Lesaka Technologies, Inc. (Nasdaq: LSAK; JSE: LSK) today released its results for the first quarter (“Q1 2024”) ended September 30, 2023.
Performance highlights for Q1 2024:
- Revenue of $136.1 million (ZAR 2.5 billion)1 in Q1 2024, compared to $124.8 million (ZAR 2.1 billion)1 for the first quarter ended September 30, 2022 (“Q1 2023”). In South African Rand (“ZAR”) revenue grew 19%, driven by strong year-on-year growth in both the Merchant and Consumer Divisions.
- A return to operating profitability with Operating Profit of $0.2 million (ZAR 4.2 million) for the quarter, improving from an Operating Loss of $4.7 million (ZAR 80.0 million) in Q1 2023, driven by the turnaround in the Consumer Division and growth in the Merchant Division.
- The Net Loss continued to narrow, at $5.7 million (ZAR 105.6 million)1. This compares to a net loss of $10.7 million (ZAR 183.2 million)1 in Q1 2023 and represents a 42% improvement in ZAR.
- Group Adjusted EBITDA, a non-GAAP measure and reconciled in Attachment B, of $8.7 million (ZAR 162.5 million)1 representing an improvement of 108% compared to the Q1 2023 Group Adjusted EBITDA of $4.2 million (ZAR 71.9 million)1. In ZAR Group Adjusted EBITDA increased by 126%.
- Continued year-on-year growth in profitability in the Merchant Division, delivering Segment Adjusted EBITDA of $8.1 million (ZAR 150.2 million)1 in Q1 2024 compared to $7.9 million (ZAR 135.2 million) in Q1 2023, an increase of 11% in ZAR. The outlook remains positive as the Merchant business extends its footprint in Southern Africa’s informal market.
- The Consumer Division reported its fourth consecutive quarter of profitability, delivering Segment Adjusted EBITDA of $2.5 million (ZAR 46.6 million)1 in Q1 2024, compared to a loss of $1.4 million (ZAR 23.9 million)1 in Q1 2023. With the divisional turnaround complete, initiatives to grow the Consumer Division are yielding positive results with revenue increasing 13% in ZAR, off a reduced cost base and in a challenging operating environment.
- Continued momentum in achieving positive net cash provided by operating activities of $3.4 million (ZAR 63.2 million) in Q1 2024, compared to net cash used in operating activities of $7.7 million (ZAR 131.2 million) in Q1 2023.
- Guidance for fiscal 2024 re-affirmed.
(1) Average exchange rates applicable for the quarter: ZAR 18.71 to $1 for Q1 2024, ZAR 17.13 to $1 for Q1 2023 and ZAR 18.74 to $1 for Q4 2023. The ZAR weakened 9.2% against the U.S. dollar during Q1 2024 when compared to Q1 2023 and (0.2%) when compared to the prior sequential quarter (Q4 2023).
Lesaka Group CEO Chris Meyer said: “It has been yet another encouraging quarter for us. We achieved a major milestone by returning to profitability at an operating level for the quarter.”
Mr. Meyer added, “In a tough economic environment the continued growth in all our key revenue drivers demonstrates the resilience of our business model and the relevance of our services to our customers. We will continue to innovate and extend the positive impact we are having on the lives of South Africa’s small merchants and grant beneficiaries as the digitalization trend in the informal economy continues.”
Full release and webcast details at https://ir.lesakatech.com/.
The discussion of our consolidated overall results of operations is based on amounts as reflected in our unaudited condensed consolidated financial statements which are prepared in accordance with U.S. GAAP. We analyze our results of operations both in U.S. dollars, as presented in the unaudited condensed consolidated financial statements, and supplementally in ZAR, because ZAR is the functional currency of the entities which contribute the majority of our revenue and is the currency in which the majority of our transactions are initially incurred and measured. Due to the significant impact of currency fluctuations between the U.S. dollar and the 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.
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 EBITDA and Group Adjusted EBITDA are non-GAAP measures.
Below is the reconciliation between our GAAP measure and our non-GAAP measures.
|
|
FY24 Q1 |
FY23 Q4 |
FY23 Q1 |
FY24 Q1 |
FY23 Q4 |
FY23 Q1 |
||||||||||||
|
For the quarter |
$’000 |
$’000 |
$’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
||||||||||||
|
Average exchange rate for conversion from ZAR to $ |
18.71 |
|
18.74 |
|
17.13 |
|
18.71 |
|
18.74 |
|
17.13 |
|
||||||
|
Loss attributable to Lesaka – GAAP |
(5,651 |
) |
(11,909 |
) |
(10,696 |
) |
(105,635 |
) |
(223,192 |
) |
(183,231 |
) |
||||||
|
Loss from equity accounted investments |
1,405 |
|
2,535 |
|
2,617 |
|
26,657 |
|
47,509 |
|
44,831 |
|
||||||
|
Net loss before loss from equity-accounted investments |
(4,246 |
) |
(9,374 |
) |
(8,079 |
) |
(78,978 |
) |
(175,683 |
) |
(138,400 |
) |
||||||
|
Income tax (benefit) expense |
264 |
|
(1,844 |
) |
31 |
|
4,825 |
|
(34,560 |
) |
532 |
|
||||||
|
Loss before income tax expense |
(3,982 |
) |
(11,218 |
) |
(8,048 |
) |
(74,153 |
) |
(210,243 |
) |
(137,868 |
) |
||||||
|
Reversal of allowance for doubtful EMI loans receivable |
(250 |
) |
– |
|
– |
|
(4,741 |
) |
– |
|
– |
|
||||||
|
Net loss (gain) on disposal of equity-accounted investment |
– |
|
12 |
|
(248 |
) |
– |
|
225 |
|
(4,248 |
) |
||||||
|
Impairment loss |
– |
|
7,039 |
|
– |
|
– |
|
131,921 |
|
– |
|
||||||
|
Unrealized loss FV for currency adjustments |
102 |
|
179 |
|
– |
|
1,947 |
|
3,355 |
|
– |
|
||||||
|
Operating income/(loss) after PPA amortization and net interest (non-GAAP) |
(4,130 |
) |
(3,988 |
) |
(8,296 |
) |
(76,947 |
) |
(74,742 |
) |
(142,116 |
) |
||||||
|
PPA amortization (amortization of acquired intangible assets) |
3,608 |
|
3,590 |
|
3,928 |
|
67,266 |
|
67,266 |
|
67,267 |
|
||||||
|
Operating income/(loss) before PPA amortization after net interest (non-GAAP) |
(522 |
) |
(398 |
) |
(4,368 |
) |
(9,681 |
) |
(7,476 |
) |
(74,849 |
) |
||||||
|
Interest expense |
4,909 |
|
5,159 |
|
4,036 |
|
91,429 |
|
96,687 |
|
69,140 |
|
||||||
|
Interest income |
(449 |
) |
(584 |
) |
(411 |
) |
(8,368 |
) |
(10,945 |
) |
(7,041 |
) |
||||||
|
Operating income/(loss) before PPA amortization and net interest (non-GAAP) |
3,938 |
|
4,177 |
|
(743 |
) |
73,380 |
|
78,266 |
|
(12,750 |
) |
||||||
|
Depreciation (excluding amortization of intangibles) |
2,248 |
|
2,203 |
|
2,070 |
|
41,900 |
|
41,303 |
|
35,482 |
|
||||||
|
Stock-based compensation charges |
1,759 |
|
1,354 |
|
1,462 |
|
32,797 |
|
25,376 |
|
25,045 |
|
||||||
|
Lease adjustments |
696 |
|
651 |
|
812 |
|
12,961 |
|
12,201 |
|
13,910 |
|
||||||
|
Once-off items |
78 |
|
64 |
|
598 |
|
1,465 |
|
1,199 |
|
10,245 |
|
||||||
|
Group Adjusted EBITDA (non-GAAP) |
8,719 |
|
8,449 |
|
4,199 |
|
162,503 |
|
158,345 |
|
71,932 |
|
||||||
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