EPS of $-0.06 increased by 34.2% from previous year
Gross margin of 22.0%
Net income of -4.05M
"With the signing and announcement of the Adumo transaction yesterday, which remains subject to shareholder votes and regulatory approvals, we anticipate continuing to consolidate the market and cement our position as the leading independent fintech platform in Southern Africa." - Ali Mazanderani
Lesaka Technologies, Inc. (LSAK) QQ3 2024 Earnings Review: Growth Acceleration, Strategic Acquisitions (Adumo, Touchsides), and Margin Progress in Southern Africa’s Fintech Platform
Executive Summary
Lesaka delivered a solid Q3 2024 financial performance in USD terms, with revenue of $138.2 million representing a modest year-over-year increase of 3.15% and a sequential decrease of 3.96% (in USD). Gross profit was $30.34 million (gross margin ~22.0%), while EBITDA reached $7.22 million and operating income was $1.43 million, underscoring improving profitability despite a challenging macro backdrop in South Africa. Net income remained negative at $-4.05 million, reflecting ongoing investments and one-off costs associated with strategic actions, but fundamental earnings per share (excludes non-operating items) surged 73% quarter-over-quarter to $0.45, and year-to-date fundamental EPS reached positive territory for the first time in recent periods.
Management emphasizes operational momentum across both the Merchant and Consumer divisions, progress in capital-efficient cash and credit offerings, and the strategic value of recent and pending acquisitions (Touchsides closed in April 2024; Adumo announced and awaiting regulatory/shareholder approvals). Notably, Lesaka improved leverage with net debt to EBITDA at roughly 2.6x, and reported positive cash generation in the quarter, even acknowledging Easter-period working capital timing that impacted cash flow. The company reaffirmed FY2024 revenue guidance (R10.7–R11.7 billion Rand) and raised group adjusted EBITDA guidance (including lease expenses) to approximately R685–R705 million for FY24, signaling a credible trajectory if Adumo closes and integration milestones progress as planned. Investors should monitor the evolution of cross-sell effectiveness, currency exposure, regulatory developments affecting cross-border or new markets, and the pace of Adumo/Touchsides integration and monetization.
Key Performance Indicators
Revenue
138.19M
QoQ: -3.96% | YoY:3.15%
Gross Profit
30.34M
21.95% margin
QoQ: 2.41% | YoY:5.83%
Operating Income
1.43M
QoQ: -37.31% | YoY:176.90%
Net Income
-4.05M
QoQ: -49.50% | YoY:30.46%
EPS
-0.06
QoQ: -50.00% | YoY:34.21%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $138.194 million for Q3 2024, up 3.15% YoY; QoQ decline of 3.96%. Commentary notes a higher mix of PIN-less top-ups vs PIN-based airtime impacting revenue recognition; impact partially offset by continued VAS growth and cash management services.
EBITDA: $7.22 million; EBITDA margin near 5.22% (EBITDA/Revenue ~0.052)
Operating income: $1.425 million (operating margin ~1.03%). One-off costs related to Adumo acquisition ($0.6 million) are highlighted in the call as part of operating items.
Net income: $(4.05) million; net income margin: approximately (−2.93%). Rationale includes non-cash amortization related to acquired intangibles and one-off acquisition costs.
Financial Highlights
Revenue and profitability:
- Revenue: $138.194 million for Q3 2024, up 3.15% YoY; QoQ decline of 3.96%. Commentary notes a higher mix of PIN-less top-ups vs PIN-based airtime impacting revenue recognition; impact partially offset by continued VAS growth and cash management services.
- Gross profit: $30.34 million; gross margin ~22.0% (0.2195 in reported ratio).
- EBITDA: $7.22 million; EBITDA margin near 5.22% (EBITDA/Revenue ~0.052)
- Operating income: $1.425 million (operating margin ~1.03%). One-off costs related to Adumo acquisition ($0.6 million) are highlighted in the call as part of operating items.
- Net income: $(4.05) million; net income margin: approximately (−2.93%). Rationale includes non-cash amortization related to acquired intangibles and one-off acquisition costs.
- Basic and diluted EPS: $(0.06) per share; fundamental earnings per share (adjusted) rose 73% QoQ to $0.45, and YTD fundamental EPS was about ZAR 0.64 per share.
Liquidity and leverage:
- Net debt to group adjusted EBITDA: 2.6x at quarter end, improving from 4.2x a year ago and 2.9x at Q2 2024.
- Net cash provided by operating activities: Rand 118 million for the quarter (approx. USD equivalent not explicitly disclosed in the US GAAP presentation; management highlighted positive quarterly operating cash flow and an earlier Easter-related working capital timing). Year-to-date cash from operations was Rand 190 million, versus Rand 163 million for the first 3 quarters of the prior year.
- Cash on hand: Rand 1.0 billion at quarter end; after adjusting for working capital movements (Kazang Pay settlement), net cash stood at Rand 0.798 billion.
Cash flow and capital expenditures:
- Free cash flow: Rand 16.1 million for the quarter; capital expenditures were Rand 5.6 million (growth capex of ~Rand 4.6 million focused on Merchant device deployment and cash vaults).
- Free cash flow yield and cash conversion improved as the business benefits from ongoing cost discipline and revenue growth in Consumer and Merchant segments.
Balance sheet and asset quality:
- Total current assets: Rand 185.78 million; total assets: Rand 551.49 million; total liabilities: Rand 298.97 million; total stockholders’ equity: Rand 252.52 million.
- Long-term debt: Rand 136.31 million; total debt: Rand 154.62 million; net debt was Rand 95.01 million.
Market and operating context:
- Management reaffirmed FY24 revenue guidance of Rand 10.7–11.7 billion; updated group adjusted EBITDA guidance to Rand 685–705 million (inclusive of lease expenses), reflecting a >50% YoY growth target; earlier guidance before including lease expenses had been higher, but the updated presentation aligns with SEC feedback. The Adumo transaction, if completed, is expected to further expand the addressable market and cross-sell opportunities in both Consumer and Merchant segments.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
138.19M
3.15%
-3.96%
Gross Profit
30.34M
5.83%
2.41%
Operating Income
1.43M
176.90%
-37.31%
Net Income
-4.05M
30.46%
-49.50%
EPS
-0.06
34.21%
-50.00%
Key Financial Ratios
currentRatio
1.6
grossProfitMargin
22%
operatingProfitMargin
1.03%
netProfitMargin
-2.93%
returnOnAssets
-0.73%
returnOnEquity
-1.6%
debtEquityRatio
0.61
operatingCashFlowPerShare
$0.31
freeCashFlowPerShare
$0.26
priceToBookRatio
0.95
priceEarningsRatio
-14.88
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways and quotes from the QQ3 2024 earnings call:
- Strategic positioning and consolidation: "With the signing and announcement of the Adumo transaction yesterday, which remains subject to shareholder votes and regulatory approvals, we anticipate continuing to consolidate the market and cement our position as the leading independent fintech platform in Southern Africa." (Ali Mazanderani, Chairman)
- Growth and cross-sell opportunities: "This starts to move our customer base from the 1.5 million active customers that we have to now 1.7 million customers and start to give us the opportunities to go beyond the social grant space while we still have the engine of the EPE base and our core focus..." (Lincoln Mali, CEO, Southern Africa)
- Merchant platform expansion and cross-sell potential: "It significantly bolsters our card acquiring capability in the formal merchant space as well as taking us into the software point-of-sales business... enhances our unit economics, both in terms of our cost of client acquisition as well as our lifetime value from a customer perspective." (Steven Heilbron, Head of Merchant Division)
- Brand and strategic milestones: "The Kazang brand is increasingly recognized and respected... awarded the most disruptive Fintech in shaping the informal economy at the Absa Commercial Payments Summit in April 2024." (Steve Heilbron)
- Acquisition strategy and capital structure: "The Adumo acquisition… augmented growth in both Merchant and Consumer divisions; valuation implied EV/EBITDA ~9x; funds to be sourced from internal financing and potential refinancing of debt as needed." (Q&A excerpt with Ali and Naeem)
- Operational momentum and cross-sell success in Consumer: "Growth in ARPU to approximately ZAR 90, up 15% YoY, and EasyPay loan book up 28% YoY to ZAR 509 million; insurance policies up 34% YoY to 414,000." (Lincoln Mali)
- Financial discipline and cash flow transformation: "Net cash provided by operating activities was Rand 118 million for the quarter; year-to-date Rand 190 million; net debt-to-EBITDA improved to 2.6x." (Naeem Kola)
With the signing and announcement of the Adumo transaction yesterday, which remains subject to shareholder votes and regulatory approvals, we anticipate continuing to consolidate the market and cement our position as the leading independent fintech platform in Southern Africa.
— Ali Mazanderani
This starts to move our customer base from the 1.5 million active customers that we have to now 1.7 million customers and start to give us the opportunities to go beyond the social grant space while we still have the engine of the EPE base and our core focus.
— Lincoln Mali
Forward Guidance
Outlook and strategic guidance for Lesaka center on the execution of the Adumo and Touchsides acquisitions, cross-sell expansion, and continued margin discipline in a challenging SA macro environment. Key points include:
- Revenue guidance reaffirmed for FY24 at Rand 10.7–11.7 billion, with caution on revenue mix (PIN vs PIN-less) and the related accounting treatment that can affect revenue recognition but not profitability.
- Group adjusted EBITDA guidance raised for FY24 to Rand 740–760 million on a lease-excluded basis, and to Rand 685–705 million including lease expenses; management frames this as more than 50% YoY growth versus FY23. Going forward, guidance will include lease expenses to reflect the full non-GAAP reporting framework after SEC feedback.
- Adumo: The completion is subject to shareholder and regulatory approvals; the strategic rationale centers on expanding the consumer base beyond grant beneficiaries (to ~1.7 million), cross-sell opportunities in insurance and credit, and stronger merchant-channel penetration (formal segment).
- Near-term catalysts: integration progress with Touchsides and Adumo; cross-sell monetization across Consumer and Merchant verticals; expansion into Namibia, Botswana, Zambia, and Kenya; acceleration of Capital Connect and Kazang Vault footprint.
- Risks and monitoring: currency volatility (Rand/USD), regulatory developments affecting cross-border or international money transfers, macroeconomic softness in SA impacting consumer demand and merchant cash flows, integration execution risk and potential dilution of near-term profitability if acquisitions stretch capital resources.
Overall, the investment thesis hinges on successful integration of Adumo and Touchsides, execution of cross-sell levers in EPE, and maintaining positive cash generation while expanding the addressable market footprint across Southern Africa.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
LSAK Focus
21.95%
1.03%
-1.60%
-14.88%
EVTC
51.60%
19.60%
4.91%
21.95%
CSGS
49.40%
10.80%
6.62%
18.07%
CCSI
79.90%
43.80%
-22.70%
5.38%
GB
76.20%
32.40%
20.20%
16.03%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The QQ3 2024 results reflect a turning point for Lesaka, transitioning from cash-burn to constructive cash generation and turning around profitability in the core business, aided by aggressive strategic actions. The Adumo and Touchsides acquisitions are the central growth catalysts, offering material cross-sell opportunities across Consumers and Merchants and expanding the addressable market beyond social grants. Management’s guidance signals credible growth potential, with FY24 revenue expected to be broadly flat to modestly higher in Rand terms and group adjusted EBITDA poised to grow >50% YoY (including lease expenses). However, the investment case hinges on the successful closing of Adumo, seamless integration, and realization of cross-sell synergies, as well as continued resilience in the rand. Investors should monitor:
- Adumo deal closing timeline and integration milestones; cross-sell conversion in both Consumer and Merchant divisions; retention of improved ARPU dynamics within the EPE base.
- Regulatory developments affecting international money transfers and potential impact on revenue mix; currency headwinds and the company’s hedging/adaptive pricing strategies.
- Execution of expansion plans into Namibia, Botswana, Zambia, and Kenya and the resulting operational and capital requirements.
Overall, provided Adumo closes as planned and cross-sell trajectories remain on track, Lesaka offers a compelling upside through a broader fintech platform with improving leverage, positive cash flow, and a diversified revenue stream across multiple verticals in Southern Africa.
Key Investment Factors
Growth Potential
Large addressable market growth through Adumo and Touchsides integrations, expansion into Namibia, Botswana, Zambia, and Kenya, and cross-sell across EPE, credit, insurance, and VAS. Management targets >50% YoY group adjusted EBITDA growth for FY24, supported by higher revenue mix from PIN-less channels, improved ARPU, and scale benefits from the Kazang ecosystem.
Profitability Risk
Regulatory changes affecting cross-border money transfers; currency volatility (rand-dollar swings) impacting reported USD results; dependency on SA macro environment; integration risk and potential delays in Adumo/Touchsides synergies; revenue mix changes (PIN vs PIN-less) affecting revenue recognition and short-term profitability; competitive fintech and payments landscape in Southern Africa.
Financial Position
Improved leverage to 2.6x net debt/EBITDA; positive quarterly operating cash flow with Rand 118m in the quarter (year-to-date Rand 190m); liquidity appears adequate to fund ongoing capex and integration costs; balance sheet remains lean with meaningful goodwill/intangible assets tied to acquisition strategies; valuation remains contingent on Adumo closing and realization of cross-sell potential.
SWOT Analysis
Strengths
Leading independent fintech platform in Southern Africa with diversified verticals (Consumer, Merchant, Enterprise).
Strong cross-sell momentum within the EPE customer base; ARPU up ~15% YoY to ~ZAR 90; high customer engagement with EasyPay and insurance products.
Strategic acquisitions (Touchsides, Adumo) expanding addressable market and cross-sell opportunities; Kazang brand recognized as disruptive Fintech.
Improved liquidity and leverage: net debt/EBITDA at ~2.6x; positive quarterly operating cash flow; growing Capital Connect and vault operations.
Weaknesses
Net income remains negative due to non-cash impairments, acquisition-related costs, and revenue mix shifts; dependency on rand-based results for USD translation.
Revenue mix sensitivity to PIN-less vs PIN-based airtime and data bundles; regulatory shifts affecting cross-border money transfers can compress margins.
Regulatory and execution risk around integrating two large acquisitions (Adumo and Touchsides) and achieving full cross-sell potential.
Opportunities
Expansion into 5-country footprint (SA, Namibia, Botswana, Zambia, Kenya) increasing addressable market (approx. 140 million people).
Cross-sell opportunities across Consumer (credit, insurance) and Merchant (VAS, bill payments, software POS) platforms; potential for higher wallet share and loyalty.
Enhanced merchant services—Deepened penetration in formal merchant segment and continued card acquiring growth; integration of Adumo could accelerate B2B payments ecosystem.
Threats
Macro and currency risk (rand volatility); SA economic conditions impacting consumer spend and merchant cash flows.
Regulatory uncertainty in payments and cross-border activities; potential delays in Adumo/Touchsides deal closing.
Competition from established fintechs and banks expanding digital ecosystems; potential margin compression from regulatory or pricing pressures.