EPS of $-0.27 decreased by 350% from previous year
Gross margin of 32.8%
Net income of -22.06M
""In line with the execution of our strategy, we advanced the optimization of our Merchant and Enterprise divisions. We are building a multi-product fintech platform organized around our customers with M&A being a key part of our strategy."" - Daniel Smith
Lesaka Technologies Inc (LSAK) QQ3 2025 Earnings Review: Adumo, Recharger and Three-Engine Growth Drive Path to Positive GAAP Earnings
Executive Summary
Lesaka delivered a mixed but strategically constructive QQ3 2025, underpinned by Acquisitions and a reoriented operating model. On an IFRS basis, revenue was USD 135.7 million with net income of USD -22.1 million and EBITDA of USD -10.8 million for the quarter, reflecting ongoing investments and one-off items. Management emphasizes a deliberate shift toward higher-margin, multi-product platform growth, anchored by three engines of growth: Consumer, Merchant, and Enterprise. Group adjusted EBITDA, calculated in ZAR, rose 237 million and fundamental earnings increased 98% YoY to 58 million, signaling improving operating leverage at the core even as GAAP profitability remains pressured by non-cash items and strategic reorganization costs.
Key drivers in QQ3 2025 included: (1) the Adumo acquisition expanding the Merchant segment’s scale and product breadth, and (2) the March 2025 closing of Recharger, expanding the Enterprise division’s electricity- and sub-metering capabilities. The company also faced currency effects (rand versus USD) and a material mark-to-market charge related to the MobiKwik investment, contributing to the quarterly net income loss. Cash flow remained positive from operations (USD 10.7 million), with ongoing capex focused on vaults (Smart Safe) and platform enhancements. Management reaffirmed guidance for FY25 revenue growth and highlighted a move toward positive net income on a US GAAP basis in FY26. Investors should monitor: (i) the trajectory of Consumer ARPU and market share gains, (ii) the pace of EBITDA margin expansion in Merchant and Enterprise, and (iii) the integration and monetization of Recharger and MobiKwik-related exposures as principal levers of future profitability.
Headline QQ3 2025 metrics and segment context (USD unless noted):
- Revenue: USD 135.7 million; YoY change -1.83%; QoQ change -7.59%.
- Gross Profit: USD 44.44 million; Gross margin 32.75%; YoY change +46.46%; QoQ change -2.38%.
- Operating Income: USD 0.57 million; margin 0.42%; YoY change -60.07%; QoQ change -26.77%.
- Net Income: USD -22.06 million; Net margin -16.26%; YoY change -445.05%; QoQ change +31.36%.
- EPS (diluted): USD -0.27; YoY change -350%; QoQ change +32.50%.
- EBITDA (GAAP): USD -10.78 million; EBITDA margin (EBITDA / Revenue) -7.94%; EBITDARatio -0.0794.
- Group adjusted EBITDA (ZAR): USD equivalent 237 million (ZAR basis); YoY increase +29%; reflects ongoing realignment costs (~ZAR 20 million) but top-line aligned with guidance.
- Fundamental earnings (ZAR): USD equivalent 58 million; YoY growth +98%.
- Net debt to Group adjusted EBITDA: 2.8x for the quarter (FX-adjusted note: includes MobiKwik market value; lock-up exposure noted).
- Cash from operating activities: USD 10.66 million; Free cash flow: USD 7.85 million.
- Cash balance end of period: USD 71.12 million; Gross debt: USD equivalent of ZAR 4.0 billion; Net debt position influenced by Recharger funding and loan book growth.
- Capex: USD 83 million; Growth capex includes Smart Safe vault rollout (~ZAR 22 million) and Enterprise payment switch development; POS devices investment of USD 12 million (Kazang and Adumo).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
135.67M
-1.83%
-7.59%
Gross Profit
44.44M
46.46%
-2.38%
Operating Income
569.00K
-60.07%
-26.77%
Net Income
-22.06M
-445.05%
31.36%
EPS
-0.27
-350.00%
32.50%
Key Financial Ratios
currentRatio
1.43
grossProfitMargin
32.8%
operatingProfitMargin
0.42%
netProfitMargin
-16.3%
returnOnAssets
-3.4%
returnOnEquity
-11.9%
debtEquityRatio
0.21
operatingCashFlowPerShare
$0.14
freeCashFlowPerShare
$0.1
priceToBookRatio
2.02
priceEarningsRatio
-4.24
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights and quotes from QQ3 2025 earnings call:
- Strategy and growth framework: Dan Smith stated, “In line with the execution of our strategy, we advanced the optimization of our Merchant and Enterprise divisions. We are building a multi-product fintech platform organized around our customers with M&A being a key part of our strategy.” This underscores a deliberate M&A-led platform strategy and integration cadence across divisions.
- Three engines of growth and profitability trajectory: Ali Mazanderani noted, “we now have 3 engines of growth as part of the Lesaka platform, all with excellent independent prospects, but which are enhanced by the connectivity between them.” He also highlighted margin ambitions: “The Merchant division had a segment adjusted EBITDA to net revenue margin of about 19% in Q3 and the Consumer division of about 26%. ... there is a belief that the margin in the Consumer division could and should be north of 30% over time. I have a similar perspective on the Merchant division.” This frames a pathway to higher group margins as scale and efficiency improve.
- Market share and ARPU momentum in Consumer: Lincoln Mali remarked on market-share gains and ARPU uplift: “we’ve grown our customer base by 70% year-on-year to 1.5 million customers. We now have 13% market share in that base… ARPU has increased to ZAR 106 compared to 94 last quarter and 90 a year ago.” These signals point to positive cross-sell dynamics and monetization of the consumer base.
- Merchant platform and throughput growth: Steven Heilbron highlighted, “Our merchant acquiring offering now has over 81,000 points of presence… Throughput on these devices was ZAR 9.9 billion for the quarter, with Adumo contributing the majority of growth.” This shows the effect of Adumo on scale and the cross-sell opportunities with Kazang Pay.
- Enterprise rebuild and Recharger integration: Naeem Kola explained, “The acquisition of the Recharger business closed in March 2025… which will be a significant contributor to the Enterprise division.” He also cited that FY25 is a “bill year” with investment and restructuring costs impacting EBITDA in the near term, but poised for higher contribution in FY26.
- MobiKwik mark-to-market impact and liquidity plan: Philippe welthagen noted the MobiKwik mark-to-market and management commentary on monetization prospects: “MobiKwik share price has been volatile and we marked it to market this quarter with a net loss of ZAR 311 million, which significantly impacted our overall financial result for the quarter.” This is a notable non-core item that management intends to monetize to reduce gearing.
- Debt refinancing and capital structure: Dan Smith summarized the refinancing benefits: “The refinance has resulted in a simpler and more cost-effective debt facility structure with more advantageous pricing… cost of debt approximately 10.7% versus about 12% previously, saving ~ZAR 52 million per year.” He also highlighted headroom to fund growth and strengthened banking partnerships.
"In line with the execution of our strategy, we advanced the optimization of our Merchant and Enterprise divisions. We are building a multi-product fintech platform organized around our customers with M&A being a key part of our strategy."
— Daniel Smith
"The Merchant division had a segment adjusted EBITDA to net revenue margin of about 19% in Q3 and the Consumer division of about 26%. I would note that year-on-year, the Consumer division has increased from about 21% to about 26%. We have an expectation that the margin in the Consumer division could and should be north of 30% over time. I have a similar perspective on the Merchant division."
— Ali Mazanderani
Forward Guidance
Management guidance and outlook (currency context: ZAR-based guidance, with USD translation not provided in the text):
- FY25 guidance reaffirmed: Revenue of ZAR 10.0–11.0 billion; Net revenue of ZAR 5.2–5.6 billion; Group adjusted EBITDA of ZAR 0.9–1.0 billion. Midpoint implies roughly 42% net revenue growth YoY and ~37% EBITDA growth YoY. The business emphasizes net revenue as the top-line metric due to revenue-mix changes (agency vs principal airtime).
- FY26 guidance and objectives: Revenue of ZAR 11.4–12.2 billion; Net revenue of ZAR 6.4–6.9 billion; Group adjusted EBITDA of ZAR 1.25–1.45 billion. At the midpoint, this implies about 12% revenue growth, 23% net revenue growth, and ~42% EBITDA growth, with an implied group EBITDA margin around 20% of net revenue. Management also introduced a new FY26 target of positive net income on a US GAAP basis at year-end, signaling a shift toward GAAP profitability.
- Strategic emphasis and risk factors: The Company will focus on unit economics, cash conversion and EBITDA growth in Merchant in the near term, while continuing to grow faster than the market through merchant acquiring and software. Enterprise is expected to become a material EBITDA contributor in FY26 as the Prism Switch, EasyPay, and Recharger integrations scale. The key risks to watch include execution risk related to integration of Adumo and Recharger, FX/Currency volatility, ongoing capital expenditures, and potential volatility in MobiKwik exposure.
- Key monitoring indicators for investors: progression of Merchant unit economics and cross-sell traction to GAAP customers, ARPU evolution in Consumer and its sustainability, growth in Enterprise EBITDA contribution (target >10% of Group EBITDA in FY26), debt and liquidity metrics (net debt/EBITDA drifting toward 2x long-term target), and the monetization path for MobiKwik (unlocking value while reducing gearing).
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
LSAK Focus
32.75%
0.42%
-11.90%
-4.24%
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
74.20%
25.30%
24.90%
10.53%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Bottom-line thesis: Lesaka is transitioning from a restructuring phase to sustainable, multi-engine growth. The combination of Adumo’s scale in merchant acquiring, Recharger’s electricity vending, and the Prism Switch-enabled Enterprise platform is expected to drive higher unit economics and EBITDA in the near to medium term. The company’s guidance for FY25/FY26 indicates strong top-line growth with improving margins, culminating in positive US GAAP net income by FY26. Key catalysts include: accelerated Merchant EBIT growth through improved unit economics and cross-sell, scalable Consumer ARPU growth, and a material ramp in Enterprise profitability via new products and cross-divisional synergies. Risks include FX volatility, MobiKwik exposure, integration execution, and the sustained ability to monetize non-core assets. Given the current trajectory, the stock could be positioned for upside if the company achieves its margins targets and debt/EBITDA normalization toward 2x, supported by the ongoing deleveraging and a robust guidance framework.
Key Investment Factors
Growth Potential
Three-Engine Growth: Consumer, Merchant, and Enterprise exhibit distinct but complementary positive trajectories. Consumer shows sustained ARPU uplift and market-share gains; Merchant benefits from Adumo integration and cross-sell to GAAP base; Enterprise is transitioning from legacy assets to scalable technology platforms (Prism Switch, EasyPay, Recharger) with potential EBITDA contribution exceeding 20% in the near term.
Profitability Risk
MobiKwik mark-to-market exposure creates volatile non-cash adjustments; execution risk in integrating Adumo and Recharger; currency volatility between ZAR and USD remains a near-term concern; reliance on capex for vaults and software platforms implies ongoing capital intensity; reliance on government grants (SASSA) and consumer financing cycles can introduce volatility in Consumer segment performance.
Financial Position
Debt refinement improved cost of capital (10.7% vs 12%), with gross debt around ZAR 4.0 billion and cash on hand ~ZAR 1.3 billion; net debt/adjusted EBITDA at 2.8x (quarterly) with target to move toward 2x; liquidity headroom enhanced by refinancing partners RMB and Investec; group margins are targeted to improve toward 30% EBITDA/net revenue in Consumer and Merchant, with Enterprise aiming north of 20% EBITDA/net revenue in the near term.
SWOT Analysis
Strengths
Three-engine growth model with cross-sell opportunities across Consumer, Merchant, and Enterprise.
Strategic acquisitions (Adumo) expanding merchant footprint and capabilities; Recharger expanding electricity-voucher and sub-metering offerings.
Strong cash generation in QQ3 2025 with positive operating cash flow (USD 10.66m) and expanding gross cash position.
Refinanced debt at a lower cost (approx. 10.7% vs 12%), better capital structure and increased headroom.
Weaknesses
GAAP profitability remains negative in QQ3 2025 due to reorganization costs, MobiKwik mark-to-market and non-cash items, limiting near-term earnings power.
Currency volatility (rand vs USD) creates translation and earnings volatility, complicating investor visibility.
Capex-intensive strategy requires continued capital discipline to sustain margin expansion.
Opportunities
Ramping Enterprise EBITDA contribution with Prism Switch and Recharger integration; cross-sell of merchant acquiring to GAAP base.
Insurance and lending cross-sell within Consumer driving higher ARPU and wallet share.
MobiKwik monetization to reduce gearing and strengthen balance sheet.
Threats
Macro-sensitive consumer and merchant spend in South Africa; regulatory and credit risk in lending for Consumer segment.
Execution risk related to integration of large acquisitions and the associated cost base in near term.
MobiKwik exposure and potential re-rating by investors if lock-up constraints constrain monetization.