EPS of $-0.07 increased by 22.2% from previous year
Gross margin of 23.8%
Net income of -4.54M
"“The biggest competitor is really inefficiency. We strive to reduce the cost of the services we provide, and we strive to provide a suite of services that give our customers the offering that they deserve.”" - Ali Mazanderani
Lesaka Technologies Inc (LSAK) QQ1 2025 Results: Net Revenue Growth Amid Adumo Integration; Building a Multiproduct Fintech Platform in Southern Africa
Executive Summary
Lesaka delivered a mixed but strategically meaningful Q1 2025, underscoring execution of a multi-year platform-build strategy anchored by the Adumo acquisition and a pivot to a multiproduct, customer-centric model. Reported USD revenue of $145.5 million for the quarter, up 6.95% YoY, with net revenue estimated at roughly $60 million (1.056 billion rand) indicating a 16% organic growth rate in rand terms, reflecting a more representative top-line dynamic after the adoption of the net-revenue metric. EBITDA stood at $6.82 million, with operating income essentially breakeven at -$0.05 million, and net income of -$4.54 million. Management reaffirmed the FY2025 guidance and highlighted that the Adumo integration would be reflected in Q2 results, signaling a path to higher scale and improved unit economics through a bundled, cross-sell approach across consumer and merchant segments.
Management reiterated the strategic thesis: accelerate digitization-driven demand in Africa, shift from bank-centric to non-bank fintech solutions, and leverage a broadened product suite to reduce customer acquisition costs while lifting take rates and reducing churn. The group climate remains supportive for growth, albeit with near-term profitability headwinds from ongoing platform investments and one-off integration costs. The outlook includes net revenue guidance of 5.2–5.6 billion rand for FY2025 and group adjusted EBITDA of 900 million to 1 billion rand, with a midpoint implying roughly 30–37% growth on a like-for-like basis depending on the treatment of Adumo-related interest expense. The balance sheet remains cash-generative at the group level, yet with leverage targets to reduce net debt to approximately 2x EBITDA over the medium term and a modest non-core asset holding in MobiKwik.
Operating income: -0.05 million USD; operating margin: -0.03%.
Net income: -4.54 million USD; net margin: -3.12%.
Financial Highlights
Group and Margin profile:
- Quarter revenue (USD): 145.55 million; YoY growth 6.95%; QoQ -0.34%.
- Gross margin: 23.8% (Gross Profit USD 34.66m on revenue USD 145.55m).
- EBITDA: 6.82 million USD; EBITDA margin 4.68%.
- Operating income: -0.05 million USD; operating margin: -0.03%.
- Net income: -4.54 million USD; net margin: -3.12%.
- EPS (diluted): -0.07 USD; Weighted average diluted shares: 62.25 million.
- Net revenue concept (RAND): 1.056 billion rand for Q1 2025, representing organic rand growth of 16% YoY; net revenue is defined as gross revenue less prepaid airtime and third-party commissions.
- Cash flow: operating cash flow -$4.14m; free cash flow -$8.10m; cash at period-end $49.6m.
- Balance sheet (USD equivalents): Total assets $551.9m; total liabilities $288.2m; total stockholders’ equity $184.2m; net debt $116.3m; cash and cash equivalents $49.7m.
Segment and product dynamics:
- Merchant division: 122,000 merchants; throughput by Kazang devices growth with supplier payments up 60% to 3.2 billion rand; VAS throughput ex supplier and money transfers up 10% YoY to 5.4 billion rand; card-enabled devices >53,450; total throughput 4.2 billion rand, up 18% YoY. Adumo integration expected to enhance throughput and cross-sell opportunities.
- Consumer division: revenue up 30% YoY to 378 million rand; segment adjusted EBITDA up 99% YoY to 79 million rand; ARPU rose to 91 rand/month from 83 rand; loan book 273 million rand; gross lending 564 million rand; loan disbursements 166 million rand; insurance policies 466,000, up 30% YoY; payout speed for claims remains high (90% paid within 24 hours; 95% within 48 hours).
Guidance and execution:
- FY2025 guidance reaffirmed: total revenue 10–11 billion rand; net revenue 5.2–5.6 billion rand (≈ 35% YoY at midpoint); group adjusted EBITDA 900 million–1 billion rand (≈ 37% YoY at midpoint). Second-quarter guidance: revenue 2.4–2.6 billion rand; net revenue 1.2–1.4 billion rand; group EBITDA 190–210 million rand. Merchant division expected to contribute ~70% of segment EBITDA; consumer ~30%.
- Adumo consolidation: integration ongoing; Q2 results will reflect three-quarters of Adumo contribution in FY2025.
- Leverage and capital allocation: net debt to EBITDA target ~2x; capital allocation flexibility for M&A funding; non-core assets include MobiKwik stake valued at about $76.3 million; monitoring for an orderly disposal.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
145.55M
6.95%
-0.34%
Gross Profit
34.66M
21.19%
5.08%
Operating Income
-45.00K
-119.74%
-115.25%
Net Income
-4.54M
19.62%
9.79%
EPS
-0.07
22.22%
14.84%
Key Financial Ratios
currentRatio
2.19
grossProfitMargin
23.8%
operatingProfitMargin
-0.03%
netProfitMargin
-3.12%
returnOnAssets
-0.82%
returnOnEquity
-2.47%
debtEquityRatio
0.9
operatingCashFlowPerShare
$-0.07
freeCashFlowPerShare
$-0.13
priceToBookRatio
1.69
priceEarningsRatio
-17.14
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management themes and quotes from the earnings call:
- Strategy and growth thesis: Ali Mazanderani emphasized a multiproduct, customer-centric platform designed to disrupt an oligopolistic merchant acquiring market ecosystem. He stated, “the future is bright” and highlighted the plan to scale the platform, broaden the product offering, and improve unit economics via reduced customer acquisition costs and higher take rates.
- Adumo integration and merchant leadership: Steven Heilbron noted the Adumo acquisition closed on Oct 1, 2024, with integration into the merchant division and EXCO participation, emphasizing a leading position in both informal micro merchants and formal SMEs. He described the throughputs and verticals (supplier payments, VAS, and card acquiring) and a path to scale across Kazang devices and vaulting solutions.
- Consumer momentum and product pipeline: Lincoln Mali highlighted the expansion into Adumo’s 250,000-strong customer base and the launch of Boomware—a front-end sales platform—and a planned expansion into larger lending via adjusted product terms (e.g., increasing loan limit from 2,000 rand to up to 4,000 rand over nine months).
- Guidance and capital allocation: Dan Smith reiterated the 30% organic growth target for merchant EBITDA and the plan to reduce group costs to about 20% of total segment EBITDA, while maintaining flexibility on funding large acquisitions. He also explained the “net revenue” construct to better reflect top-line growth under currency and product mix dynamics.
- Industry context and disruption: Ali highlighted secular fintech trends in Africa, noting the opportunity to shift from bank-dominated payment ecosystems to non-bank providers, with a historical reference to bank share erosion in merchant acquiring globally (e.g., 97% of top 50 banks in 2011 vs. 43% in 2022). These quotes illustrate the management’s view of a long-duration secular trend favoring Lesaka's platform strategy.
“The biggest competitor is really inefficiency. We strive to reduce the cost of the services we provide, and we strive to provide a suite of services that give our customers the offering that they deserve.”
— Ali Mazanderani
“We have achieved the midpoint of our guidance not just this quarter, but for the last nine consecutive quarters.”
— Ali Mazanderani
Forward Guidance
Outlook assessment based on management guidance and market dynamics:
- FY2025 Revenue and earnings trajectory: The company reaffirmed revenue guidance of 10–11 billion rand and net revenue guidance of 5.2–5.6 billion rand, implying roughly 35% YoY top-line growth at the midpoint. Group EBITDA guidance of 900 million–1 billion rand points to ~37% YoY growth at the midpoint, though the metric is sensitive to Adumo’s consolidation and the treatment of consumer loan book-related interest expense.
- Mid-term growth drivers: The Adumo integration expands the merchant portfolio (touchpoints, vaulting, supplier payments) and cross-sell opportunities into the grants and formal merchant space, while consumer lending expansion (loan size, term adjustments) supports higher ARPU and stickier customer relationships. The enterprise pillar is expected to contribute meaningfully to EBITDA as the company monetizes its internal and external client relationships.
- Risks and achievability: Near-term profitability may remain pressured due to integration costs, higher group-level investments, and the shift to net-revenue measurement which may distort gross-revenue comparisons. However, the company’s track record of meeting or exceeding guidance across nine straight quarters supports a constructive view on the achievability of the midpoints, provided integration milestones stay on track and macro conditions remain supportive.
- Key indicators to monitor: pace and profitability of Adumo integration, merchant mix optimization (pin vs pinless airtime), cross-sell uptake in EPE and lending products, growth in enterprise pillar revenue, working capital dynamics, and leverage trajectory toward a 2x net debt/EBITDA target. Investors should watch quarterly EBITDA progression by segment and the cadence of non-core asset realization (MobiKwik) to assess external liquidity risk and capital allocation flexibility.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
LSAK Focus
23.81%
-0.03%
-2.47%
-17.14%
EVTC
49.90%
21.60%
6.03%
17.92%
CSGS
48.40%
9.81%
5.70%
26.07%
CCSI
79.30%
43.00%
-42.90%
5.33%
GB
77.70%
22.70%
27.70%
9.89%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Outlook is cautiously constructive. Lesaka’s QQ1 2025 results validate the strategic shift toward a multiproduct fintech platform and underpin the long-term TAM expansion in Southern Africa. The Adumo integration enhances the merchant division’s scale and cross-selling potential, while the consumer division demonstrates strong cross-sell momentum and growing ARPU. Although near-term profitability is pressured by integration costs and the transition to net revenue, the guided FY2025 net revenue growth of ~35% and group EBITDA growth around 37% at the midpoint reflect a coherent plan to scale profitability as integration benefits accrue. Key upside drivers include accelerated merchant throughput, better unit economics through bundled products, and continued growth in the enterprise segment. Risks include currency translation effects, execution risks on M&A, and competitive dynamics. Overall, the stock presents a selectively attractive risk-adjusted opportunity for investors with a medium-term horizon, provided the company maintains discipline on cost, debt, and incorporation of Adumo synergies into earnings power.
Key Investment Factors
Growth Potential
Significant growth potential from a diversified fintech platform: (1) Adumo integration expands merchant coverage and cross-sell capabilities; (2) multiproduct strategy (cash management, VAS, lending, insurance) enhances customer lifetime value and reduces churn; (3) enterprise pillar monetizes corporate relationships and accelerates TAM expansion; (4) USSD and vaulting innovations position Lesaka to capture underserved segments and improve cost-to-serve.
Profitability Risk
Key risks include near-term profitability headwinds from integration and platform scaling, currency volatility between rand and USD, competitive intensity from banks and fintechs, and execution risk around M&A integration and new product launches. Financing large acquisitions could introduce leverage risk if growth does not translate to EBITDA expansion as expected.
Financial Position
Solid liquidity with cash of ~$49.6m and net debt of ~$116.3m; net debt/EBITDA at quarter end ~2.6x, with a target decline toward ~2x. Non-core asset (MobiKwik) valued at ~$76.3m; ongoing focus on improving capital allocation and cost discipline (group costs ~20% of segment EBITDA).
SWOT Analysis
Strengths
Broad multiproduct platform across consumers and merchants, with Adumo integration expanding reach and capabilities
Large merchant base (122k merchants) and significant throughput in Kazang ecosystem
Strong material cross-sell potential (lending, insurance, VAS) with high retention in EPE segment
First-mover advantage in Southern Africa fintech with expanding enterprise footprint
Weaknesses
Near-term profitability headwinds due to integration costs and scaling investments
Negative quarterly net income amid ongoing investments; reliance on rand-dollar translation
Group costs elevated (approx. 20% of segment EBITDA target) and potential FX exposure on debt and capex
Concentration risk in a few core geographies (Southern Africa) with macro risks
Opportunities
M&A bolt-ons in SA and neighboring markets to broaden product suite and TAM
Enterprise pillar monetization and tokenization/security tech (Prism) expansions
Cross-sell enhancements via Boomware front-end, USSD, vaulting, and merchant services
Digitization tailwinds across Africa support merchant adoption and non-bank competition
Threats
Macro volatility and potential rand depreciation impacting USD-denominated metrics
Intense competition from banks and fintechs expanding merchant and consumer offerings
Execution risk around Adumo integration and the realization of synergies