- Lesaka Technologies reports strong Q1 2024 performance with a 9% revenue increase and return to operating profitability.
- The company achieved a 42% reduction in net loss and 108% improvement in Group Adjusted EBITDA compared to Q1 2023.
- Lesaka reaffirms its guidance for fiscal 2024, focusing on delivering affordable financial services and demonstrating resilience in a challenging economic environment.
Lesaka Technologies, a leading Fintech company with a strong presence on both the Nasdaq and the Johannesburg Stock Exchange (JSE), has announced its impressive first-quarter financial results for 2024, demonstrating robust growth and a significant return to profitability. The company’s performance is a testament to its resilience and adaptability in an ever-changing economic landscape.
Q1 2024 Financial Highlights
Table 1: Lesaka Technologies Q1 2024 Financial Performance
| Financial Metrics | Q1 2024 (USD ‘000s) | Q1 2023 (USD ‘000s) | % Change (USD) | % Change (ZAR) |
|---|---|---|---|---|
| Revenue | 136,089 | 124,786 | 9% | 19% |
| Operating Income (Loss) | 228 | (4,671) | nm (not meaningful) | nm |
| Net Loss Attributable to Lesaka | (5,651) | (10,696) | -47% | -42% |
| GAAP Loss Per Share (USD) | (0.09) | (0.17) | -48% | -44% |
| Group Adjusted EBITDA (USD ‘000s) | 8,719 | 4,199 | 108% | 127% |
| Fundamental Loss Per Share (USD) | – | (0.08) | nm | nm |
(Source: Lesaka Technologies Q1 2024 Financial Results)
Revenue Growth and Operating Profitability
Lesaka Technologies reported Q1 2024 revenue of $136.1 million (ZAR 2.5 billion), marking a 9% increase compared to the same period in 2023. This impressive growth was primarily driven by a surge in low-margin prepaid airtime sales and other value-added services, as well as higher transaction, insurance, and lending revenues. The company’s operations in South Africa’s informal market continue to thrive, contributing to a substantial revenue increase of 19% in South African Rand (ZAR).
Furthermore, Lesaka achieved a return to operating profitability with an operating income of $0.2 million (ZAR 4.2 million) for Q1 2024, in stark contrast to an operating loss of $4.7 million (ZAR 80.0 million) in Q1 2023. This turnaround was propelled by cost reduction initiatives in the Consumer Division and the significant growth in the Merchant Division.
Narrowing Net Loss and Improved Adjusted EBITDA
Lesaka Technologies’ net loss continued to narrow, reporting a net loss of $5.7 million (ZAR 105.6 million) in Q1 2024. This represents a remarkable 42% improvement in ZAR compared to the same period in 2023.
Group Adjusted EBITDA, a key performance metric for the company, showed substantial improvement. Lesaka reported Group Adjusted EBITDA of $8.7 million (ZAR 162.5 million) for Q1 2024, a remarkable 108% increase compared to Q1 2023. In ZAR, Group Adjusted EBITDA increased by an even more substantial 126%, underlining the company’s robust financial performance.
Strength in Merchant Division
The Merchant Division, a core part of Lesaka’s business, demonstrated continued year-on-year growth in profitability. In Q1 2024, it delivered Segment Adjusted EBITDA of $8.1 million (ZAR 150.2 million), showcasing an 11% increase in ZAR compared to Q1 2023. The positive outlook for the Merchant Division is driven by its expanding footprint in South Africa’s informal market.
Consumer Division’s Turnaround
The Consumer Division reported its fourth consecutive quarter of profitability, delivering Segment Adjusted EBITDA of $2.5 million (ZAR 46.6 million) in Q1 2024. This significant turnaround marks a substantial improvement from a loss of $1.4 million (ZAR 23.9 million) in Q1 2023. Initiatives aimed at growing the Consumer Division are yielding positive results, with revenue increasing by 13% in ZAR. This growth is achieved while operating in a challenging economic environment.
Positive Cash Flow and Fiscal 2024 Guidance
Lesaka Technologies maintained momentum in achieving positive net cash provided by operating activities, reporting $3.4 million (ZAR 63.2 million) in Q1 2024. This marks a notable shift from the net cash used in operating activities of $7.7 million (ZAR 131.2 million) in Q1 2023.
The company reaffirmed its guidance for fiscal 2024, demonstrating confidence in its future performance. For the second quarter of 2024 (Q2 2024), ending on December 31, 2023, Lesaka anticipates:
Table 2: Lesaka Technologies Q2 2024 Guidance
| Q2 2024 Guidance | Low (ZAR) | High (ZAR) |
|---|---|---|
| Revenue | 2.65 billion | 2.75 billion |
| Group Adjusted EBITDA | 170 million | 180 million |
For the full fiscal year 2024 (FY 2024), ending on June 30, 2024, Lesaka Technologies expects:
Table 3: Lesaka Technologies FY 2024 Guidance
| FY 2024 Guidance | Low (ZAR) | High (ZAR) |
|---|---|---|
| Revenue | 10.7 billion | 11.7 billion |
| Group Adjusted EBITDA | 680 million | 740 million |
Lesaka’s management has provided this guidance based on ZAR financial metrics, as the company primarily measures its operating performance in South African Rand. It’s essential to note that Group Adjusted EBITDA is a non-GAAP financial measure and excludes certain charges. The company has not reconciled this non-GAAP financial measure to the corresponding GAAP financial measure due to factors outside its control.
Factors Impacting the Results
The impressive results can be attributed to several factors:
- Higher Revenue: Lesaka’s revenue increase of 19% in ZAR was driven by a surge in low-margin prepaid airtime sales, value-added services, transaction revenues, insurance, and lending. This growth was partially offset by lower hardware sales revenue.
- Operating Income: The return to operating profitability is a result of cost reduction initiatives in the Consumer Division and contributions from the Merchant Division.
- Higher Net Interest Charge: An increased net interest charge can be attributed to higher interest rates.
- Foreign Exchange Movements: The U.S. dollar strengthened by 9% against the ZAR during Q1 2024, impacting U.S. dollar-reported results.
Segment Performance and Liquidity
Lesaka Technologies evaluates segment performance based on Segment Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA), adjusted for specific items. Key segment results include:
- Merchant Division: In Q1 2024, the Merchant Division’s revenue was $121.4 million, up 21% compared to Q1 2023 in ZAR. Segment revenue increased due to the increase in low-margin prepaid airtime sales and other value-added services. The Segment Adjusted EBITDA margin for Q1 2024 was 6.6%.
- Consumer Division: Consumer Division revenue was $15.6 million in Q1 2024, a 13% increase in ZAR compared to Q1 2023. This growth was primarily due to more transaction fees generated from higher EPE account holders, higher insurance revenues, and an increase in lending revenue. The Segment Adjusted EBITDA margin for Q1 2024 was 15.9%.
- Group Costs: Group costs primarily include employee-related costs, expenditures related to compliance, non-employee directors’ fees, legal fees, and more. In Q1 2024, group costs decreased compared to the prior period due to lower external audit, legal, and consulting fees.
Lesaka Technologies reported cash and cash equivalents of $35.1 million as of September 30, 2023, with unrestricted cash balances increasing due to positive contributions from the Merchant and Consumer divisions. The company utilized cash reserves for scheduled loan repayments, investments in assets, and working capital.
Future Outlook
Lesaka Technologies continues to demonstrate its strength and resilience in the Fintech sector. The company’s ability to adapt and thrive in challenging economic conditions is evident in its Q1 2024 results. With a positive outlook and reaffirmed guidance for fiscal 2024, Lesaka Technologies is poised for continued growth and success.
Lesaka Group CEO Chris Meyer commented on the encouraging results, stating, “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. 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.”
