. It will establish a uniform legislative framework to regulate the conduct of all financial institutions across the
financial services
sector.
While the
framework will
make significant
changes, including
the conversion
of existing
licences through
transitional
arrangements
and
new
activities
requiring
licensing,
it
is
likely
to
increase
operational
costs
to
meet
regulatory
expectations. The final draft
of the COFI
Bill is expected to
be tabled before Parliament
late 2025 or
early 2026 for approval.
However,
contingencies are in place to
ensure smooth transition should the
COFI Bill face further
delays which will include formal
consultations
and the phased introduction of the new legislative framework.
We
are required
to comply
with the
requirements of
payment schemes,
including VISA
and Mastercard.
We
have deployed
a
significant number of devices, and any
mandatory compliance upgrades to our deployed POS
devices would require significant capital
expenditures and/or be
disruptive to our
customer base. Failure
to comply with
the payment schemes’
rules may result
in significant
fines and/or a loss of license to participate in the scheme(s).
We provide card acquiring services
to our customers
by partnering with
Nedbank Limited and
ABSA Bank Limited,
and payment
processing services
in partnership
with the
largest banks
in South
Africa. If
these agreements
were to
be terminated,
Adumo would
not be able to operate
its payment services unless it
were able to obtain
alternative card acquiring or
payment processing agreements
with other partners
or obtain a
direct designation license
with the schemes
and regulatory bodies.
In addition, if
we were to
lose our
Payment Association of South Africa (“PASA
”) registrations or fail to have them renewed, it would be
unable to operate its payment
services.
Compliance with the requirements under these various regulatory regimes may
cause us to incur significant additional costs and
failure to
comply with
such requirements
could result
in the
shutdown of
the non-complying
facility,
the imposition
of liens,
fines
and/or civil or criminal liability.
Proposed regulatory changes to the national payments system are
expected to have a substantial impact
on the South African payments industry. It may change the manner
in which we conduct business and likely
lead to increased operating
costs for our business
as we work
to ensure compliance with
the new legislative
and regulatory framework, which may have a material adverse effect on our business.
On March
3, 2025,
the South
African Reserve
Bank (“SARB”)
published
certain draft
regulatory documents
for commentary
that
are
expected
to have
a substantial
impact
on how
we conduct
our
business namely:
(i)
a draft
directive
entitled
“Directive
in
respect
of specific
payment
activities within
the
national
payment
system”
(the “Directive”);
(ii) a
draft
exemption
notice
entitled
“Designation by the
Prudential Authority of
specific activities conducted
in the national
payment system which
shall be deemed
not
to constitute
‘the business
of a
bank’ under
paragraph (cc)
in section
1(1) of
the Banks
Act, 1990”
(the “Exemption
Notice”); and
(iii) the National
Payment System
Bill (“NPS
Bill”), which
seeks to
replace the
existing National
Payment System
Act, 1998.
The
proposed regulations
were made
available for
comment, and
we submitted
detailed comments
to our
industry body,
Association of
South African Payment Providers, on the proposed regulations.
The key objectives of the proposed regulations are to
clarify the mandate and objectives of the
SARB with respect to the national
payment
system
(“NPS”);
and
establish
a
robust
regulatory,
oversight,
and
supervisory
framework
for
the
NPS.
The
proposed
regulations also aim
to promote financial
inclusion, competition, the
prevention of financial
crime, and the
fair treatment and
protection
of
customers,
while introducing
an activity-based
licensing and
authorization
regime. In
this regard,
the Directive
defines
thirteen
“payment
activities”
and
provides
that
a
person,
which
can
be
a
bank
or
a
non-bank,
providing
a
“payment
activity"
must
obtain
authorisation from the
SARB to undertake
such activity.
Under the Exemption
Notice, certain payment
activities are exempted
from
the definition of ‘the business of a bank’. Prior to the
Exemption Notice, these activities could only be undertaken by a bank. Pursuant
to the
Exemption Notice,
these activities
can be
undertaken by
non-banks, subject
to certain
conditions. Certain
of our
businesses,
including EasyPay Everywhere,
Adumo and Kazang Pay,
currently undertake activities which
would qualify as “payment
activities”
under the
Directive and
the NPS Bill.
Under the
current regulatory
framework, these
activities are
undertaken in
partnership with
a
sponsoring bank and the sponsoring bank is
subject to regulation by the SARB.
In other words, the business undertaking the “payment
activity” is not subject to direct regulation with respect to such payment activities.
It is
uncertain if
and when
the proposed
regulations will
enter into
effect and
whether a
non-bank such
as the
relevant Lesaka
subsidiary
may
elect
whether
to
conduct
an exempted
payment
activity
by
partnering
with
a
bank
to
do so,
or on
its own,
if
it
is
authorised by the
SARB -
i.e. whether both
options will
be available
to a
non-bank. Should
our businesses
be subject to
direct regulation
under this new regime (i.e., if our current sponsorship model
is no longer available), we expect that we
will incur significant operating
costs to comply
with the new
requirements, and
to obtain
authorization with
respect thereto. Furthermore,
while some requirements
may already exist under
other current regulatory frameworks
for certain of our
businesses, we will likely
need to invest in additional
resources, systems and processes to
satisfy the regulatory requirements contemplated in the
proposed regulations, which may also lead
to increased operational costs, which may have a material adverse effect
on our business.
We
may
be
subject
to
regulations
regarding
privacy,
data
use
and/or
security,
which
could
adversely
affect our business.
We are
subject to regulations in
a number of the countries
in which we operate
relating to the processing
(which includes,
inter
alia
, the collection, use, retention, security and transfer) of
personal information about the people (whether natural or juristic)
who use
our products
and services.
The interpretation
and application
of user
data protection
laws are
in a
state of
flux. These
laws may
be
interpreted
and
applied
inconsistently
from
country
to
country
and
our
current
data
protection
policies
and
practices
may
not
be
consistent with those interpretations and applications. Complying
with these varying requirements could cause us to incur
substantial
costs or
require us
to change
our business
practices in
a manner
adverse to
our business.
Any failure,
or perceived
failure, by
us to
comply with any regulatory requirements or international
privacy or consumer protection-related laws and regulations could
result in
proceedings
or
actions
against
us
by
governmental
entities
or
others,
subject
us
to
significant
penalties
and
negative
publicity.
In
addition, as
noted above,
we are
subject to
the possibility
of security
breaches, which
themselves may
result in
a violation
of these
laws.
Amendments to
the NCA
were signed into
law in
South Africa
in August 2019.
Compliance with
these
amendments may adversely impact our micro-lending operations in South Africa.
In August 2019, the National Credit Amendment Bill, or debt-relief bill, was signed into law in South Africa.
The effective date
of the debt-relief
bill has not
yet been announced
and has been
significantly delayed.
We
believe that the
debt-relief bill will
restrict
the ability of financial services providers to provide lending
products to certain low-income earners and will increase the
cost of credit
to
these
consumers.
As a
result,
compliance
with
the debt
-relief
bill
may
adversely
impact
our
micro-lending
operations
in
South
Africa. Furthermore, we expect that it will take us, and other credit providers, some time to fully understand, interpret and
implement
this new legislation
in our lending processes
and practices. Non-compliance
with the provisions of
this new legislation may
result in
financial loss and penalties, reputational loss or other administrative punishment.
Risks Relating to our Common Stock
Our stock price has been and may continue to be volatile.
Our stock price has periodically experienced significant volatility. During the 2025 fiscal
year, our stock price ranged from a low
of $3.39 to a high of $5.60. We
expect that the trading price of our common stock may
continue to be volatile as a result of a number
of factors, including, but not limited to the following:
•
Any adverse developments in litigation or regulatory actions in which we are
involved;
•
Fluctuations in currency exchange rates, particularly the U.S. dollar/ZAR exchange
rate;
•
Announcement
of
additional
BEE
transactions,
especially
one
involving
the
issuance
or
potential
issuance
of
equity
securities or dilution or sale of our existing business in South Africa;
•
Quarterly variations in our operating results;
•
Significant fair value adjustments or impairment in respect of investments
or intangible assets;
•
Announcements of acquisitions or disposals;
•
The timing of, or delays in the commencement, implementation or completion
of major projects;
•
Large purchases or sales of our common stock; and
•
General conditions in the markets in which we operate.
Additionally,
shares of
our common
stock can
be expected
to be
subject to
volatility resulting
from purely
market forces
over
which we have no control.
The put
right we granted
to the IFC
Investors on the
occurrence of certain
triggering events may
have
adverse impacts on us.
In May 2016, we issued an aggregate of 9,984,311 shares of our common stock to the IFC Investors. Certain IFC Investors were
also investors in Adumo and on October 1, 2024, we issued an aggregate of 1,989,162 additional shares of our common stock to these
IFC Investors pursuant to the
Adumo transaction agreement. As of
June 30, 2025, the
IFC Investors held 9,356,028
shares. We granted
the IFC Investors certain rights, including the
right to require us to
repurchase any share held by the
IFC Investors pursuant to the May
2016 and
October 2024
transactions upon
the occurrence
of specified
triggering events,
which we
refer to
as a
“put right.”
The put
price per
share will
be the
higher of
the price
per share
paid to
us by
the IFC
Investors and
the volume-weighted
average price
per
share prevailing for the 60 trading days preceding the triggering event, except
that with respect to a put right triggered by rejection of
a bona
fide offer,
the put
price per
share will
be the
highest price
offered
by the
offeror.
If a
put triggering
event occurs,
it could
adversely impact
our liquidity
and capital
resources. In
addition, the
existence of
the put
right could
also affect
whether or
on what
terms a
third
party
might
in the
future
offer
to purchase
our
company.
Our response
to any
such offer
could also
be complicated,
delayed or otherwise influenced
by the existence of the put right.
Approximately
31%
of
our
outstanding
common
stock
is
owned by
two shareholders.
The
interests of
these shareholders may conflict with those of our other shareholders.
There is a concentration
of ownership of our
outstanding common stock because
approximately 31% of our
outstanding common stock
is owned by two shareholders. Based
on their most recent SEC filings
disclosing ownership of our shares, Value Capital Partners (Pty)
Ltd, or VCP, and IFC Investors, beneficially own approximately 19% and 12% of our outstanding common stock as of June 30, 2025,
respectively.
The interests of
VCP and the
IFC Investors may
be different
from or conflict
with the interests
of our other
shareholders. As a
result of
the significant
combined ownership
by VCP
and the
IFC Investors,
they may
be able,
if they
act together,
to significantly
influence the
voting outcome
of all
matters requiring
shareholder approval.
This concentration
of ownership
may have
the effect
of
delaying or preventing
a change of control of
our company,
thus depriving shareholders
of a premium for
their shares, or facilitating
a change of control that other shareholders may oppose.
We may seek to raise
additional financing by
issuing new securities
with terms or
rights superior to
those
of shares of our common stock, which could adversely affect the market price of such shares.
We
may require
additional financing
to fund future
operations, including
expansion in
current and new
markets, programming
development and acquisition,
capital costs and
the costs of any
necessary implementation of
technological innovations or
alternative
technologies, or to fund acquisitions. We may also wish to raise additional equity funding to
reduce the amount of debt funding on our
balance sheet. Because of the exposure to market risks associated
with economies in emerging markets, we may not
be able to obtain
financing on favorable terms or at all.
If we raise additional funds by
issuing equity securities, the percentage ownership of our
current
shareholders will be reduced, and the holders of the new equity securities may have rights superior to those of the holders of shares of
common stock,
which could
adversely affect
the market
price and
voting power
of shares
of common
stock. If
we raise
additional
funds by issuing debt securities, the holders of these debt securities would similarly have some rights senior
to those of the holders of
shares of common stock, and the terms of these debt securities could impose restrictions on operations and
create a significant interest
expense for us.
Issuances
of significant
amounts of
stock in
the future
could potentially
dilute
your equity
ownership
and adversely affect the price of our common stock.
We
believe that
it is necessary
to maintain
a sufficient
number of
available authorized
shares of our
common stock
in order
to
provide
us
with
the flexibility
to
issue shares
for
business
purposes
that
may
arise
from time
to
time.
For example,
we
could
sell
additional shares to raise
capital to fund our
operations, to reduce debt
or to acquire other
businesses, issue shares in
a BEE transaction,
issue additional shares under our stock incentive plan or declare a stock dividend. Our board may authorize
the issuance of additional
shares of common stock without notice to, or further
action by, our shareholders, unless shareholder approval is required by law or the
rules of the NASDAQ Stock
Market. The issuance of additional
shares could dilute the equity
ownership of our current shareholders
and any such additional shares would likely be freely tradable, which could
adversely affect the trading price of our common
stock.
We
have
identified
material
weaknesses
in
our
internal
control
over financial
reporting
which, if
not
timely
remediated,
may
adversely
affect
the
accuracy
and
reliability
of
our
financial
statements,
and
our
reputation, business and stock price, as well as lead to a loss of investor confidence in us.
As described
under Item
9A - “Controls and
Procedures.”, we
concluded that
our disclosure
controls and
procedures were
not
effective
as of
June 30,
2025 and
that we
had, as
of such
date, material
weaknesses in
our internal
control over
financial reporting
related to:
●
Our
Consumer
lending
process,
specifically
insufficient
risk
assessment
and
monitoring
activities
relating
to
changes
in
systems
and
processes,
insufficient
controls
over
internal
information
and
information
from
service
organizations,
and
insufficient
design
and
implementation
of
information
technology
general
controls
(“ITGCs”),
controls
over
service
organizations and process level controls,
resulting in ineffective process level
controls, including a lack of validation
of the
completeness and accuracy of information used within the process;
●
Our payroll process, specifically
insufficient risk assessment
and monitoring activities relating
to changes over the
transfer
of
ownership
to
the
centralized
payroll
processes,
insufficient
controls
over
information
from
service
organizations,
and
insufficient design and implementation of ITGCs, controls over service organizations and process level controls resulting in
ineffective process level controls including a lack of validation of
the completeness and accuracy of information used within
this process;
●
Our
annual
goodwill
impairment
process,
specifically
related
to
insufficient
risk
assessment
and
ineffective
design
and
implementation of controls resulting in ineffective process level
controls;
●
Our business
combination process,
specifically insufficient
risk assessment
and ineffective
design and
implementation of
controls
over the
purchase price
allocation of
the Adumo
and Recharger
acquisitions including
insufficient
controls over
information resulting in ineffective process level controls including a lack of validation of the completeness and accuracy
of
information used;
●
Our
revenue
recognition
process
relating
to
prepaid
airtime
sold
and
processing
fees
relating
to
certain
agreements,
specifically insufficient risk assessment and ineffective design and implementation of
controls related to our judgement over
revenue recognized either as principal versus as agent resulting in ineffective
process level controls.;
●
Our journal entry process, specifically relating to insufficient risk assessment, and ineffective design and implementation of
controls including
insufficient controls
over information
resulting in
ineffective process
level controls
including a
lack of
validation of the completeness
of the journal entry
population and a lack of
validation of the completeness
and accuracy of
information used within the process; and
●
An insufficient number of experienced and trained resources to execute
on their internal control responsibilities resulting in
ineffective
design, implementation
and operating
effectiveness of
process level
controls for
processes in
the scope
of our
internal control over financial reporting evaluation.
A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting such that there
is
a
reasonable
possibility
that
a
material
misstatement
of
our
annual
or
interim
consolidated
financial
statements
would
not
be
prevented or detected on a timely basis. The material weaknesses identified in Item 9A - “Controls and Procedures.”, did not result in
any
adjustments or
restatements of
our audited
and unaudited
consolidated
financial statements
or disclosures
for any
prior period
previously reported by us.
We
intend to remediate
these material weaknesses.
While we believe
the steps we
take to remediate
these material weaknesses
will improve
the effectiveness
of our
internal
control over
financial
reporting
and will
remediate the
identified deficiencies,
if our
remediation
efforts
are
insufficient
to
address the
material
weakness
or
we identify
additional
material
weaknesses in
our
internal
control over financial reporting in the future, our ability
to analyze, record and report financial information
accurately, to prepare
our
financial statements within
the time periods
specified by the rules
and forms of the
SEC and to otherwise
comply with our
reporting
obligations
under
the federal
securities
laws may
be
adversely
affected.
The occurrence
of,
or failure
to
remediate,
these material
weaknesses and any future material weaknesses in our internal control over financial reporting may adversely affect
the accuracy and
reliability of our financial
statements and have other
consequences that could
materially and adversely affect
our business, including
an
adverse
impact
on
the
market
price
of
our
common
stock,
potential
actions
or
investigations
by
the
SEC
or
other
regulatory
authorities, shareholder lawsuits, a loss of investor confidence and
damage to our reputation.
Failure to maintain effective internal control over financial
reporting in accordance with Section 404
of
the Sarbanes-Oxley Act, especially
over companies that we may
acquire, could have a material
adverse effect
on our business and stock price.
Under
Section
of
Sarbanes,
we
are
required
to
furnish
a
management
certification
and
auditor
attestation
regarding
the
effectiveness of our
internal control over
financial reporting. We
are required to
report, among other things,
control deficiencies that
constitute
a
“material
weakness”
or
changes
in internal
control
that materially
affect,
or are
reasonably
likely to
materially
affect,
internal control over financial reporting.
A “material
weakness” is
a deficiency,
or a
combination of
deficiencies, in
internal control
over financial
reporting such
that
there is a reasonable possibility that
a material misstatement of annual or
interim financial statements will not be
prevented
or detected
on a timely basis.
The
requirement
to
evaluate
and
report
on
our
internal
controls
also
applies
to
companies
that
we
acquire.
Some
of
these
companies,
such as
Adumo
and
Recharger,
may
not be
required
to comply
with
Sarbanes prior
to the
time we
acquire
them.
The
integration of these acquired companies
into our internal control over financial reporting
could require significant time and resources
from our management
and other personnel and
may increase our compliance
costs. If we fail
to successfully integrate
the operations
of these acquired companies into our internal control over financial reporting, our internal control over financial reporting may not be
effective.
While
we
continue
to
dedicate
resources
and
management
time
to
ensuring
that
we
have
effective
controls
over
financial
reporting, failure to
achieve and maintain
an effective internal
control environment could
have a material
adverse effect on
the market’s
perception of our business and our stock price.
The
restatement
of
our
prior
quarterly
financial
statements
may
affect
shareholder
and
investor
confidence in us or harm our reputation, and may subject us to
additional risks and uncertainties, including
increased
costs
and
the
increased
possibility
of
legal
proceedings
and
regulatory
inquiries,
sanctions
or
investigations.
We
identified
material
misstatements
in
the
original
filings
of
our
Quarterly
Report
on
Form
10-Q
for
the
quarters
ended
September 30, 2024, December 31, 2024 and March 31, 2025 (“Original Filings”) and withdrew reliance on these Original
Filings on
September 10,
2025.
We
filed amended
quarterly reports
on September
29, 2025
which include
restatement(s),
refer to
the section
titled “Restatement” in
Note 1 to
the unaudited condensed
consolidated financial statements
in each of
the amended filings
on Form
10-Q/A for the quarters ended September 30, 2024, December 31, 2024 and March 31, 2025, for additional information regarding the
restatement(s).
Management
also
identified
material
weaknesses
in
our
internal
control
over
financial
reporting
specific
to
the
evaluation of information that was known or knowable at the time of the transaction or event included
in the Original Filings, refer to
Item 9A - “Controls and Procedures.”
As a result of the restatement
described above, we have
incurred, and may continue to
incur, unanticipated costs
for accounting
and
legal
fees
in
connection
with,
or
related
to,
such
restatement.
In
addition,
such
restatement
could
subject
us
to
a
number
of
additional risks and uncertainties, including the increased possibility of legal proceedings and inquiries, sanctions or investigations by
the SEC
or other
regulatory authorities.
Any of
the foregoing
may adversely
affect
our reputation,
the accuracy
and timing
of our
financial
reporting,
or
our
business,
results
of
operations,
liquidity
and
financial
condition,
or
cause
shareholders,
investors
and
customers to lose confidence in the accuracy and completeness
of our financial reports or cause the market price of
our common stock
to decline.
You
may experience some difficulties in effecting
service of legal process, enforcing U.S and/or foreign
judgments
or
bringing
original
actions
based
upon
U.S.
laws,
including
federal
securities
laws
or
other
foreign laws, against us or certain of our directors and officers and experts.
While Lesaka is incorporated
in the state of
Florida, United States, substantially
all of the company’s
assets are located outside
the United
States. For
this reason,
the majority
of Lesaka’s
directors and
all its
officers reside
outside of
the United
States and
the
majority of our experts, including our independent registered public accountants,
are based in South Africa.
As a
result, even
though you
could effect
service of
legal process
upon Lesaka,
as a
Florida corporation,
in the
United States,
you may not be able
to collect any judgment obtained
against Lesaka in the United
States, including any judgment based
on the civil
liability provisions of U.S. federal securities laws, because substantially all of
our assets are located outside the United States.
Any legal processes initiating action in the United States against Lesaka's
directors, officers, and experts who are located outside
of the United States, will need to be served on them in that country, in accordance with the procedures prescribed by the relevant U.S.
court. South
Africa is
not a
party to
any treaties
regarding the
enforcement of
foreign commercial
judgments. In
order to
be able
to
enforce a foreign judgment,
it is required for the
South African courts to first
"recognize" the U.S. judgment
- in the absence of
this,
the
foreign
judgment
has no
automatic
extra
territorial
effect.
The foreign
judgment
constitutes a
"cause
of
action" which
may
be
recognized and enforced by South African courts. In order to
achieve this, legal proceedings must be commenced in the
South African
courts.
South Africa
is a party
to the New
York
Convention on
the Recognition
and Enforcement
of Foreign
Arbitral Awards,
and its
International
Arbitration
Act
of
provides
that
foreign
arbitral
awards
must
be
recognised
and
enforced
in
South
Africa.
However, application
must still be made
to the South African
High Court in order
for the award to
be recognised and
enforceable in
South Africa.
Additional,
practical,
considerations
relating
to
the enforcement
of foreign
judgments
and arbitration
awards in
South
Africa
include the following:
●
If a foreign judgment is enforced by a South African court,
the approval of the SARB (or an Authorised Dealer of
SARB) is
required
(i) before
a
defendant
resident
in
South
Africa
may
pay
money
to
a
non-resident
plaintiff;
and
(ii) to
settle
the
judgement in a currency other than South African Rand; and
●
A plaintiff who is not resident
in South Africa may be required
to provide security for costs
when initiating court proceedings
in South Africa (including for the enforcement of foreign judgments and
awards).

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B.
UNRESOLVED
STAFF COMMENTS
None.

---

ITEM 2. PROPERTIES
ITEM 2.
PROPERTIES
We lease our corporate
headquarters facility which consists of approximately 81,000 square feet in Johannesburg,
South Africa.
We
also lease
properties throughout
South Africa,
including 207
financial services
branches, 14
financial service
express stores,
satellite branches
and 14
sites to
support our
integrated POS
software and
hardware to
the hospitality
industry operations.
We
also
lease additional office
space in Johannesburg, Cape
Town and
Durban, South Africa; Gaborone,
Botswana; Windhoek Namibia;
and
Nairobi, Kenya.
These leases
expire at
various dates
through 2030,
assuming the
exercise of
options to
extend. We
believe that
we
have adequate facilities for our current business operations.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3.
LEGAL PROCEEDINGS
Litigation related to CPS
Lesaka SA is
a party to
proceedings in the Constitutional
Court of South Africa
involving its subsidiary, Cash Paymaster
Services
Proprietary Limited
(“CPS”), which is
currently in
liquidation. The objective
of these proceedings
is to procure
an order for
CPS to
pay to SASSA the
profit generated by CPS
pursuant to an agreement
concluded between SASSA and
CPS, following the award
of a
tender to CPS. This arose as a consequence of prior court proceedings which concluded that the tender should not have been awarded
to CPS (for
technical reasons not related
to any conduct
by CPS). Lesaka
SA has been
included in these proceedings
in order to
provide
information relevant to determining the profit so made by CPS.
A hearing was
held in the Constitutional
Court on May
27, 2025 and
we await the ruling
of the Constitutional
Court. While no
formal steps have been taken by CPS or any other party to these proceedings to claim that Lesaka SA should be liable to
SASSA or to
CPS as a
consequence of
the proceedings currently
before the Constitutional
Court, it is
difficult to
anticipate what the
ruling of the
Constitutional Court will be.
General
From time to time, we
are involved in
legal proceedings and litigation
arising in the ordinary
course of business. As of
the date
of this Annual Report on Form 10-K, we are not
a party to any litigation or legal proceeding
or subject to any claim that, in the
current
opinion
of
management,
could
reasonably
be
expected
to
have
a
material
adverse
effect
on
our
financial
position
or
results
of
operations. However, due to the risks and uncertainties inherent in legal proceedings, actual results could differ from current expected
results.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART
II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Market information
Our common stock is listed on The NASDAQ Global Select Market, or Nasdaq, in the United States under
the symbol “LSAK”
and on the JSE in South Africa under the symbol “LSK.” The Nasdaq is
our principal market for the trading of our common stock and
we have a secondary listing on the JSE.
Our transfer
agent in
the United
States is
Computershare Shareowner
Services LLC,
480 Washington
Blvd, Jersey
City,
New
Jersey,
07310. According
to the
records of
our transfer
agent, as
of September
25, 2025, there
were 6
shareholders of
record of
our
common stock.
We
believe that
a substantially
greater number
of beneficial
owners of
our common
stock hold
their shares
though
banks, brokers,
and other financial
institutions (i.e. “street
name”). Our transfer
agent in South
Africa is JSE
Investor Services (Pty)
Ltd, One Exchange Square, 2 Gwen Lane, Sandown, Sandton, 2196, South
Africa.
Dividends
We
have not
paid any
dividends on
shares of our
common stock
during our
last two
fiscal years
and presently
intend to
retain
future earnings to finance the expansion of
the business. We do not anticipate paying any cash dividends in
the foreseeable future. The
future dividend policy will depend on our earnings, capital requirements, debt commitments, expansion plans, financial condition and
other relevant factors.
Issuer purchases of equity securities
On September 2, 2025, our board of directors approved a share repurchase authorization to repurchase up to an aggregate of $15
million of our
common stock. The
authorization has no
expiration date. This
share purchase authorization
replaces our $100
million
share repurchase authorization.
The table
below presents
information relating
to purchases
of shares
of our
common stock
during the
fourth quarter
of fiscal
2025:
Period
(a)
Total
number of
shares purchased
(b)
Average price
paid per share ($)
(c)
Total
number of shares
purchased as part of
publicly announced
plans or programs
(d)
Maximum dollar value
of shares that may yet
be purchased under the
plans or programs ($)
April 2025
-
-
100,000,000
May 2025
(1)
230,442
4.49
-
100,000,000
June 2025
(1)
2,853
4.19
-
100,000,000
Total
233,295
-
(1) Relates to the delivery of shares of our common
stock to us by certain of our employees to settle their income
tax liabilities.
These shares do not reduce the repurchase authority under our previous $100
million share repurchase program.
Share performance graph
The chart
below compares
the five-year
cumulative return,
assuming the
reinvestment of
dividends, where
applicable, on
our
common stock with that of the S&P 500 Index and the NASDAQ Industrial Index. This graph assumes
$100 was invested on June 30,
2020, in each of our common stock, the companies in the S&P 500 Index, and the companies
in the NASDAQ Industrial Index.

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6.
[RESERVED]

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS
The following
discussion and
analysis should
be read
in conjunction
with Item
8 - “Financial Statements
and Supplementary
Data.” In
addition
to historical
consolidated
financial
information,
the following
discussion
and
analysis contains
forward-looking
statements that involve risks, uncertainties and assumptions. See Item 1A -
“Risk Factors” and “Forward Looking Statements.”
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.
Overview
We
offer
an
integrated
and
holistic
multiproduct
platform
that
provides
transactional
accounts,
lending,
insurance,
merchant
acquiring,
cash
management,
software
and
ADP.
Targeted
solutions
and
integrations
facilitate
payments
between
consumers
and
businesses. By providing a full-service fintech platform in our connected ecosystem, we facilitate the digitization of commerce
in our
markets.
Sources of Revenue
We generate revenue
through a diversified portfolio of financial, payment, software, and technology solutions, structured across
three reportable segments: Merchant, Consumer,
and Enterprise.
Merchant
Revenues in Merchant are derived from a combination of transaction-based
fees and an ad valorem pricing model.
●
Merchant acquiring:
We earn
revenue from merchant acquiring
on an ad valorem basis,
based on a percentage
of the total
transaction value processed through our network. We
also earn revenue from transaction fees charged to merchants.
●
Software
(technology
products):
Revenue
is
generated
through
selling
hardware
(such
as
POS
devices)
and
providing
licensing software and technology services to merchants.
●
Cash:
We
generally
earn
revenue
on
an
ad
valorem
basis,
based
on
a
percentage
of
the total
cash
settlements
processed
through our cash vaulting network. We
also earn transaction fees when customers utilize our ATM
network.
●
Lending:
We generate interest revenue from qualifying
merchant customers who
are able to
access short-term business loans.
This revenue stream includes interest charged on outstanding
loan balances.
●
ADP:
We also offer merchant customers access to platforms through which we (a) generate revenue from the sale of prepaid
airtime and
generate fees
from distribution
of ADP,
including prepaid
solutions (airtime,
data, electricity
and gaming),
bill
payments, International
Money Transfers
(“IMT”) and
supplier enabled payments.
These fees are
largely charged
on an ad
valorem basis.
Consumer
Revenues in Consumer are generated from transactional banking fees, interest income, insurance premiums and card transaction
processing fees.
●
Transactional
Fees:
We
earn
revenue
by
charging
a monthly
fee
and
charge
fees
on an
ad valorem
basis for
goods
and
services purchased.
Transactional
fees associated
with our
consumer accounts
include monthly
account service
fees, ATM
withdrawal fees, and other fees based on usage.
●
Lending:
Revenue
from
our
lending
products
is
derived
from
a
combination
of
origination
fees,
monthly
interest
on
outstanding loan balances and monthly service fees.
●
Insurance:
Revenue from our insurance offerings is earned monthly premiums
paid by the policyholders.
Enterprise
Like Merchant, Enterprise generates revenue from a combination of transaction-based
fees and an ad valorem pricing model.
●
ADP:
Revenue from our
ADP offering
for Enterprise clients
is primarily based
on a fixed
fee per transaction.
A secondary
pricing model is on an ad valorem basis, depending on the specific digital product
being sold.
●
Utilities:
Our utilities vertical generates revenue predominantly through an annuity-based model, with fees charged on an ad
valorem basis
based on
the total
value of
electricity vended
through our
platform. Ad-hoc
hardware sales
of utility
meters
also an additional contribution to revenue.
●
Payments:
Our payment
solutions enable
payment acceptance
for us
and external
enterprises, on
which we
earn a
fee per
transaction processed.
Developments during Fiscal 2025
This item
generally discusses
our 2025
results compared
to our 2024
results. Discussions
of our
2024 results
compared to
our
2023 results can be found within our Annual Report on Form 10-K
for the year ended June 30, 2024.
Merchant Division
Performance in Merchant has been driven by:
Merchant acquiring
Merchant acquiring includes 84,541 devices deployed under the Adumo,
Card Connect and Kazang brands.
2025 vs
Number of devices in deployment
84,541
51,880
44,935
63%
Total Throughput
for the year (ZAR billions)
35.5
15.6
12.0
127%
●
2025 is inclusive of approximately 29,000 devices deployed by Adumo with the Adumo transaction closing on October
1, 2024, the impact of which is not included in the prior period comparatives.
●
Throughput increased
to ZAR
35.5 billion
for the
year,
driven mainly
by the
inclusion of
Adumo for
nine months
of
fiscal 2025 and 15% year-on-year growth attributable
to Kazang Pay.
Software
Our software solutions are offered through GAAP.
Number of GAAP sites
9,649
Approximate ARPU per site (ZAR)
(1)
3,144
(1) ARPU
is calculated
on a revenue
per site basis,
as monthly
figure based
on a three
-month rolling
average for the
quarter
ending June 30, 2025.
●
GAAP was acquired on October 1, 2024.
●
Monthly
ARPU
per
site
combines
hardware
on
a
rental
basis
and
software
subscription
revenue,
but
excludes
the
merchant acquiring revenue when our software customers utilize our merchant
acquiring payment solutions.
Cash
2025 vs
Number of devices in deployment
4,572
4,448
4,393
3%
Cash settlements (throughput) for the year (ZAR billions)
114.8
112.6
110.1
2%
Our cash business continues to reflect a tale of two distinct markets:
●
Small-to-Medium
merchant
sector: Ongoing
decline in
cash usage
with flat
net growth
in vault
activity in
a more
mature
digital economy where cash is increasingly displaced by digital alternatives.
●
Micro-merchant market: High cash prevalence and increasing digital adoption is supporting strong growth in the numbers of
devices and cash settlements. Throughput in
our vaults placed in the
micro-merchant sector increased more than 90% to
ZAR
13.8 billion
in fiscal
2025, representing
more than
10% of
total vault
throughput for
the year
compared to
over 5%
a year
ago. This is fast becoming a meaningful contributor to our cash offering.
Lending
Our lending
solutions are
offered to
merchants through
Capital Connect and
Adumo Capital.
Adumo Capital
is a joint
venture
with Retail Capital, a division of Tyme
Bank, with a 50:50 profit share.
2025 vs
Total lending origination
volume (ZAR millions)
(1)
28%
Total net loan book
outstanding at period end (ZAR millions)
(1)
69%
(1) Amounts reflected above includes 100% of
Adumo Capital’s
credit disbursed and net loan book.
●
2025 is inclusive
of lending origination volume
(for nine months)
and the net loan
book under the
Adumo brand, with
the Adumo transaction closing on October
1, 2024, the impact of
which is not included in
the prior period comparatives.
●
Capital Connect comprises more than 70%
of our merchant lending activity. After a
challenging two-year period shaped
by
macroeconomic
headwinds,
Capital
Connect
lending
origination
volume
rebounded
during
fiscal
2025.
Capital
Connect disbursed ZAR 783 million
in 2025, compared with ZAR 716
million last year and ZAR 769 million
in 2023.
This recovery has been driven
by targeted strategic interventions, including dedicated sales
teams, improved proprietary
visibility
into
merchants’
business
activity,
increased
emphasis
on
new
client
acquisition
and
renewals
for
repeat
borrowers.
ADP
ADP in our Merchant Division includes prepaid solutions (airtime, data,
electricity and gaming), bill payments, IMT and
supplier enabled payments. IMT and bill payments are included in the supplier
enabled throughput shown below,
with supplier
payments representing the most significant contributor to ADP throughput
in the Merchant Division.
2025 vs
Number of devices in deployment
94,345
87,562
74,955
8%
Total throughput
for the year (ZAR billions)
42.5
33.0
27.6
29%
Prepaid solutions throughput for the year (ZAR billions)
19.1
18.1
14.8
6%
Supplier enabled payments throughput for the year (ZAR
billions)
23.4
14.9
12.8
57%
●
We
had
94,345
devices
deployed
as
of
June
30,
2025,
representing
a
8%
year-on-year
growth.
Core
to
our
device
placement strategy
is the decision
to focus on
quality business
and optimizing
our existing
fleet, which
is reflected
in
healthy throughput growth.
●
Total
throughput
increased
29%
to
ZAR
42.5
billion
year-on-year,
driven
by
a
57%
increase
in
supplier
enabled
payments.
Unification of Merchant under Lesaka brands
Over the
past three
years, we
have
brought together
Kazang and
Connect and
subsequently added
Adumo and
GAAP to
our
Merchant Division. In 2025, we accelerated the integration of our micro-merchant and merchant businesses as we build an integrated,
multi-product platform
serving merchants of
all sizes. The
unification of our
Merchant Division’s
operations and the
realignment of
these
brands
under
a
single
Lesaka
identity
has
commenced.
We
expect
streamlining
efforts
to
reduce
complexity,
eliminate
duplication,
and
unify
our
go-to-market
strategy.
As
a
result
of
these
actions,
we
have
incurred
reorganization
costs,
as
well
as
additional intangible asset amortization charges due
to the shortening of the deemed useful lives of some of our brands.
Consumer Division
Our consumer base includes South African grant beneficiaries and other EasyPay
Payouts cardholders.
●
Our grant beneficiary base
includes both permanent and
non-permanent grant beneficiaries. As
the division has evolved,
both sub-categories of consumers are revenue generating and hence the combined consumer base metrics shown below
are most appropriate to measure the performance of the division financially and operationally. Although historically we
have
shown
these
metrics
separately,
it
is
maintained
that
90%
of
the
active
consumer
base
are
permanent
grant
beneficiaries.
●
Our definition
of an active
consumer is any
EPE consumer that
has made a
voluntary transaction (debit
and/or credit)
within the last
90 days.
Consumers who may
be charged a
monthly banking fee
but have
not made a
voluntary transaction
in the last 90 days would not be considered an active consumer.
●
The definition of an active consumer reflects the revenue generating engagement of our entire consumer base and more
accurately tracks our current and future monetization strategy for
the division.
●
We will continue
to show the EasyPay Payouts separately given this follows a different
monetization model.
2025 vs
Transactional accounts
(banking) - EPE
Total active EPE transactional
account base at year end
(millions)
1.9
1.5
1.3
24%
Approximate Net EPE account activations for the year - active
EPE transactional account base (number '000)
48%
Lending - EasyPay Loans
Approximate number of loans originated during the year
(number '000)
1,299
1,061
22%
Gross advances in the year (ZAR millions)
2,500
1,686
1,306
48%
Loan book size, before allowances, at year end (ZAR millions)
(1)
82%
Insurance - EasyPay Insurance
Approximate number of insurance policies written in the year
(number '000)
23%
Total active insurance
policies on book as of year end (number
'000)
28%
Gross written premium (ZAR millions)
38%
Average
revenue
per
consumer
per
month,
in
the
quarter,
(active customers) (ZAR)
(2)
11%
EasyPay Payouts
Approximate number of active cardholders (number '000)
212,724
n.a.
n.a.
nm
Approximate load value for the year (ZAR millions)
(3)
n.a.
n.a.
nm
(1) Gross loan book, before
provisions.
(2) ARPU is calculated on a revenue
per active consumer basis whereby an
active consumer can be both a permanent and
non-
permanent grant beneficiary with prior
periods adjusted for comparison
purposes. Previously ARPU represented only accounted
for permanent grant beneficiaries. ARPU is a monthly figure based on a 3-month rolling average for the quarter ended June 30,
2025.
(3) Represents
the 9-month
period for
fiscal 2025
given Adumo
integration into
results from
the second
quarter of
fiscal 2025
onwards.
●
Driving customer acquisition, supported by increased focus on
customer service.
o
Net active account growth
(
permanent grant beneficiaries
per SASSA’s
monthly Social Assistance report
for June
30, 2025, on
the SASSA statistical
reports portal)
for the year
was approximately
348,000 accounts,
compared to
approximately 235,000 a year ago (fiscal 2024).
o
Our focus
is on
all revenue
generating consumers
who have
initiated a
transaction within
the last
90-day period.
This
will
include
both
permanent
and
temporary
grant
beneficiaries.
Our
total
active
consumer
base
stood
at
approximately 1.9 million at the end of June 2025, compared to 1.5 million
a year ago.
●
Progress on cross selling.
EasyPay Loans
o
We
originated approximately
1.3 million
loans during
the year,
with our
consumer loan
book, before
allowances
(“gross book”), increasing 82% to ZAR
996 million as of June 30, 2025, compared
to ZAR 548 million as of June
30, 2024.
o
We
have not
amended our
credit scoring
or other
lending criteria,
and the
growth is
reflective of
the demand
for
our tailored
loan product
for this
market, growth
in EPE
bank account
customer base
and improved
cross-selling
capabilities.
o
The loan conversion rate continues to improve following the implementation of several targeted Consumer lending
campaigns and encouraging results from our digital channels.
o
The portfolio loss ratio, calculated as the loans written off over the last 12 months as a percentage of the total gross
loan book at the end
of the quarter,
has remained stable at approximately
6% on an annualized basis,
compared to
a year ago (fourth quarter of fiscal 2024). With
the roll-out of the new lending product, targeting
larger loans for a
longer tenor, we expect a modest and non
-material increase in the portfolio loss ratio.
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 approximately 34%
of our active permanent
grant account
base as of June 30, 2025, compared to 33% as of June 30, 2024. Approximately 210,000 new policies were written
in the year, increasing 23% compared to approximately 170,000 a year ago. The total number of active policies has
grown 28% to approximately 564,000 policies at year end, compared to
439,000 policies a year ago (fiscal 2024).
ARPU
o
ARPU for
our active
consumer base
has increased
to approximately
ZAR 85
per month
for the
fourth quarter
of
fiscal 2025
from approximately
ZAR 76
a year
ago (during
the fourth
quarter of
fiscal 2024).
ARPU reflects
the
definition of an active customer and includes permanent and non-permanent grant
beneficiaries.
EasyPay Payouts
o
The number of active
card holders was approximately 213,000
at year end, with
a load value of
approximately ZAR
457 million for 9 months with the Adumo transaction closing on October
1, 2024.
Enterprise Division
ADP includes
prepaid solutions
and bill
payments through
channels such
as retailer
distribution networks
and online
banking
apps.
2025 vs
ADP
Total Throughput
for the year (ZAR billions)
40.7
38.5
6%
Utilities
Total Throughput
for the year (ZAR millions)
(1)
1,329
1,051
26%
Number of Registered Meters (Thousands)
524,711
444,397
18%
(1) The Recharger
transaction closed on
March 3, 2025.
Utility payments throughput
for fiscal 2025
is a 4-month
contribution
(comprising a
1-month contribution
to the
third
quarter and
a full
quarter contribution
to the
fourth quarter).
Utilities throughput
shown combines historical performance pre
-acquisition.
Acquisition of Bank Zero
On June
26, 2025,
we announced
the acquisition
of Bank
Zero, subject
to regulatory
approval. The
transaction marks
another
key
milestone
in
our
journey
to
build
a
vertically
integrated
fintech
platform.
The
combination
of
Bank
Zero's
digital
banking
infrastructure and its operational banking license, together with our fintech and distribution platform, is intended to transform the way
Lesaka is able to conduct business in the future, offering key financial,
strategic and regulatory benefits, including:
(i)
Better end-to-end servicing of Lesaka's customer base through a full
suite of banking services,
(ii)
Unlocking meaningful synergies and new opportunities for
the group,
(iii)
Accelerating product innovation and streamlining operations across Consumer,
Merchant and Enterprise,
(iv)
Enabling a transformative shift in our financial profile, and
(v)
Empowering the combined group to deliver greater value to consumers
and businesses across South Africa.
Upon completion of the proposed transaction, the
selling shareholders of Bank Zero -
which include Michael Jordaan (Chairman
of Bank Zero), Yatin Narsai (CEO of Bank Zero), and other
key members of the Bank Zero
will collectively hold an approximate 12%
stake in Lesaka. Bank Zero sellers will be
subject to regulatory and contractual lockups ranging from between 18 and
36-months post-
completion, depending on the seller.
Subject
to
completion
of
the
transaction,
Michael
Jordaan
is
expected
to
join
our
Board
of
Directors,
while
Yatin
Narsai
is
expected
to
continue
as
CEO
of
Bank
Zero.
The
broader
Bank
Zero
leadership
team
will
remain
in
their
current
roles,
ensuring
continuity and integration.
Balance Sheet Optimization
Debt refinance and new banking partner
At the end of February 2025, we completed the ZAR 4.5 billion refinance of our debt facilities, including Investec Bank Limited
(acting
through
its
Investment
Banking
division:
Corporate
Solutions)
(“Investec
Bank”)
as
a
new
banking
partner
alongside
our
incumbent
bank,
FirstRand
Bank
Limited
(acting
through
its
Rand
Merchant
Bank
division)
(“RMB”).
The
benefits
of
the
debt
refinance include:
(i) consolidating most
of our legacy
senior debt facilities
at the center,
(ii) reducing our
overall weighted
average
borrowing
rate by
approximately
1.3%
per year,
(iii) reshaping
the repayment
profile
of our
senior
debt, and
(iv)
diversifying our
funding sources and increasing debt facility headroom, thereby creating
flexibility and capacity for organic and inorganic growth.
Refinancing the Merchant lending facility
At the end of September 2025, we refinanced and increased our merchant lending facility to $22.5 million (ZAR 400 million) to
create capacity
to fund growth
of our merchant
lending book.
We
achieved a 75
basis point
reduction in
the overall
funding cost
of
this facility.
Mobikwik
We completed the disposal of our major non
-core asset, Mobikwik, for $16.4 million (ZAR 290 million) with proceeds received
at the end
of June. These
funds have been
included in our
cash balances and
used to partially
offset our
debt, in line
with our stated
intention.
Lesaka Employee Share Trust
We
successfully
launched
Lesaka’s
Employee
Share
Ownership
Plan
(“Lesaka
ESOP”)
in
March
reflecting
our
commitment to our people and adherence to change of control obligations placed on us by the Competition Commission South Africa
at the time of
the Connect acquisition in
2022. Our ESOP is
designed to create alignment
with our long-term
growth objectives. The
Lesaka ESOP
Trust
held an
effective
3% of
our issued
shares at
the date
of implementation,
representing approximately
ZAR 220
million at the
current market
price. This allocation
of shares ensures
that employees
have a meaningful
stake in our
future financial
success and gives them the opportunity to share in the value created by us.
The Lesaka
ESOP Trust
advances our
transformation initiatives
and plays
an important
role in
improving our
BBBEE rating.
Our employee base is comprised of 87% designated groups for BBBEE purposes. Through the creation of a broader base
of employee
ownership, we are helping to promote economic inclusion and contribute
to transformation in the broader South African economy.
Association of South African Payment Providers (“ASAPP”)
ASAPP,
publicly launched (www.asapp.co.za) in January 2025, is now fully established as the main representatives of non-bank
participants
in
the
payments
space.
The
eight
original
members
(Altron
Fintech,
Hello
Group
Inc.,
iKhokha
(Pty)
Ltd,
Lesaka
Technologies
(Pty)
Ltd,
Network
International
Holdings
Plc,
Peach
Payment
Services
(Pty)
Ltd,
Shop2Shop
(Pty)
Ltd,
Yoco
Technologies
(Pty)
Ltd)
have
been
joined
by
Flash
Group,
PayU
GPO,
Cross
Switch
Technology
Ltd,
and
Paycorp
Group.
Key
workstreams include:
●
Greater inclusion of Non-Bank participation in the payment’s
ecosystem including services such as settlement of funds
as part of the Bank's Act.
●
Calling to action a review of interchange pricing in South Africa, directly with
the SARB.
●
Working alongside the SARB and other regulatory stakeholders
on the strategic direction
of the Faster Payment
System,
National Treasury Financial Inclusion
Forum and the Payments Industry Body Formation.
Critical Accounting Policies
Our audited 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.
Management
believes
that
the
following
accounting policies
are critical due
to the degree
of estimation required
and the impact
of these policies
on the understandi
ng of the
results of our operations and financial condition.
Recoverability of Goodwill
A significant component
of our growth
strategy is to acquire
and integrate businesses
that complement
our existing operations.
The purchase
price of
an acquired
business is
allocated to
the tangible
and intangible
assets acquired
and liabilities
assumed
based
upon their estimated
fair value at the
date of purchase.
The difference between
the purchase price and
the fair value of
the net assets
acquired is
recorded as goodwill.
In determining
the fair value
of assets acquired
and liabilities assumed
in a business
combination,
we use various
recognized valuation methods, including
present value modeling.
Further, we make assumptions
using certain valuation
techniques, including discount rates and timing of future cash flows.
We
review the
carrying value
of goodwill
annually (June
30) or
more frequently
if circumstances
indicating impairment
have
occurred.
W
e did not
perform interim impairment
testing in fiscal
2025 as no
triggering events were
identified outside of
the annual
impairment test date. In performing this review, we are required to estimate the fair value of goodwill that is implied from a valuation
of the reporting unit to which the goodwill has been allocated after deducting the fair values
of all the identifiable assets and liabilities
that form part
of the reporting unit.
The determination of
the fair value
of a reporting
unit requires us
to make significant
judgments
and estimates.
Changes in
these judgements
and estimates may
impact on
the outcome
of the
impairment test.
For instance,
the fair
value of the ISV reporting
unit included in our acquisition
of Adumo exceeded the carrying value
of the reporting unit as of
June 30,
2025, by only 2.4%.
If we had used
a weighted average cost of
capital (“WACC”)
rate that was 1%
higher, we would
have recorded
an impairment of $3.8 million, and if the WACC
rate was 1% lower, the headroom would
have increased from 2.4% to 12.4%.
In determining
the fair
value of
reporting units
for fiscal
2024 and
2023, our
key judgements
related to
reporting unit
revenue
growth rates and
the weighted-average cost
of capital applicable
to peer and
industry comparables of
the reporting units.
In determining
the
fair value
of reporting
units for
fiscal
2025,
we
considered
key
judgements
related
to reporting
unit
revenue
growth
rates,
the
weighted-average cost of capital applicable to peer and industry comparables of the reporting units and the forecast period to be used.
We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. In addition, we
make judgments
and assumptions
in allocating
assets and
liabilities to
each of
our reporting
units. Refer
to Note
10 to
our audited
consolidated financial statements for a summary of the key judgements used in
our impairment testing.
The results of our impairment tests during fiscal 2025 and 2023 indicated that the fair value of our reporting units exceeded their
carrying
values,
with
the exception
of the
$17.0
million
(related
to
the
Cash Connect,
Adumo
Technologies,
Adumo Payouts
and
EasyPay reporting units) and $7.0 million
(related to the PPT/
NUETS reporting unit), respectively, of goodwill impaired during fiscal
2025 and
2023, as discussed
in Note 10
to our audited
consolidated financial
statements. The
results of our
impairment tests during
fiscal 2024
indicated that the fair value of our reporting units exceeded their carrying values and so
did not require impairment.
Intangible Assets Acquired Through Acquisitions
The
fair values
of the
identifiable
intangible
assets acquired
through
acquisitions
were determined
by management
using
the
purchase method
of accounting. We
completed the acquisition
of Adumo and
Recharger during
fiscal 2025 where
we identified and
recognized intangible assets. We
did not identify any significant intangible assets related to the Touchsides
acquisition in fiscal 2024.
We
used the
relief from
royalty method
to value
identified brands
identified in
the Adumo
acquisition, and
the multi-period
excess
earnings method to value identified customer relationships and
the replacement cost approach to value
the identified technology assets
related to Adumo and Recharger
.
We have used
the relief from royalty method, the
multi-period excess earnings method, the
income
approach
and
the
cost
approach
to
value
other
historic
acquisition-related
intangible
assets.
In
so
doing,
we
made
assumptions
regarding expected future revenues and
expenses to develop the
underlying forecasts, applied contributory asset
charges, WACC rates,
and useful lives.
The valuations were based on information available at the
time of the acquisition and the expectations and
assumptions that were
deemed reasonable by us. No assurance can be given, however,
that the underlying assumptions or events associated with such assets
will occur as
projected. For these
reasons, among others,
the actual cash
flows may vary
from forecasts of
future cash flows.
To
the
extent actual cash flows
vary, revisions
to the useful life
or impairment of intangible
assets may be necessary.
Management assesses
the useful life of
the acquired intangible assets
upon initial recognition and revisions
to the useful
life or impairment of
these intangible
assets may be necessary in the future.
For instance, during early
calendar 2025, our executive
considered the unification of
our merchant segments operations
and the
realignment of
our brands
under the
master brand
“Lesaka”.
We
have identified
the steps
and timing
to realign
the affected
brands
under
the
master
brand
and
expect
to
have
complete
alignment
by
February
2027,
with
certain
brands
expected
to
be
aligned
by
December 2025. The change in
brands has resulted in a
change in the useful
life of certain of
our brand and trademark intangible
assets
which
has
resulted
in
an
increase
in
amortization
expense
of
$2.6
million
during
the
year
ended
June
30,
2025.
Furthermore,
we
recorded an
impairment loss
of $1.8
million related
to Adumo
Technologies
intangible assets which
were fully
impaired during
the
year ended June 30, 2025. Refer to Note 10 of our audited consolidated
financial statements for additional information.
Revenue recognition - principal versus agent considerations
We generate
revenue from the provision of transaction-processing
services through our various platforms
and service offerings.
We use these platforms to (a) sell prepaid airtime
vouchers that are held as
inventory and (b) distribute ADP, including prepaid airtime
vouchers (which we do not hold as inventory), prepaid electricity, gaming vouchers, and other services, to end consumers through our
platforms. The determination of whether we act as a principal
or as an agent when providing these services using
guidance contained
in
Accounting
Standards
Codification
(“ASC”)
Revenue
from
Contracts
with
Customers
requires
a
significant
amount
of
judgement. When
we are the
principal in
a transaction,
revenue is reported
on a gross
basis. When
we are an
agent in
a transaction,
revenue
is recognized
based on
the amount
that
we are
contractually
entitled to
receive
for
performing
the distribution
service on
behalf of our customers.
Finance Loans Receivable and Allowance for Credit Losses
Merchant lending
The allowance for credit losses related to Merchant finance loans receivables is calculated by multiplying the expected write-off
rate for
doubtful or
legal debt
with the
total actual
receivables in
default plus
multiplying the
lifetime loss
rate with
the month-end
outstanding lending book. Our risk management procedures include adhering to our proprietary lending criteria which uses an online-
system loan application
process, obtaining
necessary customer
transaction-history data
and credit bureau
checks. We
consider 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.
We recently
(in the past three 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. In addition, management determines
the expected write-off
rate for doubtful or
legal debt based on historical
recovery trends for defaulted
receivables. The allowance for
credit losses related
to these merchant
finance loans receivables
is calculated by
multiplying the expected
write-off rate for
doubtful
or legal debt with the total actual receivables in default plus multiplying the lifetime loss rate with the month-end outstanding lending
book.
The lifetime loss
rate as of June
30, 2025 and
June 30, 2024, was
1.14% and 1.18%,
respectively.
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 95%, 4% and 1%, respectively,
of the outstanding lending book as of June 30, 2025.
Prior to
July 1, 2023,
we maintained
an allowance
for credit
losses -
finance loans
receivable related
to our Merchant
services
segment
with
respect
to
short-term
loans
to
qualifying
merchant
customers.
Our
policy
was
to
regularly
review
the
ageing
of
outstanding
amounts due
from these
merchants and
an allowance
is created
for the
full amount
outstanding if
the customer
was in
arrears for more than 15 days. We wrote off loans and related interest and fees when it is evident that reasonable recovery procedures,
including where deemed necessary,
formal legal action, had failed.
Consumer microlending
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
, excluding upfront initiation fees.
Loans to customers have
a tenor of up
to nine months,
with the majority of loans originated having a tenor of six months. 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. We
consider 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. While
the allowance for credit
losses is primarily determined utilizing
a provisioning model, there is still
an
element of judgment
required to assess the
ultimate recoverability of
these finance loan receivables,
including ongoing evaluation
of
the creditworthiness of each customer.
We
have operated this
lending book for
more than five
years and use
historical default experience
over the lifetime
of loans in
order to calculate a lifetime loss rate for the lending book. We analyze 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. 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,
excluding upfront initiation fees. The
lifetime loss rate as of each
of June 30,
and June 30,
2024, was 6.50%. The
performing component (that is,
outstanding loan payments not
in arrears) of the
book exceeds
more than 98% of outstanding lending book as of June 30, 2025.
Prior to July
1, 2023, we
maintained an allowance
for credit losses
- finance loans
receivable related to
our Consumer services
segment with respect
to short-term loans
to qualifying customers.
Our policy was
to regularly review
the ageing
of outstanding amounts
due from
borrowers and
adjust the
provision based
on management’s
estimate of
the recoverability
of finance
loans receivable.
We
wrote off microlending loans and related service fees if a borrower is
in arrears with repayments for more than three months or , in
the
event of the borrower’s death, or if the borrower was under
debt review.
Valuation
of investment in Cell C
We have elected to measure
our investment in
Cell C, an
unlisted equity security, at fair
value using the
fair value option.
Changes
in
the
fair
value
of
this
equity
security
are
recognized
in
the
caption
“change
in
fair
value
of
equity
securities”
in
our
audited
consolidated statements of operations. The tax impact related to the change in
fair value of equity securities is included in income tax
expense in our audited
consolidated statements of operation.
The determination of
the fair value of this
equity security requires us
to
make significant judgments
and estimates.
We base our estimates
on assumptions we
believe to be
reasonable but that
are unpredictable
and inherently uncertain. Refer
to Note 6
of our audited consolidated
financial statements regarding the
valuation inputs and
sensitivity
related to our investment in Cell C.
We used a discounted cash flow model to determine the fair value of our investment in Cell C as of June 30, 2024 and 2023, and
valued Cell C at
$0.0 (zero) as of each
of June 30, 2025 and
2024. We utilized the latest business plan provided by Cell
C management
for the
period ended
May 31,
2030, for
the June
30, 2025,
valuation and
the business
plan approved
by Cell
C management
for the
period ended December 31, 2027, for the June 30, 2024, valuation, and the
following key valuation inputs were used:
Weighted Average
Cost of Capital:
24% as of June 30, 2025 and between 21% and 23% as of June 30, 2024
Long-term growth rate:
4.5% (4.5% as of June 30, 2024)
Marketability discount:
15% (20% as of June 30, 2024)
Minority discount:
17% (24% as of June 30, 2024)
Net adjusted external debt - June 30, 2025:
(1)
ZAR 8.3 billion ($0.5 billion), no lease liabilities included
Net adjusted external debt - June 30, 2024:
(2)
ZAR 8 billion ($0.4 billion), no lease liabilities included
(1) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30,
2025.
(2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30,
2024.
We
believe the
Cell C
business plan
is reasonable
based on
the current
performance and
the expected
changes in
the business
model. Refer to the sensitivity analysis included in
Note 6 to our audited consolidated financial statements
related to our valuation of
Cell C as of June 30, 2025.
On September 1, 2025,
Cell C’s largest
shareholder, Blue
Label Telecoms
Limited (“BLT”),
announced that BLT,
The Prepaid
Company Proprietary Limited (a wholly-owned subsidiary of BLT), Cell C Limited, Comm Equipment Company Proprietary Limited
(a
wholly-owned
indirect
subsidiary
of
BLT),
K2021889191
(South
Africa)
(RF)
Proprietary
Limited,
and
K2022559963
(South
Africa)
(RF)
Proprietary
Limited,
had
entered
into
an
agreement
setting
out
the
terms
of
the
proposed
restructure
of
BLT
and
its
subsidiaries (the
“Pre-Listing Restructuring”).
The Pre-Listing
Restructuring encompasses
various transactions
aimed at
optimizing
Cell C’s
capital structure
and balance sheet
in preparation for
a separation and
listing of the
Cell C business
on the JSE.
The Cell C
listing remains subject to, amongst other things, market conditions, shareholder, regulatory and other relevant approvals and therefore
the exact date of listing is
unknown at the date of this Annual
Report on Form 10-K. The listing
of Cell C’s
business on the JSE may
result in
a change
in the
methodology used
to value
our interest
in Cell
C because
we may
use its
quoted listed
price instead
of the
discounted cash flow model currently used.
Recent Accounting Pronouncements
Recent accounting pronouncements adopted
Refer
to
Note
2 of
our
audited consolidated
financial
statements for
a full
description
of recent
accounting
pronouncements,
including the dates of adoption and effects on financial
condition, results of operations and cash flows.
Recent accounting pronouncements not yet adopted as of June 30, 2025
Refer to Note 2
of our audited consolidated
financial statements for a
full description of recent
accounting pronouncements not
yet adopted as of June 30, 2025, including the expected dates of adoption
and effects on 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
June 30,
ZAR : $ average exchange rate
18.1644
18.7070
17.7641
Highest ZAR : $ rate during period
19.6350
19.4568
19.7558
Lowest ZAR : $ rate during period
17.1144
17.6278
16.2034
Rate at end of period
17.7554
18.1808
18.8376
Translation Exchange Rates
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 years ended June 30, 2025, 2024 and 2023, vary slightly from the averages shown in the table above. The
translation rates we use in presenting our results of operations are the rates shown
in the following table:
Table 2
June 30,
Income and expense items: $1 = ZAR
17.9031
18.6844
17.9400
Balance sheet items: $1 = ZAR
17.7554
18.1808
18.8376
We
have
translated
the
results
of
operations
and
operating
segment
information
for
the
year
ended
June
30,
and
2024,
provided in
the tables
below using
the actual
average exchange
rates per
month between
the USD
and ZAR
in order
to reduce
the
reconciliation
of information
presented to
our chief
operating decision
maker.
The impact
of using
this method
compared with
the
average rate for the
quarter and year to
date is not significant,
however, it does result in
minor differences. We believe that presentation
using
the
average
exchange
rates
per
month
compared
with
the
average
exchange
rate
per
quarter
and
for
the
year
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
audited 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 audited 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 audited
consolidated financial statements
in Note 21 to
those statements. Our
chief operating decision maker
is our Executive Chairman
and
he
evaluates
segment
performance
based
on
segment
earnings
before
interest,
tax,
depreciation
and
amortization
(“EBITDA”),
adjusted for
items mentioned
in the
next sentence
(“Segment Adjusted
EBITDA”) for
each operating
segment. We
do not
allocate
once-off items (as defined below), stock-based compensation charges, depreciation and amortization, impairment of goodwill or other
intangible assets,
other items
(including gains
or losses
on disposal
of investments,
fair value
adjustments to
equity securities,
fair
value
adjustments
to
currency
options),
interest
income,
interest
expense,
income
tax
expense
or
loss
from
equity-accounted
investments
to
our
reportable
segments.
We
have
included
an
intercompany
interest
expense
in
our
Consumer
Segment
Adjusted
EBITDA for fiscal
2025. Once-off items represent
non-recurring expense items,
including costs related
to acquisitions and
transactions
consummated or
ultimately not
pursued. The
Stock-based compensation
adjustments reflect
stock-based compensation
expense and
are both excluded from the calculation of Segment Adjusted EBITDA and
are therefore reported as reconciling items to reconcile the
reportable segments’ Segment Adjusted EBITDA to our loss before income
tax expense. Effective from fiscal 2025, all lease charges
are allocated
to our operating
segments, whereas
in previous
filings we
presented certain
lease charges
on a separate
line outside
of
our operating segments. Prior
period information has been
recasted to include the lease
charges which were
previously reported on a
separate line in our Consumer and Merchant (and now Merchant, Consumer
and Enterprise) operating segments.
Group
Adjusted
EBITDA
represents
Segment
Adjusted
EBITDA
after
deducting
group
costs.
Refer
also
“Results
of
Operations-Use of Non-GAAP Measures” below.
In fiscal 2025 we closed the acquisitions of Adumo
and Recharger and have integrated their businesses into our
ours. Our fiscal
2025 financial results
include Adumo from
October 1, 2024
and Recharger
from March 3,
2025. Refer also
to Note 3
to the audited
consolidated financial
statements for
additional information
regarding these
transactions. Adumo
and Recharger
are not included
in
our financial results for fiscal 2024 and 2023.
We
analyze our
business and
operations
in terms
of three
inter-related
but independent
operating segments:
(1) Merchant
(2)
Consumer and (3) Enterprise.
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.
Fiscal 2025 Compared to Fiscal 2024
The following factors had
a significant influence on
our results of
operations during fiscal 2025
as compared with
the same period
in the prior year:
●
Revenue increased:
Our revenues
increased by
16.9% in
U.S. dollar
and 13.5%
in ZAR,
primarily due
to the
inclusion of
Adumo
and
Recharger,
an
increase
in
value-added
services activity
in
Merchant,
higher Pinned
Airtime
sales,
as well
as
higher transaction, insurance and lending revenues in Consumer,
which was partially offset by a lower contribution from our
legacy Enterprise businesses;
●
Operating
income
increase,
before
transaction
costs:
Operating
income,
before
transaction
and
related
costs,
increased
significantly primarily
due to contribution
s
from Adumo
from October
1, 2024
and Recharger
from March
3, 2025,
which
were partially offset
by increased costs and an
increase in amortization
of acquisition-related intangible assets
related to the
acquisition of Adumo and Recharger;
●
Non-cash fair value adjustment related to equity securities:
We recorded a non
-cash fair value loss of $59.8 million during
fiscal 2025 related to the disposal of our investment in MobiKwik;
●
Higher net
interest charge:
Net interest
charge
increased to
$18.9 million
(ZAR 342.8
million) from
$16.6 million
(ZAR
311.1 million) primarily
due to higher overall borrowings, which
was partially offset by an increase
in interest received as a
result of the inclusion of Adumo; and
●
Foreign exchange movements:
The U.S. dollar was 4.2% weaker against the ZAR during fiscal
2025 compared to the prior
period, which positively impacted our U.S. dollar reported results.
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 U.S. Dollars
Year
ended June 30,
$ %
$ ’000
$ ’000
change
Revenue
659,701
564,222
17%
Cost of goods sold, IT processing, servicing and support
486,546
442,673
10%
Selling, general and administration
131,512
91,969
43%
Depreciation and amortization
33,721
23,665
42%
Impairment loss
18,863
-
nm
Transaction costs related to Adumo, Recharger
and Bank Zero acquisitions and
certain compensation costs
16,159
2,325
595%
Operating (loss) income
(27,100)
3,590
nm
Change in fair value of equity securities
(59,828)
-
nm
Loss on disposal of equity-accounted investment
-
nm
Reversal of allowance for EMI doubtful debt receivable
-
nm
Interest income
2,596
2,294
13%
Interest expense
21,453
18,932
13%
Loss before income tax (benefit) expense
(105,946)
(12,798)
728%
Income tax (benefit) expense
(18,198)
3,363
nm
Net loss before earnings (loss) from equity-accounted investments
(87,748)
(16,161)
443%
Earnings (Loss) from equity-accounted investments
(1,279)
nm
Net loss
(87,634)
(17,440)
402%
Add net loss attributable to non-controlling interest
-
nm
Net loss attributable to us
(87,504)
(17,440)
402%
Table 4
In South African Rand
Year
ended June 30,
ZAR %
ZAR ’000
ZAR ’000
change
Revenue
11,980,399
10,553,233
14%
Cost of goods sold, IT processing, servicing and support
8,833,924
8,280,262
7%
Selling, general and administration
2,388,795
1,719,992
39%
Depreciation and amortization
612,298
442,570
38%
Impairment loss
334,929
-
nm
Transaction costs related to Adumo, Recharger
and Bank Zero acquisitions and
certain compensation costs
291,358
43,154
575%
Operating (loss) income
(480,905)
67,255
nm
Change in fair value of equity securities
(1,089,871)
-
nm
Loss on disposal of equity-accounted investment
2,886
-
nm
Reversal of allowance for EMI doubtful debt receivable
-
4,741
nm
Interest income
47,108
42,896
10%
Interest expense
389,882
354,048
10%
Loss before income tax (benefit) expense
(1,916,436)
(239,156)
701%
Income tax (benefit) expense
(328,347)
62,616
nm
Net loss before earnings (loss) from equity-accounted investments
(1,588,089)
(301,772)
426%
Earnings (Loss) from equity-accounted investments
2,035
(24,298)
nm
Net loss
(1,586,054)
(326,070)
386%
Add net loss attributable to non-controlling interest
2,307
-
nm
Net loss attributable to us
(1,583,747)
(326,070)
386%
Revenue increased
by $95.5
million (ZAR
1.4 billion)
or 16.9%
(in ZAR,
13.5%).
The increase
in ZAR
was primarily
due to,
the inclusion
of Adumo,
an increase
in the
volume of
value-added
services provided
(Pinless Airtime
and
gaming), an
increase
in
Pinned Airtime sales, an increase
in certain issuing fee base prices
and transaction activity in our issuing
business, and an increase in
insurance
premiums
collected
and
lending
revenues
following
higher
loan
originations.
Refer
to
discussion
above
at
“-Recent
Developments” for a description of key trends impacting our revenue this
fiscal year.
Cost of goods sold, IT processing, servicing and support increased by $43.9 million (ZAR 0.6 million ) or 9.9% (in ZAR, 6.7%),
primarily due
to the
inclusion of
Adumo, higher
commissions paid
related to
ADP revenue
generated, and
higher insurance-related
claims and third-party transaction fees, which was partially offset
by the decrease in Pinned Airtime sales.
Selling, general
and administration expenses
increased by $39.5
million (ZAR 668.8
million), or 43.0%
(in ZAR, 38.9%).
The
increase was primarily
due to the inclusion
of Adumo; higher
employee-related expenses
(including annual salary
increases); higher
stock-based compensation
charges, consulting
fees and audit
fees; and the
year-over-year
impact of inflationary
increases on certain
expenses.
Depreciation
and
amortization
expense
increased
by
$10.06
million
(ZAR
169.7
million),
or
42.5%
(in
ZAR,
38.4%).
The
increase was due to the inclusion of acquisition-related intangible asset amortization related
to intangible assets identified pursuant to
the Adumo and Recharger acquisitions and an increase
in depreciation expense related to additional POS devices deployed.
During fiscal
2025, we
recorded an
impairment loss
which includes
an impairment
of goodwill
of $17.0
million related
to the
impairment of goodwill allocated
to each of Merchant,
Consumer and Enterprise as
well as an impairment of
intangible assets of 1.8
million. Refer to
Note 10 of
our audited consolidated
financial statements
for additional information
regarding these impairment
losses.
Transaction costs related to Adumo, Recharger
and Bank Zero acquisitions and certain compensation costs includes
fees paid to
external service
providers associated
with legal
and advisory
services procured
to close
the Adumo
transaction on
October 1,
2024,
and the Recharger transaction in March 2025,
as well as post-combination compensation charges recognized
related to the Recharger
acquisition of $13.6 million
(ZAR 245.7 million) and
increased primarily due to
these post-combination compensation charges.
This
caption also includes
transaction costs related
to the proposed
acquisition of Bank
Zero. Refer to
Note 3 to
our audited consolidat
ed
financial statements for additional information.
Our operating (loss)
income margin in
fiscal 2025
and 2024 was (4.1%)
and 0.6%, respectively.
We
discuss the components of
operating loss margin under “-Results of operations
by operating segment.”
The change in fair value of equity securities of $59.8 million during fiscal 2025 represents a non-cash
fair value adjustment loss
related to MobiKwik. We
did not record any changes
in the fair value of
equity interests in MobiKwik during
the fiscal 2024, or
any
fair value adjustments for Cell C during fiscal 2025 or 2024, respectively.
We continue to carry our investment
in Cell C at $0 (zero).
Interest on surplus cash increased to $2.6 million (ZAR 47.1 million) from $2.3 million (ZAR 42.9 million), primarily due to the
inclusion of Adumo and higher overall average cash balances on deposit during
fiscal 2025 compared with 2024.
Interest expense increased to $21.5
million (ZAR 389.9 million)
from $18.9 million (ZAR 354.0
million). In ZAR, the increase
was primarily
as a result
of higher
overall borrowings
during fiscal 2025
compared with
the comparable
period in the
prior quarter,
which was partially offset by lower overall interest rates.
Fiscal 2025 income tax benefit was $18.2
million (ZAR 328.3 million) compared to an
income tax expense of $3.4 million
(ZAR
62.6
million)
in
fiscal
2024.
Our
effective
tax
rate
for
fiscal
was
impacted
by
deferred
tax
impact
related
to
the
fair
value
adjustment to our equity
securities, the reversal of
$12.8 million related to
certain valuation allowances created
in prior years
following
(i) an improvement
in profitability of
certain of our
subsidiaries and (ii)
a change in
judgment on the
need for a valuation
allowance
of $11.4 million related to an entity
which we believe has achieved
sustainable profitability, the tax expense recorded by our profitable
South African operations,
a deferred tax
benefit related to
acquisition-related intangible
asset amortization, non-deductible
expenses
(in transaction-related expenses), the on-going losses incurred by certain of our South African businesses and the associated valuation
allowances created related to the deferred tax assets recognized regarding
net operating losses incurred by these entities.
Our effective
tax rate
for fiscal
2024 was
impacted by
the tax
expense recorded
by our
profitable South
African operations,
a
deferred tax benefit related to acquisition-related intangible asset amortization, non-deductible expenses, the on-going losses incurred
by certain of our
South African businesses and
the associated valuation allowances
created related to the
deferred tax assets recognized
regarding net operating losses incurred by these entities.
Results of operations by operating segment and group costs
The composition of revenue and the contributions of our business activities to
Group Adjusted EBITDA are illustrated below:
Table 5
In U.S. Dollars
Year
ended June 30,
% of
% of
%
Operating Segment
$ ’000
total
$ ’000
total
change
Consolidated revenue:
Merchant
526,598
80%
459,790
81%
15%
Consumer
96,008
15%
69,211
12%
39%
Enterprise
42,556
6%
46,897
8%
(9%)
Subtotal: Operating segments
665,162
101%
575,898
101%
15%
Eliminations
(5,461)
(1%)
(11,676)
(1%)
(53%)
Total
consolidated revenue
659,701
100%
564,222
100%
17%
Group Adjusted EBITDA:
Merchant
(1)(2)
36,195
71%
29,170
79%
24%
Consumer
(1)(2)
23,949
47%
12,679
34%
89%
Enterprise
(1)(2)
1,287
3%
2,931
8%
(56%)
Group costs
(10,743)
(21%)
(7,844)
(21%)
37%
Group Adjusted EBITDA (non-GAAP)
(3)
50,688
100%
36,936
100%
37%
(1) Segment
Adjusted EBITDA
for fiscal
2025, includes
reorganization
and retrenchment
costs for
Merchant of
$0.8 million,
Enterprise of $0.8 million, and Consumer of $0.1
million. Segment Adjusted EBITDA for fiscal 2024, includes retrenchment costs
for
Merchant $0.3 million and Consumer of $0.2 million.
(2) Lease expenses which
were previously presented on
a separate line in fiscal
2024 are now included
in Merchant, Consumer
and Enterprise Segment Adjusted EBITDA. The prior period has been re-presented
to conform with current period presentation.
(3) Group Adjusted EBITDA
is a non-GAAP measure, refer
to reconciliation below at
“-Results of Operations-Use of
Non-
GAAP Measures”.
Table 6
In South African Rand
Year
ended June 30,
% of
% of
%
Operating Segment
ZAR ’000
total
ZAR ’000
total
change
Consolidated revenue:
Merchant
9,562,360
80%
8,599,450
81%
11%
Consumer
1,744,429
15%
1,294,632
12%
35%
Enterprise
773,057
6%
877,317
8%
(12%)
Subtotal: Operating segments
12,079,846
101%
10,771,399
101%
12%
Eliminations
(99,447)
(1%)
(218,166)
(1%)
(54%)
Total
consolidated revenue
11,980,399
100%
10,553,233
100%
14%
Group Adjusted EBITDA:
Merchant
(1)(2)
657,177
71%
545,472
79%
20%
Consumer
(1)(2)
435,193
47%
237,362
34%
83%
Enterprise
(1)(2)
23,724
3%
54,924
8%
(57%)
Group costs
(193,853)
(21%)
(146,815)
(21%)
32%
Group Adjusted EBITDA (non-GAAP)
(3)
922,241
100%
690,943
100%
33%
(1)
Segment
Adjusted
EBITDA
for
fiscal
2025,
includes
reorganization
and
retrenchment
costs
for
Merchant
of
ZAR
15.7
million, Enterprise
of ZAR
13.6 million,
and Consumer
of ZAR
1.5 million.
Segment Adjusted
EBITDA for
fiscal 2024,
includes
retrenchment costs for Merchant of ZAR 4.9 million and Consumer of ZAR 3.5 million.
(2) Lease expenses
which were previously
presented on a
separate line in
fiscal 2024 are
now included in
Merchant and Consumer
Segment Adjusted EBITDA. The prior period has been re-presented to conform
with current period presentation.
(3) Group Adjusted EBITDA
is a non-GAAP measure, refer
to reconciliation below at
“-Results of Operations-Use of
Non-
GAAP Measures”.
Merchant
Segment revenue primarily increased due to the inclusion
of Adumo, and a higher volume
of ADP provided (Pinless Airtime and
gaming) and
an increase
in fewer Pinned
Airtime sales.
In ZAR,
the increase
in Segment
Adjusted EBITDA
is primarily
due to
the
inclusion of Adumo, which was partially offset by higher operating expenses incurred, including employment-related expenditures, to
expand
our
offering,
an
increase
in
the
allowance
for
credit
losses
following
higher
loan
originations
and
reorganization
and
retrenchment costs incurred during fiscal 2025.
Our Segment Adjusted EBITDA margin (calculated as
Segment Adjusted EBITDA divided by revenue) for
fiscal 2025 and 2024
was 6.9% and 6.3%, respectively.
Consumer
Segment
revenue
increased
primarily
due
to higher
transaction
fees
generated
from
the higher
EPE
account holders
base,
an
increase
in
certain
issuing
fee
base
prices
and
transaction
activity
in
our
issuing
business,
insurance
premiums
collected,
lending
revenues following an increase in loan originations and the inclusion of
Adumo. This increase in revenue has translated into improved
profitability, which was partially offset
by a higher allowance for credit losses following an increase in loan originations during fiscal
2025,
higher insurance-related
claims, interest
expense (of
ZAR 61.4
million)
incurred to
fund our
lending book,
higher computer
software license costs, and the
year-over-year impact of inflationary increases on certain expenses.
We have included an intercompany
interest expense in our Consumer Segment Adjusted EBITDA for fiscal 2025
compared with fiscal 2024.
Our Segment Adjusted EBITDA margin for fiscal 2025
and 2024 was 24.9% and 18.3%, respectively.
Enterprise
Segment revenue
decreased primarily
due to
fewer ad
hoc hardware
sales as well
as lower
revenue generated
from the
sale of
prepaid
airtime
vouchers,
which
was
partially
offset
by
the
inclusion
of
Recharger.
In
ZAR,
the
significant
decrease
in
Segment
Adjusted EBITDA is primarily due to the impact of few sales,
which was partially offset by the inclusion of Recharger
.
Our Segment Adjusted EBITDA margin for fiscal 2025
and 2024 was 3.0% and 6.2%, respectively.
Group costs
Our group
costs primarily
include employee
related costs
in relation
to employees
specifically hired
for group
roles and
costs
related
directly
to
managing
the
US-listed
entity;
expenditures
related
to
compliance
with
the
Sarbanes-Oxley
Act
of
2002;
non-
employee directors’ fees; legal fees; group and US-listed related audit
fees; and directors’ and officers’ insurance premiums.
Our group costs for fiscal
2025 increased compared with the prior
period due to higher employee costs
resulting from an increase
in the number of individuals allocated to group costs and base salary
adjustments, higher bonus expense, travel, audit,
consulting and
legal fees.
Fiscal 2024 Compared to Fiscal 2023
The following factors had
a significant influence on
our results of
operations during fiscal
2024 as compared with
the same period
in the prior year:
●
Higher revenue:
Our revenues
increased
by
6.9%
in U.S.
dollar
and
11.4%
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
profitability
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
$16.6 million (ZAR 311.1 million) from $16.7 million
(ZAR
299.9 million) primarily due to higher interest rates;
●
Significant transaction costs:
We expensed $2.3 million of transaction costs related to the Adumo transaction in fiscal
2024;
and
●
Foreign exchange movements:
The U.S. dollar was 4.1% stronger against the ZAR during fiscal
2024 compared to the prior
period, which adversely impacted our U.S. dollar reported results.
The following tables show the changes in the items comprising our statements of
operations, both in U.S. dollars and in ZAR:
Table 7
In U.S. Dollars
Year
ended June 30,
$ %
$ ’000
$ ’000
change
Revenue
564,222
527,971
7%
Cost of goods sold, IT processing, servicing and support
442,673
417,544
6%
Selling, general and administration
91,969
95,050
(3%)
Depreciation and amortization
23,665
23,685
(0%)
Impairment loss
-
7,039
nm
Transaction costs related to Adumo and Recharger
acquisitions
2,325
-
nm
Operating income (loss)
3,590
(15,347)
nm
Reversal of allowance for EMI doubtful debt receivable
-
nm
Loss on disposal of equity-accounted investment
-
nm
Interest income
2,294
1,853
24%
Interest expense
18,932
18,567
2%
Loss before income tax expense (benefit)
(12,798)
(32,266)
(60%)
Income tax expense (benefit)
3,363
(2,309)
nm
Net loss before loss from equity-accounted investments
(16,161)
(29,957)
(46%)
Loss from equity-accounted investments
(1,279)
(5,117)
(75%)
Net loss attributable to us
(17,440)
(35,074)
(50%)
Table 8
In South African Rand
(US GAAP)
Year
ended June 30,
ZAR %
ZAR ’000
ZAR ’000
change
Revenue
10,553,233
9,471,800
11%
Cost of goods sold, IT processing, servicing and support
8,280,262
7,490,739
11%
Selling, general and administration
1,719,992
1,705,196
1%
Depreciation and amortization
442,570
424,909
4%
Impairment loss
-
126,280
nm
Transaction costs related to Adumo and Recharger
acquisitions
43,154
-
nm
Operating income (loss)
67,255
(275,324)
nm
Reversal of allowance for EMI doubtful debt receivable
4,741
-
nm
Loss on disposal of equity-accounted investment
-
3,678
nm
Interest income
42,896
33,243
29%
Interest expense
354,048
333,092
6%
Loss before income tax expense (benefit)
(239,156)
(578,851)
(59%)
Income tax expense (benefit)
62,616
(41,423)
nm
Net loss before loss from equity-accounted investments
(301,772)
(537,428)
(44%)
Loss from equity-accounted investments
(24,298)
(91,799)
(74%)
Net loss attributable to us
(326,070)
(629,227)
(48%)
Revenue increased by $36.3 million (ZAR 1.1 billion), or 6.9% (in ZAR, 11.4%)
,
primarily due to the increase in the number of
low-margin
prepaid
airtime
vouchers
sold
and
an
increase
in
volume
of
other
value-added
services
provided,
as
well
as
higher
transaction volumes processed, insurance premiums collected
and lending revenues following an increase in loan
originations, which
was partially offset
by a lower
number of
hardware sales in
our POS hardware
distribution business
given the
lumpy nature of
bulk
sales.
Cost of goods sold, IT processing, servicing and
support increased by $25.1 million (ZAR
0.8 billion), or 6.0% (in ZAR,
10.5%),
primarily due to
the increase in low
margin prepaid airtime
sales, which were
partially offset by
the lower cost of
goods sold related
to fewer hardware sales.
Selling, general
and administration expenses
decreased by
$3.1 million (ZAR
14.8 million), or
3.2% (in ZAR,
0.9%).
In ZAR,
the modest increase
was primarily due to
higher employee-related expenses
related to the expansion
of our senior management
team
and the year-over
-year impact of
inflationary increases on
employee-related expenses,
which were partially
offset by
the benefits of
various cost reduction initiatives in Consumer.
Depreciation and
amortization expense
decreased by
$0.02 million
(in USD,
< 0.1%),
and increased
by ZAR
17.7 million
(in
ZAR, 4.2%). In ZAR, the increase was due to an increase in depreciation expense
related to additional POS devices deployed.
During fiscal 2023, we
recorded an impairment loss
of $7.0 million related
to the impairment of our
hardware/ software supply
business
unit’s
allocated
goodwill.
Refer
to
Note
of
our
audited
consolidated
financial
statements
for
additional
information
regarding these impairment losses.
Transaction costs related to Adumo
acquisition includes fees
paid to external
service providers associated
with legal, commercial,
financial and tax due
diligence activities performed,
fees paid to legal advisors
to draft the purchase
agreement as well as
other legal
and advisory services procured related to the transaction.
Our operating income
(loss) margin in
fiscal 2024
and 2023
was 0.6% and (2.9%),
respectively.
We
discuss the components of
operating loss margin under “-Results of operations
by operating segment.”
We
did
not
record
any
changes
in
the
fair
value
of
equity
interests
in
MobiKwik
and
Cell
C
during
fiscal
and
2023,
respectively.
We continue
to carry our investment
in Cell C at $0
(zero). Refer to Note
9 to our consolidated financial
statements for
the methodology
and inputs used
in the fair
value calculation for
MobiKwik and Note
6 for the
methodology and
inputs used in
the
fair value calculation for Cell C.
During fiscal 2024, we
received an outstanding amount
of $0.3 million related
to the sale
of Carbon in fiscal
2023, which resulted
in the reversal
of an allowance
for doubtful
loans receivable
of $0.3
million recorded
in fiscal 2023.
We
recorded a
net loss of
$0.2
million comprising a
loss of $0.4 million
related to the disposal of
a minor portion of
our investment in Finbond
and a $0.25 million
gain related to the disposal of our entire interest in Carbon during fiscal 2023. Refer
to Note 9 to our consolidated financial statements
for additional information regarding these disposals.
Interest on
surplus cash
increased to
$2.3 million
(ZAR 42.9
million) from
$1.9 million
(ZAR 33.2
million), primarily
due to
higher interest rates.
Interest expense increased
to $18.9 million
(ZAR 354.0 million)
from $18.6 million
(ZAR 333.1 million),
primarily as a
result
of higher overall
interest rates and
higher overall borrowings
during fiscal 2024
compared with comparable
period in the
prior year,
which was partially offset by lower interest
expense incurred on certain of our borrowings
for which we were able to negotiate lower
rates of interest during the latter half of fiscal 2023 and again towards the end of calendar 2023
.
Fiscal 2024 tax
expense was
$3.4 million
(ZAR 62.6
million) compared
to a tax
benefit of $2.3
million (ZAR 41.4
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 a reduction
in the enacted
South African corporate
income tax rate from
28% to 27% from January 2023 (but backdated to July 1, 2022), the tax expense recorded by our profitable South African operations,
a
deferred
tax
benefit
related
to
acquisition-related
intangible
asset
amortization,
non-deductible
expenses,
a
deferred
tax
benefit
related to an expense paid by Connect before
we acquired the business and which subsequently has been
determined to be deductible
for
tax purposes,
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.
Results of operations by operating segment and group costs
The composition of revenue and the contributions of our business activities to
Group Adjusted EBITDA are illustrated below:
Table 9
In U.S. Dollars
Year
ended June 30,
% of
% of
%
Operating Segment
$ ’000
total
$ ’000
total
change
Consolidated revenue:
Merchant
459,790
81%
416,562
79%
10%
Consumer
69,211
12%
62,801
12%
10%
Enterprise
46,897
8%
50,456
10%
(7%)
Subtotal: Operating segments
575,898
101%
529,819
101%
9%
Not allocated to operating segments
-
-
1,469
-
nm
Eliminations
(11,676)
(1%)
(3,317)
(1%)
252%
Total
consolidated revenue
564,222
100%
527,971
100%
7%
Group Adjusted EBITDA:
Merchant
(1)(2)
29,170
78%
29,008
117%
1%
Consumer
(1)(2)
12,679
34%
1,675
7%
657%
Enterprise
(2)
2,931
8%
3,256
13%
(10%)
Group costs
(7,844)
(21%)
(9,109)
(37%)
(14%)
Group Adjusted EBITDA (non-GAAP)
(3)
36,936
100%
24,830
100%
49%
(1) Segment
Adjusted EBITDA
for fiscal
2024, includes
retrenchment costs
for Merchant
$0.3
million and
Consumer of
$0.2
million.
(2) Lease expenses which
were previously presented on
a separate line in fiscal
2024 are now included
in Merchant, Consumer
and Enterprise Segment Adjusted EBITDA. The prior period has been re-presented
to conform with current period presentation.
(3) Group Adjusted EBITDA
is a non-GAAP measure, refer
to reconciliation below at
“-Results of Operations-Use of
Non-
GAAP Measures”.
Table 10
In South African Rand
Year
ended June 30,
% of
% of
%
Operating Segment
ZAR ’000
total
ZAR ’000
total
change
Consolidated revenue:
Merchant
8,599,450
81%
7,473,122
79%
15%
Consumer
1,294,632
13%
1,126,650
12%
15%
Enterprise
877,317
8%
905,181
10%
(3%)
Subtotal: Operating segments
10,771,399
102%
9,504,953
100%
13%
Not allocated to operating segments
-
-
26,354
-
nm
Eliminations
(218,166)
(2%)
(59,507)
-
267%
Total
consolidated revenue
10,553,233
100%
9,471,800
100%
11%
Group Adjusted EBITDA:
Merchant
(1)(2)
545,472
79%
520,403
117%
5%
Consumer
(1)(2)
237,362
34%
30,049
7%
690%
Enterprise
(2)
54,924
8%
58,413
13%
(6%)
Group costs
(146,815)
(21%)
(163,415)
(37%)
(10%)
Group Adjusted EBITDA (non-GAAP)
(3)
690,943
100%
445,450
100%
55%
(1) Segment Adjusted EBITDA for
fiscal 2024, includes retrenchment costs
for Merchant of ZAR 4.9 million
and Consumer of
ZAR 3.5 million.
(2) Lease expenses
which were previously
presented on a
separate line in
fiscal 2024 are
now included in
Merchant and Consumer
Segment Adjusted EBITDA. The prior period has been re-presented to conform
with current period presentation.
(3) Group Adjusted EBITDA
is a non-GAAP measure, refer
to reconciliation below at
“-Results of Operations-Use of
Non-
GAAP Measures”.
Merchant
Segment revenue
increased due
to the
increase in
prepaid airtime
vouchers sold
and other
ADP provided,
which was
partially
offset
by
lower
revenue
generated
from
a
decrease
in
certain
ADP
transaction
volumes
processed
(such
as
international
money
transfers). In ZAR, the increase in Segment Adjusted EBITDA is primarily
due to the higher sales activity.
Our Segment Adjusted EBITDA margin in fiscal 2024
and 2023 was 6.3% and 7.0%, 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
in fiscal
2024 compared
with fiscal
2023. Consumer
Segment Adjusted
EBITDA during
fiscal 2024
was also
impacted by
higher credit
losses (as
a result
of an increase
in originations)
and higher insurance-related claims (as a result of a higher number of
insurance policies) compared with fiscal 2023.
Our Segment Adjusted EBITDA margin in fiscal 2024
and 2023
was 18.3% and 2.7%, respectively.
Enterprise
Segment revenue decreased due to a lower number of hardware sales
in our POS hardware distribution business given the lumpy
nature of
bulk sales
as well
as lower
revenue generated,
which was
partially offset
by the increase
in prepaid
airtime vouchers
sold
and
other value-added
services provided
.
In ZAR,
the decrease
in Segment
Adjusted EBITDA
is primarily
due
to lower
hardware
sales.
Our Segment Adjusted EBITDA margin in fiscal 2024
and 2023 was 6.2% and 6.5%, respectively.
Group costs
Our group
costs primarily
include employee
related costs
in relation
to employees
specifically hired
for group
roles and
costs
related
directly
to
managing
the
US-listed
entity;
expenditures
related
to
compliance
with
the
Sarbanes-Oxley
Act
of
2002;
non-
employee directors’ fees; legal fees; group and US-listed related audit
fees; and directors’ and officers’ insurance premiums.
Our group costs for
fiscal 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 and travel expenses.
Presentation of Merchant, Consumer and Enterprise by segment for fiscal 2025, 2024 and 2023
The tables below present Merchant, Consumer and Enterprise revenue and
EBITDA for fiscal 2025,
2024 and 2023, including
lease charges, as well as the U.S. dollar/ ZAR exchange rates applicable
per fiscal quarter and year:
Table 11
Fiscal 2025
In United States dollars
Quarter 1
Quarter 2
Quarter 3
Quarter 4
$ ’000
$ ’000
$ ’000
$ ’000
$ ’000
Revenue
Merchant
123,651
145,209
128,781
128,957
526,598
Consumer
21,072
22,929
24,096
27,911
96,008
Enterprise
11,883
8,933
9,444
12,296
42,556
Subtotal: Operating segments
156,606
177,071
162,321
169,164
665,162
Eliminations
(3,038)
(855)
(871)
(697)
(5,461)
Total
consolidated revenue
153,568
176,216
161,450
168,467
659,701
Group Adjusted EBITDA:
Merchant
7,554
10,319
8,103
10,219
36,195
Consumer
4,396
4,342
6,333
8,878
23,949
Enterprise
(31)
1,287
Group costs
(2,949)
(2,820)
(1,772)
(3,202)
(10,743)
Group Adjusted EBITDA (non-GAAP)
9,363
11,810
12,797
16,718
50,688
Income and expense items: $1 = ZAR
17.72
17.85
18.40
17.87
17.90
Table 12
Fiscal 2024
In United States dollars
Quarter 1
Quarter 2
Quarter 3
Quarter 4
$ ’000
$ ’000
$ ’000
$ ’000
$ ’000
Revenue
Merchant
112,061
117,182
111,801
118,746
459,790
Consumer
15,580
16,707
17,904
19,020
69,211
Enterprise
9,467
11,921
11,322
14,187
46,897
Subtotal: Operating segments
137,108
145,810
141,027
151,953
575,898
Eliminations
(1,019)
(1,917)
(2,833)
(5,907)
(11,676)
Total
consolidated revenue
136,089
143,893
138,194
146,046
564,222
Group Adjusted EBITDA:
Merchant
6,910
7,497
7,420
7,343
29,170
Consumer
2,120
2,575
3,757
4,227
12,679
Enterprise
2,931
Group costs
(1,822)
(2,011)
(2,199)
(1,812)
(7,844)
Group Adjusted EBITDA (non-GAAP)
8,023
8,952
9,703
10,258
36,936
Income and expense items: $1 = ZAR
18.71
18.71
18.88
18.47
18.68
Table 13
Fiscal 2023
In United States dollars
Quarter 1
Quarter 2
Quarter 3
Quarter 4
$ ’000
$ ’000
$ ’000
$ ’000
$ ’000
Revenue
Merchant
96,771
105,034
108,414
106,343
416,562
Consumer
15,004
15,434
15,876
16,487
62,801
Enterprise
14,450
16,999
10,157
8,850
50,456
Subtotal: Operating segments
126,225
137,467
134,447
131,680
529,819
Not allocated to segments
-
-
-
1,469
1,469
Eliminations
(1,439)
(1,399)
(479)
-
(3,317)
Total
consolidated revenue
124,786
136,068
133,968
133,149
527,971
Group Adjusted EBITDA:
Merchant
6,406
6,693
7,645
8,264
29,008
Consumer
(1,893)
1,263
2,134
1,675
Enterprise
1,174
2,087
(340)
3,256
Group costs
(2,300)
(2,256)
(2,293)
(2,260)
(9,109)
Group Adjusted EBITDA (non-GAAP)
3,387
6,695
6,950
7,798
24,830
Income and expense items: $1 = ZAR
17.13
17.52
17.93
18.74
17.94
Use of Non-GAAP Measures
U.S. securities laws
require that when
we publish any
non-GAAP measures, we
disclose the reason
for using these
non-GAAP
measures and provide reconciliations to the most directly comparable GAAP measures. The presentation of Group Adjusted EBITDA
is
a
non-GAAP
measure.
We
provide
this
non-GAAP
measure
to
enhance
our
evaluation
and
understanding
of
our
financial
performance
and
trends.
We
believe
that
this
measure
is
helpful
to
users
of
our
financial
information
understand
key
operating
performance and
trends
in our business
because it
excludes certain
non-cash expenses
(including depreciation
and amortization
and
stock-based compensation charges) and income
and expenses that we consider once-off in nature.
Non-GAAP Measures
Group
Adjusted
EBITDA
is
earnings
before
interest,
tax,
depreciation
and
amortization
(“EBITDA”),
adjusted
for
non-
operational
transactions
(including
loss
on
disposal
of
equity-accounted
investments,
change
in
fair
value
of
equity
securities),
(earnings)
loss
from
equity-accounted
investments,
stock-based
compensation
charges
and
once-off
items.
We
included
an
intercompany interest expense in
our Consumer Segment Adjusted EBITDA
for eight months to February
28, 2025. We
commenced
utilizing our
February 2025
lending facilities
to fund
a portion
of our
Consumer lending
book from
March 1,
2025. Once-off
items
represents non-recurring income and
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 14
Years
ended June 30,
$ ’000
$ ’000
$ ’000
Loss attributable to Lesaka - GAAP
(87,634)
(17,440)
(35,074)
Loss from equity accounted investments
(114)
1,279
5,117
Net loss before loss from equity-accounted investments
(87,748)
(16,161)
(29,957)
Income tax expense (benefit)
(18,198)
3,363
(2,309)
Loss before income tax expense
(105,946)
(12,798)
(32,266)
Interest expense
21,453
18,932
18,567
Interest income
(2,596)
(2,294)
(1,853)
Reversal of allowance for doubtful EMI loan receivable
-
(250)
-
Net loss on disposal of equity-accounted investment
-
Change in fair value of equity securities
59,828
-
-
Operating (loss) income
(27,100)
3,590
(15,347)
Impairment loss
18,863
-
7,039
PPA amortization
(amortization of acquired intangible assets)
21,384
14,419
15,149
Depreciation
12,337
9,246
8,536
Stock-based compensation charges
9,550
7,911
7,309
Interest adjustment
(2,195)
-
-
Once-off items
(1)
17,826
1,853
1,922
Unrealized Loss FV for currency adjustments
(83)
Group Adjusted EBITDA - Non-GAAP
50,688
36,936
24,830
(1) The table below presents the components of once-off
items for the periods presented:
Table 15
Years
ended June 30,
$ ’000
$ ’000
$ ’000
Transaction costs related to Adumo, Recharger
and Bank Zero acquisitions and
certain compensation costs
16,159
2,325
-
Transaction costs
1,794
Indirect taxes provision
(127)
-
(Income recognized) Expenses incurred related to closure of legacy businesses
-
(952)
Non-recurring revenue not allocated to segments
-
-
(1,469)
Employee misappropriation of company funds
-
-
1,202
Separation of employee expense
-
-
Total once-off
items
17,826
1,853
1,922
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
we
incurred
significant
transaction
costs
related
to
the
acquisition
of
Adumo
and
Recharger over a number of quarters, and the transactions are generally
non-recurring
Indirect tax
provision release
relates to
the reversal
of a
non-recurring indirect
tax provision
created in
fiscal 2023
which was
resolved in
fiscal 2025
following settlement
of the
matter with
the tax
authority.
(Income recognized)
Expenses incurred
related to
closure
of
legacy
businesses
represents
(i)
gains
recognized
related
to
the
release
of
the
foreign
currency
translation
reserve
on
deconsolidation of a subsidiary
and (ii) costs incurred related to subsidiaries which we
are in the process of deregistering/ liquidation
and therefore we consider these costs non-operational and ad hoc in nature. Non-recurring revenue not allocated to segments includes
once off revenue recognized that we
believe does not relate to
either our Merchant or Consumer
divisions. Employee misappropriation
of company funds
represents a once
-off loss incurred.
We
incurred separation
costs related to
the termination of
certain senior-level
employees, including an
executive officer and
senior managers, during
the fiscal year and
we consider these specific
terminations to
be of a non-recurring nature.
Liquidity and Capital Resources
At June 30,
2025, our unrestricted
cash and cash
equivalents were $76.5
million and comprised
of ZAR-denominated
balances
of ZAR
1.0 billion
($55.2 million),
U.S. dollar-denominated
balances of
$3.2 million,
and other
currency deposits,
primarily Indian
rupee (related to the sale of MobiKwik), of $18.1 million, all amounts translated at exchange rates
applicable as of June 30, 2025. The
increase in our unrestricted cash balances from June 30, 2024, was primarily due to the positive contribution from all of our operating
segments,
proceeds from the sale of MobiKwik,
and utilizing of our borrowing facilities, which
was partially offset by the utilization
of cash reserves
to fund certain
scheduled and other
repayments of our
borrowings, settle the
cash portion of
the purchase consideration
related to
our various
acquisitions, purchase
ATMs
and vaults
and other
items of
capital expenditure,
pay annual
bonuses, pay
for
expenses included in our group costs, and to make an investment in working
capital.
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. Refer to Note 12
to our consolidated financial statements
for the year ended June 30, 2025, for additional information related to our
borrowings.
Our ability to make payments on our indebtedness and to
fund our operations may be dependent upon the operating
income and
the distribution
of funds
from our
subsidiaries. However,
as local laws
and regulations
and/or the
terms of our
indebtedness restrict
certain
of
our
subsidiaries
from
paying
dividends
and
transferring
assets
to
us,
there
is no
assurance
that
our
subsidiaries
will
be
permitted to provide us with sufficient dividends, distributions
or loans when necessary.
We
will make
a cash
payment of
ZAR 175.0
million ($9.9
million translated
at exchange
rates as
of June
30, 2025)
in March
2026 related to the cash portion of the deferred consideration due to the seller of
Recharger.
Available short-term
borrowings
Summarized below are our short-term facilities available and utilized as of
June 30, 2025:
Table 16
RMB GBF
RMB Other
Nedbank
$ ’000
ZAR ’000
$ ’000
ZAR ’000
$ ’000
ZAR ’000
Total
short-term facilities available, comprising:
Total overdraft
39,475
700,901
-
-
-
-
Indirect and derivative facilities
(1)
-
-
5,672
100,718
8,817
156,554
Total
short-term facilities available
39,475
700,901
5,672
100,718
8,817
156,554
Utilized short-term facilities:
Overdraft
24,469
434,461
-
-
-
-
Indirect and derivative facilities
-
-
1,864
33,089
2,110
Total
short-term facilities available
24,469
434,461
1,864
33,089
2,110
Interest rate, based on South African prime rate
10.25%
N/A
N/A
(1)
Other
facilities
include
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.
In terms of
a commitment provided
to the lender
under the CTA
entered into on
February 27, 2025,
we have undertaken
not to
utilize more than ZAR 5.0 million ($0.3 million) of the Nedbank Facility.
Long-term borrowings
We have
aggregate long-term borrowing
outstanding of ZAR 3.6 billion
($200.8 million translated at
exchange rates as of
June
30, 2025) as
described in Note
12. These borrowings
include outstanding
long-term borrowings
obtained by Lesaka
SA of ZAR
3.1
billion, which
was used
to refinance
our previous
long-term borrowings.
We
have utilized
all of
these long-term
borrowings. As
of
September 29, 2025, we also have a revolving credit facility, of ZAR 400.0 million which is utilized to
fund a portion of our merchant
finance loans receivable
book and an asset
backed facility of ZAR
227.0 million which
is utilized to partially
fund the acquisition of
POS devices and vaults.
Restricted cash
We have
also entered into cession and pledge
agreements with Nedbank related to
our Nedbank indirect credit facilities
and we
have ceded and pledged
certain bank accounts to
Nedbank. The funds included
in these bank accounts
are restricted as they
may not
be withdrawn without the express
permission of Nedbank. Our cash,
cash equivalents and restricted
cash presented in our
consolidated
statement of cash flows as of June 30, 2025, includes restricted cash of $0.1 million
that has been ceded and pledged.
Arrangement with African Bank to fund our ATMs
In
September
2024,
we
entered into
an
arrangement
with African
Bank Limited
(“African
Bank”)
and
certain
cash-in-transit
service providers
to fund
our ATMs.
Under this
arrangement, African
Bank will
use its
cash resources
to fund
our ATMs
and it
is
specifically recorded that the cash in our ATMs are African Bank’s property.
Therefore, as we have not utilized a facility to
obtain the
cash, and do not own or control the cash for an extended period
of time, we do not record cash or cash equivalents and borrow
ings in
our
consolidated statement
of financial
position. Cash
withdrawn
from our
ATMs
by our
EPE customers
and other
consumers are
settled through the interbank settlement
system from the ATM
users bank account to African
Bank’s bank
accounts. We
pay African
Bank a
monthly fee
for the
service provided
which is calculated
based on
the cumulative
daily outstanding
balance of
cash utilized
multiplied by the South African prime interest rate less 1%.
We are exposed
to the risk of cash lost while it is in our ATMs
(i.e. from
theft) and are required to repay African Bank for any shortages.
Cash flows from operating activities
Net cash used in operating activities during fiscal 2025 was $9.1 million (ZAR 163.3 million) compared to net cash provided by
operating activities of $28.8 million
(ZAR 537.9 million) during fiscal
2024. Excluding the impact of
income taxes, our cash used
in
operating activities during fiscal 2025 includes
cash utilized for the settlement
of working capital movements within our
Merchant and
Enterprise businesses related to quarter-end transaction processing activities and which were settled in the following week (our fourth
quarter of fiscal 2024 closed on
a Sunday), and the net growth in our
Consumer and Merchant finance loans
receivable books, which
was partially offset by the positive contribution from our
Merchant and Consumer businesses.
Net cash
provided by
operating activities
during fiscal
2024 was
$28.8 million
(ZAR 537.9
million) compared
to $0.4
million
(ZAR 7.4 million) during fiscal
2023. Excluding the impact of
income taxes, our cash
provided by operating activities during
the fiscal
2024 was positively impacted by the contribution from Merchant and
Consumer, the sale of Cell C inventory and temporary
working
capital movements within
our merchant business
as a result
of quarter-end
transaction processing activities
closing on a
Sunday and
which were settled in the following week, which was partially offset
by growth in our consumer finance loans receivable book
During fiscal 2025,
we paid our
first provisional South
African tax payments
of $4.2 million
(ZAR 76.1 million)
related to our
tax year. During fiscal 2025, we
also made our second
provisional South African tax
payments
of $2.2 million (ZAR
39.3 million
related to our 2025
tax year and received
tax refunds of $0.44
million (ZAR 7.2 million).
We
also paid taxes totaling
$0.3 million in
other tax jurisdictions, primarily in the Botswana and Namibia.
During fiscal 2024,
we paid our
first provisional South
African tax payments
of $2.7 million
(ZAR 49.5 million)
related to our
tax year. During fiscal 2024, we
also made our second
provisional South African tax
payments of $2.9 million
(ZAR 52.7 million
related to our
2024 tax year
and received
tax refunds of
$0.0 million (ZAR
0.8 million).
We
also paid taxes
totaling $0.4
million in
other tax jurisdictions, primarily in the Botswana.
During fiscal 2023,
we paid our
first provisional South
African tax payments
of $3.0 million
(ZAR 50.8 million)
related to our
tax year. During fiscal 2023, we
also made our second
provisional South African tax
payments
of $4.1 million (ZAR
76.1 million
related to our
2023 tax year
and received
tax refunds of
$0.2 million (ZAR
3.8 million).
We
also paid taxes
totaling $0.4
million in
other tax jurisdictions, primarily in the Botswana.
Taxes paid during
fiscal 2025, 2024 and 2023 were as follows:
Table 17
Year
ended June 30,
$
$
$
ZAR
ZAR
ZAR
‘000
‘000
‘000
‘000
‘000
‘000
First provisional payments
4,182
2,663
2,955
76,118
49,534
50,798
Second provisional payments
2,198
2,861
4,079
39,279
52,721
76,089
Taxation paid related
to prior years
4,081
12,187
Tax refund received
(438)
(38)
(210)
(7,173)
(768)
(3,756)
Total South African
taxes paid
6,167
6,127
6,839
112,305
113,674
123,404
Foreign taxes paid
5,738
7,063
6,482
Total
tax paid
6,481
6,506
7,200
118,043
120,737
129,886
We expect to make additional provisional
income tax payments in South Africa related to our 2025 tax year in the first quarter of
fiscal 2026, however, the amount was not quantifiable
as of the date of the filing of this Annual Report.
Cash flows from investing activities
Cash used
in investing
activities for
fiscal 2025
included capital
expenditures of
$17.2 million
(ZAR 307.9
million), primarily
due to the acquisition of vaults and POS devices.
We also incurred expenditures of
$3.9 million (ZAR 69.8 million), primarily related
to
the
capitalization
of
development
costs,
during
fiscal
2025.
During
fiscal
2025,
we
paid
$12.9
million
related
to acquisition
of
certain businesses, including Adumo and Recharger. We
also received $16.4 million related to the sale of our
entire equity investment
in MobiKwik in June 2025.
Cash used
in investing
activities for
fiscal 2024
included capital
expenditures of
$12.7 million
(ZAR 236.6
million), primarily
due
to
the
acquisition
of
vaults
and
POS
devices.
During
fiscal
2024,
we
received
proceeds
of
$3.5
million
related
to
the
sale of
remaining interest in Finbond and $0.25 million related to the second (and final) tranche from the
disposal of our entire equity interest
in Carbon.
Cash used
in investing
activities for
fiscal 2023
included capital
expenditures of
$16.2 million
(ZAR 289.8
million), primarily
due to the
acquisition of ATMs
.
During fiscal 2023,
we received proceeds
of $0.25 million
related to the
first tranche (of
two) from
the disposal of our entire equity interest in Carbon and $0.4 million related to
the sale of minor positions in Finbond.
Cash flows from financing activities
During
fiscal
2025,
we
utilized
$98.6
million
from
our
South
African
overdraft
facilities
to
fund
our
ATMs
and
our
cash
management business through
Connect as well
as to partially
fund the acquisition
of Recharger
and for the
February 2025 refinance
of certain of our facilities. We
repaid $89.2 million of those facilities,
including towards our refinanced facilities.
We utilized
$190.1
million of our borrowings
to settle a portion
of the Adumo purchase
consideration, pay certain transaction
expenses, repay Adumo’s
borrowings,
repurchase
shares
of
our
common
stock,
fund
the
acquisition
of
certain
capital
expenditures,
for
working
capital
requirements
and
for
the
February
refinance
of
certain
of
our
facilities.
We
repaid
$131.2
million
of
long-term
borrowings
towards our refinanced facilities and in accordance with our repayment schedule, paid
$7.2 million to settle Adumo’s borrowings, and
settled a portion
of our revolving credit
facility utilized. We also paid an
origination fee of $1.0
million to secure
additional borrowings
as well as paid dividends to the non-controlling interest of $0.4 million.
During fiscal 2024, we utilized approximately $183.0 million
from our South African overdraft facilities to fund our ATMs
and
repaid
$199.6
million
of
these facilities.
We
utilized
$23.7
million
of
our
long-term
borrowings
to
fund
the
acquisition
of
certain
capital
expenditures
and
for
working
capital
requirements.
We
repaid
$20.1
million
of
these
long-term
in
accordance
with
our
repayment schedule as
well as to settle
a portion of
our revolving credit facility
utilized. We
received $0.1 million
from the exercise
of stock options. We also paid $1.5 million to repurchase shares from employees in order for the employees to settle taxes due related
to the vesting of shares of restricted stock.
During
fiscal
2023,
we
utilized
$520.1
million
from
our
South
African
overdraft
facilities
to
fund
our
ATMs
and
our
cash
management
business
through
Connect
and
repaid
$547.3
million
of
these
facilities.
We
utilized
$24.4
million
of
our
long-term
borrowings
to settle $10.5 million of
our revolving credit facilities, fund
our merchant finance loans receivable
business, and to fund
the
acquisition
of
certain
capital
expenditures.
We
repaid
$17.5
million
of
these
long-term,
including
$10.5
million
to
settle
our
revolving credit balance in full. We
received $0.5 million from the exercise of stock options. We
also paid $1.3 million to repurchase
shares from
employees in
order for
the employees to
settle taxes due
related to the
vesting of
shares of restricted
stock and
to settle
the strike price due and taxes due related to the exercise of stock options.
Contractual Obligations
The following table sets forth our contractual obligations as of June 30, 2025:
Table 18
Payments due by Period, as of June 30, 2025 (in $ ’000s)
Total
Less than 1
year
2-3 years
3-5 years
Thereafter
Short-term credit facilities
(A)
24,469
24,469
-
-
-
Long-term borrowings
Principal repayments
(A)(B)
200,769
11,956
31,445
157,368
-
Interest payments
(A)(B)
38,652
10,739
19,475
8,438
-
Operating lease liabilities, including imputed interest
(C)
11,660
4,852
5,460
1,348
-
Purchase obligations
2,872
2,872
-
-
-
Capital commitments
-
-
-
Deferred purchase consideration due to seller of
Recharger
(D)
9,856
9,856
-
-
-
Other long-term obligations reflected on our balance
sheet
(E)(F)
2,991
-
-
-
2,991
Total
291,426
64,901
56,380
167,154
2,991
(A) - Refer to Note 12 to our audited consolidated financial statements.
(B) - Long-term
borrowings principal
repayments for the
3-5 year period
includes all unamortized
fees as of
June 30, 2025.
Interest payments based on
applicable interest rates as of
June 30, 2025, and expected
outstanding long-term borrowings over
the period. All amounts converted from ZAR to USD using the June 30, 2025,
USD/ ZAR exchange rate.
(C) - Refer to Note 8 to our audited consolidated financial statements.
(D) - Represents the
deferred consideration of ZAR
175 million due in
March 2026 to the
seller of Recharger.
Refer to Note
3 to our audited consolidated financial statements.
Translated at exchange rates applicable as of June
30, 2025.
(E) - Includes policyholder liabilities of $3.2 million related to our insurance business. All amounts are translated at exchange
rates applicable as of June 30, 2025.
(F) -
We
have excluded
cross-guarantees in
the aggregate
amount of
$0.1 million
issued as
of June
30, 2025,
to RMB
and
Nedbank
to secure
guarantees it
has issued
to third
parties on
our behalf
as the
amounts that
will be
settled in
cash are
not
known and the timing of any payments is uncertain.
Off-Balance Sheet Arrangements
We have no off
-balance sheet arrangements.
Capital Expenditures
Capital expenditures for the years ended June 30, 2025, 2024 and 2023
were as follows:
Table 19
$
$
$
ZAR
ZAR
ZAR
’000
’000
’000
’000
’000
’000
Merchant
18,117
11,202
12,812
324,350
209,302
229,847
Consumer
1,500
1,317
3,170
26,855
24,607
56,870
Enterprise
1,482
26,532
2,728
3,122
Total
21,099
12,665
16,156
377,737
236,637
289,839
Our capital expenditures
for fiscal 2025,
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, except
for certain
capital
expenditures
of
POS
devices
and
vaults,
made
by
Connect
which
were
funded
through
the
utilization
of
asset-backed
borrowings.
We
had outstanding capital
commitments as of June
30, 2025, of $0.2
million. In addition
to these capital expenditures,
we expect that
capital spending for fiscal
will include acquisition of
POS devices, vaults,
computer software, computer and office
equipment,
as well
as for
our ATM
infrastructure
and branch
network in
South Africa
.
Acquisition
of these
assets will
be funded
through the use of internally-generated funds and available
facilities.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A.
QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
We seek to manage our exposure to currency exchange, translation, interest rate, credit, microlending credit and equity price and
liquidity risks as discussed below.
Currency Exchange Risk
We are subject to currency exchange risk because we purchase components for vaults, that we assemble, and inventories that we
are required
to settle
in other
currencies, primarily
the euro,
renminbi, and
U.S. dollar.
We
have used
forward contracts
in order
to
limit our 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.
We
had no outstanding foreign exchange contracts as of June 30,
2025 and 2024.
Translation Risk
Translation risk relates to the risk that our
results of operations will vary significantly as
the U.S. dollar is our
reporting currency,
but we earn a significant amount of our revenues and
incur a significant amount of our 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 our
control, there can
be no assurance
that future fluctuations will not adversely affect our results
of operations and financial condition.
Interest Rate Risk
As a result
of our normal borrowing
activities, our operating results
are exposed to fluctuations
in interest rates,
which we manage
primarily through regular
financing activities. Interest
rates in South
Africa have been
trending downwards
in recent quarters and
as
of the date of this Annual Report, are expected to decline by a further 25 basis points in the
first quarter of calendar 2026 and stabilize
at that
level for
the remainder
of that
year.
We
periodically evaluate
the cost
and effectiveness
of interest
rate hedging
strategies to
manage
this
risk.
We
generally
maintain
investments
in
cash
equivalents
and
held
to
maturity
investments
and
have
occasionally
invested in marketable securities.
We have
short and long-term borrowings in South
Africa as described in Note 12
to our consolidated financial statements 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 June 30,
2025, 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
June 30, 2025. 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 June 30,
2025, are shown. The
selected 1% hypothetical change does
not reflect what could be considered
the best-
or worst-case scenarios.
Table 20
As of June 30, 2025
Annual expected
interest charge
($ ’000)
Hypothetical
change in
interest rates
Impact of
hypothetical
change in
interest rates
($ ’000)
Estimated annual
expected interest
charge after
hypothetical change
in interest rates
($ ’000)
Interest on South Africa borrowings
23,987
1%
2,262
26,249
(1%)
(2,262)
21,725
Credit Risk
Credit risk
relates to
the risk of
loss that we
would incur
as a
result of non-performance
by counterparties.
We
maintain credit
risk
policies
in
respect
of
our
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
our
management
deems
appropriate.
With
respect to
credit risk
on financial
instruments,
we maintain
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
We are exposed
to credit risk in our 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 line
with local regulations.
We
consider this policy to be appropriate because the affordability test we perform 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 our 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
We
maintain an allowance
for doubtful finance
loans receivable related
to its Merchant
services segment with
respect to short-
term loans
to qualifying
merchant customers.
Our risk
management procedures
include adhering
to our
proprietary lending
criteria
which uses an online-system loan
application process, obtaining necessary customer transaction-history data and
credit bureau checks.
We
consider these procedures to be appropriate because it
takes into account a variety of
factors such as the customer’s credit capacity
and customer-specific risk factors when originating a loan.
Equity Securities Price Risk
Equity price risk relates to the risk
of loss that we would incur as
a result of the volatility in the exchange
-traded price of equity
securities that we hold. As of June 30, 2025, we did not have any equity securities that
were exchange-traded and held as available for
sale. Historically, exchange
-traded equity securities held as available for sale were expected to be held for an extended period of time
and we were
not concerned with
short-term equity price volatility
with respect to
these securities provided that
the underlying business,
economic and management characteristics of the company remained
sound.
The market price of these exchange-traded equity securities may fluctuate for a variety of reasons
and, consequently, the amount
we may obtain in a subsequent sale of these securities may significantly differ
from the reported market value.
Equity Securities Liquidity Risk
Equity liquidity risk
relates to the
risk of loss
that we would
incur as a
result of the
lack of liquidity
on the exchange
on which
those securities are
listed.
We
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.
We monitor these investments for impairment and make appropriate reductions in carrying value when an impairment is deemed
to be other-than-temporary.
As of June 30, 2025, we did not own any exchange-traded equity securities.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8.
FINANCIAL STATEMENTS
AND SUPPLEMENTARY
DATA
Our audited
consolidated financial
statements, together
with the
reports
of our independent
registered public
accounting firms,
appear on pages through of this Annual Report.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls
and procedures
Under the
supervision and
with the
participation of
our management,
including our
Executive Chairman
and our
Group Chief
Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as
such term is defined under Rule 13a-15(e)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our Executive Chairman and
Group Chief
Financial Officer
concluded that
our disclosure
controls and
procedures were
not effective
as of
June 30,
2025, due
to
the material weaknesses in internal control over financial reporting as described
below.
Internal Control over Financial Reporting
Internal control over financial reporting
is a process designed
by, or under the supervision of, our
Executive Chairman and Group
Chief
Financial
Officer,
or
persons
performing
similar
functions,
and
effected
by
our
board
of
directors,
management,
and
other
personnel, to provide
reasonable assurance regarding
the reliability of
financial reporting and
the preparation of
financial statements
for external purposes in accordance with U.S. GAAP.
Internal control over financial reporting includes
those policies and procedures that
(1) pertain to the
maintenance of records that,
in reasonable detail, accurately and fairly
reflect the transactions and dispositions of
our assets; (2) provide reasonable
assurance that
transactions are recorded as
necessary to permit preparation of
financial statements in accordance
with U.S. GAAP,
and that receipts
and expenditures of the company are being made only in accordance with authorizations of our officers and directors; and (3) provide
reasonable assurance regarding prevention
or timely detection of unauthorized
acquisition, use or disposition
of our assets that could
have a material effect on our audited consolidated financial statements.
Inherent Limitations in Internal Control
over Financial Reporting
Internal control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of
its inherent
limitations.
Internal
control
over
financial reporting
is a
process that
involves
human
diligence
and
compliance
and
is
subject
to
lapses
in
judgment and
breakdowns
resulting
from human
failures.
Internal
control over
financial
reporting
also
can
be
circumvented by collusion or improper
management override. Because of such
limitations, there is a risk that
material misstatements
may not
be prevented
or detected
on a
timely basis
by internal
control over
financial reporting.
However,
these inherent
limitations
are known features of the financial reporting
process. Therefore, it is possible to design safeguards into
the process to reduce, though
not eliminate, this risk.
Management’s
Report on Internal Control Over Financial Reporting
Management,
including
our
Executive
Chairman
and
our
Group
Chief
Financial
Officer,
is
responsible
for
establishing
and
maintaining
adequate
internal
control
over
our
financial
reporting.
Management
conducted
an
evaluation
of
the
effectiveness
of
internal control over financial reporting based on criteria established in Internal Control - Integrated Framework
(2013) issued by the
Committee
of Sponsoring
Organizations
of the
Treadway
Commission
(COSO). Based
on this
evaluation
and as
described
below,
management concluded that our internal control over financial reporting was not
effective as of June 30, 2025.
As permitted by
the rules of
the SEC, management
has excluded Adumo
and Recharger
from its evaluation
for the year
ended
June 30, 2025, the year of acquisition. As of June 30, 2025, Adumo and Recharger’s total assets represented approximately 7% of our
consolidated total
assets and approximately
13% of consolidated
total current
assets. Their total
revenues constituted
approximately
8% of our consolidated revenue
and their operating income constituted
approximately 11% of our
consolidated operating loss for the
year ended June 30, 2025.
A material
weakness is
a deficiency,
or a
combination of
deficiencies, in
internal control
over financial
reporting, such
that a
reasonable
possibility
exists that
a
material
misstatement
of
our
annual
or
interim
financial statements
would
not
be
prevented
or
detected on a timely basis.
As of June 30, 2025, we identified material weaknesses related to:
●
Our
Consumer
lending
process,
specifically
insufficient
risk
assessment
and
monitoring
activities
relating
to
changes
in
systems
and
processes,
insufficient
controls
over
internal
information
and
information
from
service
organizations,
and
insufficient design
and implementation
of ITGCs,
controls over
service organizations
and process
level controls,
resulting
in ineffective
process level
controls, including
a lack
of validation
of the
completeness and
accuracy of
information used
within the process;
●
Our payroll process, specifically
insufficient risk assessment
and monitoring activities relating
to changes over the
transfer
of
ownership
to
the
centralized
payroll
processes,
insufficient
controls
over
information
from
service
organizations,
and
insufficient design and implementation of ITGCs, controls over service organizations and process level controls resulting in
ineffective process level controls including a lack of validation of
the completeness and accuracy of information used within
this process;
●
Our
annual
goodwill
impairment
process,
specifically
related
to
insufficient
risk
assessment
and
ineffective
design
and
implementation of controls resulting in ineffective process level
controls;
●
Our business
combination process,
specifically insufficient
risk assessment
and ineffective
design and
implementation of
controls
over the
purchase price
allocation of
the Adumo
and Recharger
acquisitions including
insufficient
controls over
information resulting in ineffective process level controls including a lack of validation of the completeness and accuracy
of
information used;
●
Our
revenue
recognition
process
relating
to
prepaid
airtime
sold
and
processing
fees
relating
to
certain
agreements,
specifically insufficient risk assessment and ineffective design and implementation of
controls related to our judgement over
revenue recognized either as principal versus as agent resulting in ineffective
process level controls.;
●
Our journal entry process, specifically relating to insufficient risk assessment, and ineffective design and implementation of
controls including
insufficient controls
over information
resulting in
ineffective process
level controls
including a
lack of
validation of the completeness
of the journal entry
population and a lack of
validation of the completeness
and accuracy of
information used within the process; and
●
An insufficient number of experienced and trained resources to execute
on their internal control responsibilities resulting in
ineffective
design, implementation
and operating
effectiveness of
process level
controls for
processes in
the scope
of our
internal control over financial reporting evaluation.
Of the
material weaknesses
described above,
the material
weaknesses related
to the
revenue recognition
process resulted
in a
material corrected misstatement for the
year ended June 30,
2025 and a restatement for
each of the quarters
ended September 30, 2024,
December 31,
2024 and
March 31,
2025 of
our revenue
and cost
of goods
sold, IT
processing, servicing
and support,
exclusive of
depreciation and amortization. There
was no impact on the
Company’s reported
operating income (loss), net
loss or loss per share
in
any of such quarters.
Of the material weaknesses described above, the material weaknesses
related to the annual goodwill impairment process resulted
in
a
corrected
material
misstatement
and
a
corrected
immaterial
misstatement
of
goodwill
and
impairment
loss in
the
Company’s
consolidated financial statements for the year ended June 30, 2025
.
Of the material weaknesses described above, the
material weaknesses related to the journal entry process
resulted in a corrected
immaterial misstatement
to our
revenue and
cost of
goods sold,
IT processing,
servicing and
support, exclusive
of depreciation
and
amortization in the Company’s consolidated
financial statements for the year ended June 30, 2025.
Of the material weaknesses described above, the material weakness related to an insufficient
number of experienced and trained
resources to
execute on
their internal
control responsibilities
also resulted
in a
corrected material
misstatement of
current and
long-
term borrowings in the Company’s
consolidated financial statements for the year ended June 30, 2025.
All
other
material
weaknesses
did
not
result
in
any
corrected
material
or
immaterial
misstatements,
however
a
reasonable
possibility exists that material misstatements in the Company’s consolidated financial statements may not be prevented or detected on
a timely basis.
Lesaka’s independent registered public accounting
firm, KPMG Inc, who audited the consolidated financial statements included
in this Annual
Report, has expressed
an adverse report
on the operating
effectiveness of our
internal control over
financial reporting
as of June 30, 2025, which appears in Part II, Item 9 of this Annual Report.
Remediation of Newly Identified Material Weaknesses
To address the material weaknesses, our management,
including our Information Technology
(“IT”) team, has commenced with
remediation of these material
weaknesses including, but not
limited to: (1) developing
and implementing a comprehensive
remediation
plan that includes specific actions aimed at enhancing the
understanding of control owners related to the operation and
importance of
internal
controls
over
financial
reporting,
including
the principles
and
requirements
of
each control,
with
a focus
on
the impacted
processes
including
controls
over
service
organizations,
ITGCs,
and
other
process
level
controls;
(2)
mandating
improved
risk
assessment
procedures
with governance
requirements
upon implementing
new systems
within the
Group together
with the
design,
implementation and monitoring
of control activities;
(3) the recruitment
of additional appropriately
skilled resources across
the Finance
and
Risk
and
Compliance
disciplines
coupled
with
the
further
upskilling
and
training
of
existing
resources
responsible
for
the
execution
of
key
controls
as
well
as
a
focus
on
a
greater
degree
of
automation
of
controls
throughout
the
organization,
(4)
the
embedding of
controls compliance
in the
key performance
indicators of
senior executives
across the
business and
(5) collaborating
closely with internal and external assurance partners to ensure the robustness of
our remediation plan.
While we are actively taking steps
to implement our remediation plan, the material weaknesses
will not be deemed resolved until
the enhanced controls
operate for a
sufficient period of
time and management
has confirmed through testing
that the same
are operating
effectively.
We
will continue to
monitor the remediation
plan's effectiveness
and adjust
our efforts
as needed. As
we assess and
test
our internal control over financial reporting, we may identify the need for additional
measures or modifications to the plan.
Remediation of Previously Identified Material Weaknesses
Management has,
however, made
progress in remediating
the material weaknesses
identified in the
previous fiscal year
related
to the failure of
specific ITGCs for certain
IT systems to operate
effectively as well
as the insufficient
design and implementation
of
controls and policies
and procedures
related to the
goodwill impairment
assessment. As a
result, controls
in the areas
of user access
and
program-change
management
for
associated
IT
systems
that
support
our
financial
reporting
processes
have
been
remediated.
Revised procedures
have been
implemented related
to the
validation of
completeness and
accuracy of
the data used
in the
goodwill
impairment model together with additional procedures implemented to enhance the precision levels in evaluating certain assumptions
utilized in this model. Even though the controls for the goodwill impairment process have been strengthened,
it has not yet been fully
remediated as model errors persisted.
Changes in Internal Control over Financial Reporting
Except as described above,
there were no changes
in our internal control over
financial reporting during the
quarter ended June
30, 2025, that
have materially affected,
or are reasonably
likely to materially
affect, our
internal control over
financial reporting.
As
stated,
management
has
excluded
Adumo and
Recharger
from
its evaluation
of the
effectiveness
of
internal control
over
financial
reporting for
the year
ended June
30, 2025,
the year of
acquisition, however
continues to
evaluate Adumo
and Recharger’s
internal
control
over
financial
reporting
(refer
to
Item
1A - “Risk
Factors-Failure
to
maintain
effective
internal
control
over
financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act).
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the shareholders
and Board of Directors of Lesaka Technologies,
Inc.
Opinion on Internal Control Over Financial Reporting
We have audited
Lesaka Technologies, Inc.
and subsidiaries’ (the Company) internal control over financial reporting as of
June
30, 2025,
based on
criteria established
in
Internal Control
- Integrated
Framework (2013)
issued by
the Committee
of Sponsoring
Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses, described below, on the
achievement of the objectives
of the control
criteria, the Company has
not maintained effective internal
control over financial reporting
as of
June 30,
2025, based
on criteria
established
in
Internal Control
- Integrated
Framework (2013)
issued by
the Committee
of
Sponsoring Organizations of the Treadway
Commission.
We
also have
audited, in
accordance with
the standards
of the
Public Company
Accounting Oversight
Board (United
States)
(PCAOB),
the
consolidated
balance
sheets
of
the
Company
as
of
June
30,
and
2024,
the
related
consolidated
statements
of
operations, comprehensive loss or
income, changes in equity,
and cash flows for
each of the years in the
two-year period ended June
30, 2025, and
the related notes
(collectively, the consolidated financial statements), and
our report dated
September 29, 2025
expressed
an unqualified opinion on those consolidated financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that
a material misstatement of the
company’s annual
or interim financial statements will
not be prevented
or detected on a timely basis. Material weaknesses related to risk assessment, sufficient experienced and trained resources, design and
implementation
of
control
activities,
information
and
communication,
and
monitoring
have
been
identified
and
included
in
management’s
assessment.
The
material
weaknesses
were
considered
in
determining
the
nature,
timing,
and
extent
of
audit
tests
applied
in our
audit of
the 2025
consolidated financial
statements, and
this report
does not
affect
our report
on those
consolidated
financial statements.
The Company acquired the Adumo (RF) Proprietary Limited,
Recharger Proprietary Limited, Master Fuel Software and Support
Proprietary
Limited
and
Genisus
Risk
Proprietary
Limited
(the
“Acquisitions”)
during
2025,
and
management
excluded
from
its
assessment
of
the
effectiveness
of
the
Company’s
internal
control
over
financial
reporting
as
of
June
30,
2025,
the
Acquisitions’
internal
control
over
financial
reporting
associated
with
total
assets
of
$22,840
thousand
and
total
revenues
of
$51,651
thousand
included in
the consolidated
financial statements
of the
Company as
of and
for the
year ended
June 30,
2025. Our
audit of
internal
control over
financial reporting
of the
Company
also excluded
an evaluation
of the
internal control
over financial
reporting
of the
Acquisitions.
Basis for Opinion
The
Company’s
management
is
responsible
for
maintaining
effective
internal
control
over
financial
reporting
and
for
its
assessment of
the effectiveness
of internal
control over
financial reporting,
included in
the accompanying
Management’s
Report on
Internal Control over Financial Reporting. Our
responsibility is to express
an opinion on the Company’s internal control over financial
reporting based
on our
audit. We
are a
public accounting
firm registered
with the
PCAOB and
are required
to be
independent with
respect to the
Company in accordance
with the U.S. federal
securities laws and
the applicable rules
and regulations of
the Securities
and Exchange Commission and the PCAOB.
We conducted
our audit in accordance with
the standards of the PCAOB. Those
standards require that we plan
and perform the
audit to
obtain reasonable
assurance about
whether effective
internal control
over financial
reporting was
maintained in
all material
respects. Our
audit of internal
control over financial
reporting included
obtaining an understanding
of internal control
over financial
reporting,
assessing
the
risk
that
a
material
weakness
exists,
and
testing
and
evaluating
the
design
and
operating
effectiveness
of
internal control
based on the
assessed risk. Our
audit also included
performing such other
procedures as we
considered necessary
in
the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A
company’s
internal
control
over
financial
reporting
is
a
process
designed
to
provide
reasonable
assurance
regarding
the
reliability of financial
reporting and the
preparation of financial
statements for external
purposes in accordance with
generally accepted
accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted
accounting principles, and that
receipts and expenditures of
the company are being made
only in
accordance
with
authorizations
of
management
and
directors
of
the
company;
and
(3)
provide
reasonable
assurance
regarding
prevention or timely detection of
unauthorized acquisition, use, or disposition
of the company’s assets that could have
a material effect
on the financial statements.
Because
of
its
inherent
limitations,
internal
control
over
financial
reporting
may
not
prevent
or
detect
misstatements.
Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ KPMG Inc.
Johannesburg, Republic of South Africa
September 29, 2025

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ITEM 9B. OTHER INFORMATION
ITEM 9B.
OTHER INFORMATION
Our Section 16 officers and directors, as defined in Rule 16a-1(f) of the Securities
Exchange Act of 1934 (the “Exchange Act”),
may from time to time
enter into plans for the
purchase or sale of our
common stock that are
intended to satisfy the affirmative defense
conditions of Rule 10b5-1(c) of the Exchange Act. During the
quarter ended June 30, 2025, no officers or directors, as defined in
Rule
16a-1(f),
adopted
,
modified
,
or
terminated
a
“Rule
10b5-1
trading
arrangement”
or
a
“non-Rule
10b5-1
trading
arrangement,”
as
defined in Item 408 of Regulation S-K.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Information
about
our
executive
officers
is
set
out
in
Part
I,
Item
under
the
caption
“Our
Executive
Officers.”
The
other
information required
by this
Item is incorporated
by reference
to the
sections of
our definitive
proxy statement
for our
2025 annual
meeting of shareholders entitled “Board of Directors and Corporate
Governance” and “Additional Information.”

---

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the sections of our definitive proxy
statement for our 2025
annual meeting of shareholders entitled
“Executive Compensation,” “Board of
Directors and Corporate Governance-Compensation
of Directors” and “-Remuneration Committee Interlocks and Insider Participation.”

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER
MATTERS
The information required by this Item is incorporated by reference to the sections of our definitive
proxy statement for our 2025
annual
meeting
of
shareholders
entitled
“Security
Ownership
of
Certain
Beneficial
Owners
and
Management”
and
“Equity
Compensation Plan Information.”

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13.
CERTAIN
RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this Item is incorporated by reference to the sections of our definitive proxy
statement for our 2025
annual
meeting
of
shareholders
entitled
“Certain
Relationships
and
Related
Transactions”
and
“Board
of
Directors
and
Corporate
Governance.”

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14.
PRINCIPAL ACCOUNTANT
FEES AND SERVICES
The information required by this Item is incorporated by reference to the sections of our definitive proxy
statement for our 2025
annual meeting of shareholders entitled “Audit and Non-Audit Fees.”
PART
IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
a)
The following documents are filed as part of this report
1. Financial Statements
The following financial statements are included on pages through.
Report of the Independent Registered Public Accounting Firm
-
KPMG, Inc.
(PCAOB Firm ID
)
Report of the Independent Registered Public Accounting Firm
-
Deloitte & Touche
(South Africa) (PCAOB
Firm ID 0
)
Consolidated balance sheets as of June 30, 2025 and 2024
Consolidated statements of operations for the years ended June 30, 2025,
2024 and 2023
Consolidated statements of comprehensive (loss) income for the years ended June 30, 2025, 2024 and 2023
Consolidated statements of changes in equity for the years ended June 30, 2025, 2024 and 2023
Consolidated statements of cash flows for the years ended June 30, 2025, 2024 and 2023
Notes to the consolidated financial statements
2. Financial Statement Schedules
Financial statement schedules have been
omitted since they are
either not required, not
applicable, or the
information is otherwise
included.
(b) Exhibits
Incorporated by Reference Herein
Exhibit
No.
Description of Exhibit
Included
Herewith
Form
Exhibit
Filing Date
2.1
Sale of Shares Agreement, dated October 31, 2021,
by and among Net1 Applied Technologies South
Africa Proprietary Limited; Net1 UEPS
Technologies, Inc.; Old Mutual Life Assurance
Company (South Africa) Limited; Lirast (Mauritius)
Company Limited; SIG International Investment
(BVI) Limited; Aldgate International Limited; Ivan
Michael Epstein; PFCC (BVI) Limited; PCF
Investments (BVI) Limited; Ovobix (RF) Proprietary
Limited; Luxanio 227 Proprietary Limited; Vista
Capital Investments Proprietary Limited; Vista
Treasury Proprietary Limited; K2021477132 (South
Africa) Proprietary Limited; and Cash Connect
Management Solutions Proprietary Limited.
8-K
10.1
November 2, 2021
2.2
Sale and Purchase Agreement, dated May 7, 2024,
between Lesaka Technologies Proprietary Limited;
Lesaka Technologies, Inc. and the parties listed in
Annexure A.
8-K
10.1
May 7, 2024
2.3
First Addendum to Sale and Purchase Agreement,
dated
October 1, 2024, between Lesaka Technologies
Proprietary
Limited; Lesaka Technologies, Inc. and
the parties listed in
Annexure A
8-K
2.2
October 1, 2025
2.4
Transaction Implementation Agreement, dated June
26, 2025, entered into between the parties listed in
Annexure A and the parties listed in Annexure B and
Lesaka Technologies Proprietary Limited and Zero
Research Proprietary Limited and Bank Zero Mutual
Bank and Naught Holdings Ltd.
8-K
2.1
June 26, 2025
3.1
Amended and Restated Articles of Incorporation
8-K
3.1
May 17, 2022
3.2
Amended and Restated By-Laws of Lesaka
Technologies, Inc.
8-K
3.2
May 17, 2022
4.1
Form of common stock certificate
10-K
4.1
September 9, 2022
4.2
Description of registrant’s securities
X
10.1*
Form of Restricted Stock Agreement
10-Q
10.49
February 7, 2023
10.2*
Form of Stock Option Agreement
10-Q
10.50
February 7, 2023
10.3*
Form of Restricted Stock Agreement (non-employee
directors)
10-Q
10.51
February 7, 2023
10.4*
Form of Indemnification Agreement
10-K
10.4
September 11, 2024
10.5*
Form of non-employee director agreement
10-K
10.5
August 24, 2017
10.6*
Amended and Restated 2022 Stock Incentive Plan of
Lesaka Technologies, Inc.
14A
A
September 30, 2022
10.7*
Amendment to the 2022 Amended and Restated
Stock Incentive Plan of Lesaka Technologies, Inc.
14A
B
April 22, 2024
10.8*
Employment Agreement, dated as of December 4,
2023, between Lesaka Technologies, Inc. and Ali
Mazanderani
8-K
10.1
December 4, 2023
10.9*
Option Award Agreement between Ali Mazanderani
and Lesaka Technologies, Inc.
14A
A
April 22, 2024
10.10*
Contract of Employment, effective February 5, 2021,
between Net1 Applied Technologies South Africa
Proprietary Limited and Lincoln Mali
8-K
10.1
February 11, 2021
10.11*
Restrictive Covenants Agreement, effective February
5, 2021, between Net1 Applied Technologies South
Africa Proprietary Limited and Lincoln Mali
8-K
10.2
February 11, 2021
10.12*
Contract of Employment, dated as of December 9,
2021, between Net1 Applied Technologies South
Africa (Pty) Ltd and Naeem Kola
8-K
10.1
December 10, 2021
10.13*
Restrictive Covenants Agreement, dated as of
December 9, 2021, between Net1 Applied
Technologies South Africa (Pty) Ltd and Naeem Kola
8-K
10.2
December 10, 2021
10.14*
Employment Agreement, dated as of December 9,
2021, between Net 1 UEPS Technologies, Inc. and
Naeem Kola
8-K
10.3
December 10, 2021
10.15*
Restrictive Covenants Agreement, dated as of
December 9, 2021, between Net 1 UEPS
Technologies, Inc. and Naeem Kola
8-K
10.4
December 10, 2021
10.16*
Employment Agreement, dated as of February 8,
2023, between Lesaka Technologies, Inc. and Steven
John Heilbron
10-Q
10.52
May 9, 2023
10.17*
Restrictive Covenants Agreement, dated as of
February 8, 2023, between Lesaka Technologies, Inc.
and Steven John Heilbron
10-Q
10.53
May 9, 2023
10.18*
Contract of Employment, dated as of October 1,
2024,
between Lesaka Technologies (Pty) Ltd and
Daniel Luke
Smith
10-Q
10.53
May 7, 2025
10.19*
Restrictive Covenants Agreement, dated as of October
1,
2024, between Lesaka Technologies (Pty) Ltd and
Daniel
Luke Smith
10-Q
10.54
May 7, 2025
10.20*
Employment Agreement, dated as of October 1, 2024,
between Lesaka Technologies, Inc. and Daniel Luke
Smith
10-Q
10.55
May 7, 2025
10.21*
Restrictive Covenants Agreement, dated as of October
1,
2024, between Lesaka Technologies, Inc. and
Daniel Luke Smith
10-Q
10.56
May 7, 2025
10.22
Policy Agreement, dated April 11, 2016, among the
Company and the IFC Investors
8-K
10.32
April 12, 2016
10.23
Amended & Restated Policy Agreement, dated
October 28,
2024, among Lesaka Technologies, Inc.
and the IFC
Investors
10-Q
10.43
February 5, 2025
10.24
Cooperation Agreement, dated May 13, 2020, by and
between Net 1 UEPS Technologies, Inc. and VCP
(Proprietary) Limited
8-K
10.1
May 14, 2020
10.25
Amendment No. 1 to Cooperation Agreement, dated
December 9, 2020, by and between Net 1 UEPS
Technologies, Inc. and Value Capital Partners (Pty)
Ltd
8-K
10.1
December 10, 2020
10.26
Amendment No. 2 to Cooperation Agreement, dated
March 22, 2022, by and between Net 1 UEPS
Technologies, Inc. and Value Capital Partners (Pty)
Ltd
10-K
10.32
September 9, 2022
10.27
Securities Purchase Agreement, dated March 22, 2022,
among Net1 UEPS Technologies, Inc., Net1 Applied
Technologies South Africa Proprietary Limited and
Value Capital Partners Proprietary Limited
10-Q
10.58
May 10, 2022
10.28
Amendment No. 1 to Securities Purchase Agreement
dated March 16, 2023, among Lesaka Technologies,
Inc. (formerly Net1 UEPS Technologies, Inc.), Lesaka
Technologies Proprietary Limited (formerly Net1
Applied Technologies South Africa Proprietary
Limited) and Value Capital Partners Proprietary
Limited
8-K
10.3
March 22, 2023
10.29
Sale of Shares Agreement dated October 1, 2024,
between
Lesaka Technologies Proprietary Limited and
Crossfin
Holdings Proprietary Limited
8-K
10.40
October 1, 2024
10.30
Trust Deed of the Lesaka Employee Share Trust
entered
into between Lesaka Technologies, Inc. and
Nomaxabiso
Norma Teyise and Zwelethu Masinga
14A
A
October 2, 2024
10.31
Relationship Agreement between Lesaka
Technologies,
Inc. and the Trustees for the time being
of the Lesaka
Employee Share Trust
14A
B
October 2, 2024
10.32
Common Terms Agreement Senior Term Loan,
Revolving
Loan and Working Capital Facilities and
Lesaka
Technologies Proprietary Limited (as
Term/RCF Borrower)
and FirstRand Bank Limited
(acting through its Rand
Merchant Bank division) (as
Facility Agent) and Bowwood
and Main No 408 (RF)
Proprietary Limited (as Debt
Guarantor) dated
February 27, 2025
10-Q
10.46
May 7, 2025
10.33
Senior Term Facility A Agreement between Lesaka
Applied Technologies Proprietary Limited (as
Term/RCF
Borrower) and The Persons Listed in
Annexure A (as
Original Senior Term Facility A
Lenders) and FirstRand
Bank Limited (acting through
its Rand Merchant Bank
Division) (as Facility Agent)
dated February 27, 2025
10-Q
10.47
May 7, 2025
10.34
Senior Term Facility B Agreement between Lesaka
Applied
Technologies Proprietary Limited (as
Term/RCF Borrower)
and The Persons Listed in
Annexure A (as Original Senior
Term Facility B
Lenders) and FirstRand Bank Limited
(acting through
its Rand Merchant Bank Division) (as
Facility Agent)
dated February 27, 2025
10-Q
10.48
May 7, 2025
10.35
Senior RCF Agreement between Lesaka Applied
Technologies Proprietary Limited (as Term/RCF
Borrower)
and The Persons Listed in Annexure A (as
Original Senior
RCF Lenders) and FirstRand Bank
Limited (acting through
its Rand Merchant Bank
Division) (as Facility Agent) dated
February 27, 2025
10-Q
10.49
May 7, 2025
10.36
Pledge and Cession in Security Agreement between
Lesaka
Technologies, Inc. (as Cedent) and Lesaka
Technologies
Proprietary Limited (as Obligors' agent
and Term/RCF
Borrower) and Bowwood and Main No
408 (RF)
Proprietary Limited (as Debt Guarantor) and
FirstRand
Bank Limited (acting through its Rand
Merchant Bank
Division) (as Facility Agent) dated
February 27, 2025
10-Q
10.50
May 7, 2025
10.37
Subordination Agreement between Lesaka Applied
Technologies Proprietary Limited (as Term/RCF
Borrower)
and The Persons Listed in Annexure A (as
Original
Subordinated Parties) and The Persons Listed
in Annexure
B (as Original Obligors) and The Persons
Listed in
Annexure C (As Original Lenders) and
FirstRand Bank
Limited (acting through its Rand
Merchant Bank Division)
(as Facility Agent) and
Bowwood and Main No 408 (RF)
Proprietary Limited
(as Debt Guarantor) dated February 28,
10-Q
10.51
May 7, 2025
10.38
General Banking Facility Agreement dated February
27,
2025 between Lesaka Technologies (Proprietary)
Limited
and FirstRand Bank Limited (acting through
its Rand
Merchant Bank division)
10-Q
10.52
May 7, 2025
10.39
Facility Letter between Nedbank Limited and Net1
Applied Technologies South Africa Limited and
certain of its subsidiaries dated as of December 13,
2013 and First Addendum thereto dated as of
December 18, 2013
8-K
10.27
December 19, 2013
10.40
Letter from Nedbank Limited to Net1 Applied
Technologies South Africa Proprietary Limited and
certain of its subsidiaries, dated December 7, 2016
8-K
10.50
December 9, 2016
10.41
Revolving Credit Facility Agreement, dated
November 29, 2022, between Cash Connect Capital
Proprietary Limited, the Parties Listed in Part I of
Schedule 1 (the Original Guarantors) and FirstRand
Bank Limited (acting through its Rand Merchant Bank
division) (as Lender)
8-K
10.1
December 5, 2022
10.42
Senior Facility E Agreement, dated September 26,
2018, among Net1 Applied Technologies South Africa
Proprietary Limited, FirstRand Bank Limited (acting
through its Rand Merchant Bank division), as lender,
and FirstRand Bank Limited (acting through its Rand
Merchant Bank division), as agent
8-K
10.96
October 2, 2018
10.43
Letter of Amendment, dated August 2, 2021, among
Net1 Applied Technologies South Africa Proprietary
Limited and FirstRand Bank Limited (acting through
its Rand Merchant Bank division), as lender, related to
the amendment to the Senior Facility E Agreement
8-K
10.1
August 2, 2021
10.44
Letter of Amendment, dated January 22, 2024, among
Lesaka Proprietary Limited and FirstRand Bank
Limited (acting through its Rand Merchant Bank
division), as lender, related to the amendment to the
Senior Facility E Agreement
8-K
10.1
January 23, 2024
10.45
Fifth Amendment and Restatement Agreement, dated
March 16, 2023, between Lesaka Technologies
Proprietary Limited (as borrower), and FirstRand Bank
Limited (acting through its Rand Merchant Bank
division) (as lender), and FirstRand Bank Limited
(acting through its Rand Merchant Bank division) (as
facility agent)
8-K
10.1
March 22, 2023
10.46
Amendment and Restatement Agreement, dated
November 24, 2023, between Lesaka Technologies
Proprietary Limited (as borrower), and FirstRand Bank
Limited (acting through its Rand Merchant Bank
division) (as lender), and FirstRand Bank Limited
(acting through its Rand Merchant Bank division) (as
facility agent)
8-K
10.1
December 1, 2023
10.47
First Amendment and Restatement Agreement, dated
March 22, 2023, between Cash Connect Management
Solutions Proprietary Limited (as borrower), arranged
by FirstRand Bank Limited (acting through its Rand
Merchant Bank division) (as mandated lead arranger),
and FirstRand Bank Limited (acting through its Rand
Merchant Bank division) (as facility agent)
8-K
10.2
March 22, 2023
10.48
Third Addendum to Facility Letter no.:
LM/CCMS/01/2021
between FirstRand Bank Ltd,
Cash Connect Management
Solutions (Pty) Ltd, Main
Street 1723 (Pty) Ltd, Cash
Connect Rentals (Pty) Ltd;
and K2020 Connect (Pty) Ltd
dated October 29, 2024
10-Q
10.41
November 6, 2024
10.49
Facility Letter dated September 30, 2024 between
Lesaka
Technologies (Proprietary) Limited and
FirstRand Bank
Limited (acting through its Rand
Merchant Bank division)
8-K
10.1
October 1, 2024
10.50
First Addendum to the Facility Letter dated December
10,
2024 between Lesaka Technologies (Proprietary)
Limited
and FirstRand Bank Limited (acting through
its Rand
Merchant Bank division)
8-K
10.1
December 10, 2024
Code of Ethics
X
Insider Trading Policy
X
Subsidiaries of Registrant
X
23.1
Consent of Independent Registered Public
Accounting Firm - KPMG, Inc.
X
23.2
Consent of Independent Registered Public
Accounting Firm - Deloitte & Touche (South Africa)
X
31.1
Certification of Principal Executive Officer pursuant
to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as amended
X
31.2
Certification of Principal Financial Officer pursuant
to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as amended
X
Certification pursuant to 18 USC Section 1350
X
Compensation Clawback Policy
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
Cover Page Interactive Data File (formatted as inline
XBRL and continued in Exhibit 101)
X
* Indicates a management contract or compensatory plan or arrangement.