What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-07 compared with 2023-05-09 · 915 added, 405 removed, 94 unchanged (93% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended June 30, 2022, and the unaudited condensed consolidated financial statements and the accompanying notes included in this Form 10-Q.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year

ended June 30, 2023,

and the unaudited condensed consolidated financial statements and

the accompanying notes included in this Form 10-Q.

securities laws

require that when

we publish any

non-GAAP measures, we

disclose the reason

for using these

reconciliations

present these non

-GAAP measures and

the material risks

and limitations of

these measures, as

reconciliation of these

GAAP measures

most directly

comparable GAAP

financial measure

Operations—Use of

Measures” below.

Forward-looking statements

Some of the statements in this Form 10-Q constitute forward-looking statements.

These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, implied or inferred by these forward-looking statements.

Such factors include, among other things, those listed under Item 1A.—“Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2022.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms and other comparable terminology.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we do not know whether we can achieve positive future results, levels of activity, performance, or goals.

Actual events or results may differ materially.

We undertake no obligation to update any of the forward-looking statements after the date of this Form 10-Q to conform those statements to reflect the occurrence of unanticipated events, except as required by applicable law.

You should read this Form 10-Q and the documents that we reference herein and the documents we have filed as exhibits hereto and thereto and which we have filed with the United States Securities and Exchange Commission completely and with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect.

We qualify all of our forward-looking statements by these cautionary statements.

Some of the statements in this Form 10-Q constitute forward-looking

These statements relate to future events or our

future financial performance

and involve known

risks, uncertainties and

other factors that

actual results,

or achievements

results, levels

performance or achievements expressed,

implied or inferred by these

forward-looking statements.

include, among other

things, those

listed under Item

1A.—“Risk Factors” in

Report on Form

the year ended

June 30, 2023.

identify forward-looking

by terminology

“will,” “should,”

“plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms

comparable terminology.

Although we believe

that the expectations

reflected in the

forward-looking statements are

reasonable, we do

not know whether

achieve positive

future results,

performance, or

undertake no obligation to update any of the forward-looking statements after the date of this Form 10-Q to conform those statements

to reflect the occurrence of unanticipated events, except as required by applicable

should read this Form 10-Q and the documents that we reference herein and the documents we have filed as exhibits hereto

understanding that our

actual future results,

levels of activity,

performance and achievements

may be materially

different from

qualify all of our forward-looking statements by these cautionary

Recent Developments

This quarter delivered continued growth for us despite prevailing macroeconomic and socio-political conditions.

With the Consumer Division (“Consumer”) contributing sequential positive Segment Adjusted EBITDA, and the Merchant Division (“Merchant”) continuing to display good growth and Segment Adjusted EBITDA profitability.

Key highlights in the third quarter of fiscal 2023 include:

outperformance by the Connect Group, within Merchant ahead of our expectations, delivering a Segment Adjusted EBITDA of ZAR 149 million for the period;

a second consecutive quarter of Segment Adjusted EBITA profitability in Consumer, with Segment Adjusted EBITDA of ZAR 30 million in the third quarter of fiscal 2023, compared to a ZAR 105 million loss in the third quarter of fiscal 2022;

reporting Group Adjusted EBITDA of ZAR 137 million for the third quarter of fiscal 2023, compared with a Segment Adjusted EBITDA loss of ZAR 113 million in the third quarter of fiscal 2022.

Merchant Division outperformance

Merchant has shown significant growth in card acquiring (Kazang Pay) and Merchant Credit, in particular Capital Connect and Kazang Pay Advance.

The integration of the Connect Group continues to create new opportunities within our micro small and medium enterprises (“MSME”) offering and is a business where growth is supported by secular trends underpinning financial inclusion, cash management and digitization for MSME’s.

Our Merchant offering continues to grow:

Kazang, which is our Value-Added-Service (“VAS”) and Supplier Payments Business, has seen strong adoption by MSME’s in the informal sector, with a 52% year-on-year growth in the number of devices deployed.

We had approximately 71,800 devices in field as of March 31, 2023, compared to approximately 64,500 as of December 31, 2022, and approximately 47,300 devices a year ago ;

Our automated cash management and payments business, Cash Connect, effectively puts the “bank” in approximately 4,370 merchants’ stores (compared to approximately 4,000 merchants’ stores a year ago).

Cash Connect is a provider of robust cash vaults in the formal sector, and is building a presence in the informal sector.

Cash Connect enables our merchant customer base to significantly mitigate their operational risks pertaining to cash management and security;

We provide card acquiring solutions, via Card Connect in the formal sector and Kazang Pay in the informal sector.

Card-enabled POS devices increased to approximately 42,000 as of March 31, 2023, compared to approximately 34,400 as of December 31, 2022, and approximately 20,300 a year ago.

As a result, our card acquiring business has recorded in excess of 100% growth in devices deployed compared to year ago;

We provide merchants access to credit through Capital Connect and Kazang Pay Advance.

We continue to see strong demand for this merchant credit offering, and disbursed ZAR 280 million during the quarter, compared to ZAR 201 million in the comparable period ended March 31, 2022.

Consumer Division achieves a second quarter of Segment Adjust EBITDA profitability and is poised for growth

Over the past four quarters we have consistently referenced the three levers underpinning our strategy of returning Consumer to profitability - cost optimization, growing active EPE account numbers and increasing ARPU through cross-selling.

continued improvement

financial performance

first quarter

operational momentum in both of our Merchant and Consumer divisions.

macroeconomic and socio-political conditions in South Africa.

Adjusted EBITDA,

a non-GAAP measure,

million ($8.7 million)

this quarter,

compared to Group

Adjusted EBITDA

million ($4.2

The continued

resilience of

our business model

in a challenging

environment for

our merchant and consumer customers demonstrates the value they place

on our services.

Our mission at Lesaka is

to enable merchants to compete and

grow, and to improve the lives of

South Africa’s grant beneficiaries

by providing access

to innovative financial

technology and value

creating solutions.

achieve this through our

vision to build

leading full-service

fintech platform

Africa, offering

cash management,

payment processing,

Services (“VAS”),

capital and financial services to merchants and underserved consumers.

Merchant Division

The year-on-year

growth achieved

Merchant Division

robust secular

trends underpinning

inclusion, cash management

and digitalization for

and medium enterprises

(“MSMEs”), especially in

the informal markets

of South Africa, where we have a leading market position.

Performance in our Merchant division has been driven by:

Kazang, our VAS

and supplier payments business,

continues to see adoption

by MSMEs in the informal

sector, with a

year-on-year growth in the number of devices

We had approximately 77,000 devices deployed as of September

approximately

slight slowdown

during our current quarter, growing by

just over 2,000 devices.

slight slowdown

attributed to

selective device

placement strategy

informal merchants to support their supplier payments to three major FMCG companies in South Africa.

that accelerated roll out program we have prioritised deployment at merchants where we can sell more products and

services through

higher margins.

Therefore, during

first quarter of fiscal 2024 we focused on optimising this new fleet and removing sub-optimal

As communicated in the fourth quarter of fiscal 2023, our product mix for VAS

sales has changed with low-margin

significantly,

approximately

compared to approximately 30% a year ago.

The impact on overall profitability

has not been material.

provide card acquiring

solutions in the informal

sector via Kazang

the formal sector we

provide this service

POS devices increased

to approximately

September 30,

2023, compared

to approximately 27,700 a year ago, a growth of 68% in deployed devices;

Our Merchant Credit

offering includes Capital Connect

formal market and

Kazang Pay Advance

in the informal

disbursed ZAR

196 million during

this quarter,

compared to approximately

ZAR 226 million

in the comparable

last year, representing a 13% decrease.

In the formal market we continue to see demand for our

merchant credit offering but

as previously disclosed,

we experienced a

slight pullback in

credit extension in

this business

since March 2023

execute quickly

Advance credit product is not suitable to continue with, especially in the high interest rate environment,

and have suspended

generated positive returns despite recent losses incurred being greater

than expected.

A reduction in origination of

loan book and disbursements is primarily a result of the decision to

suspend Kazang Pay Advance during the period but was

also partially impacted by the slight pull back in credit

extension in Capital Connect.

cash management

Cash Connect,

in approximately

stores, compared

to approximately

4,200 merchants’

stores a year

informal sector.

customer base

significantly mitigate their

operational risks pertaining

management and security.

new ATM recycler is generating

strong interest,

and this business

transferred to

Division, where

fully integrated

Cash Connect proposition as an alternative to vaults for our merchant

Consumer Division

Over the past five quarters we have consistently referenced the three levers underpinning our strategy of returning the Consumer

Division to profitability – (i) growing active EasyPay Everywhere (“EPE”) account numbers, (ii) increasing average revenue per

(“ARPU”) through cross-selling and (iii) cost optimization.

The progress on our three key initiatives is as follows:

Cost optimization

Successfully executed cost optimization initiatives have contributed to our achievement of two consecutive quarters of positive Segment Adjusted EBITDA, including branch rationalizations, deployment of our ATMs in third party merchant stores and reductions in our cash management expenditures.

These costs savings are in addition to the realized cost savings delivered by the Project Spring initiative last year.

We continue to evaluate, and implement, further optimization measures, particularly around our branch infrastructure and ATM network, as we grow Consumer.

Driving customer acquisition

Our total active EasyPay Everywhere (“EPE”) transactional account base stood at approximately 1.3 million, at the end of March 31, 2023, of which approximately 1.1 million (or approximately 85%) are permanent grant recipients.

The balance comprises Social Relief of Distress (“SRD”) grant recipients.

As at the end of March 2023, we increased our permanent grant account base by 3% on a net basis and our total grant base by 16%, compared to a year ago.

The net growth of our permanent grant recipient base has been slower than anticipated as we continue to transition the business into a sales driven, customer-centric, financial services provider;

Our priority is to grow our permanent grant recipient customers base, where we can build deeper relationships by offering other products such as insurance and lending.

We do not offer the same breadth of service to the SRD grant base due to the more temporary nature of the grant;

We continue to focus our efforts on designing and implementing products and services that we believe will enhance the lives of these people and their families.

This in turn should improve account activation and utilization.

Progress on cross selling

transactional

September 2023,

which more than

1.1 million (or

more than 85%)

are permanent grant

comprises Social Relief

of Distress (“SRD”) grant

recipients, which was introduced

during the COVID pandemic and

extended in calendar

our permanent

grant recipient

customers base,

deeper relationships

offering other products such as insurance and lending.

We do not offer the same breadth of service to the SRD grant

temporary nature

activations, for

the permanent

approximately

76,000 gross account activations in

the first quarter, compared

to approximately 45,000 in the first

quarter of fiscal

approximately

accounts, compared to approximately 2,700 in first quarter of fiscal 2023

Progress on cross

EasyPay Loans

We issued approximately 210,000 loans in the quarter with the net loan book increasing 11% to ZAR 397 million on March 31, 2023, compared to ZAR 359 million in the comparable period ended March 31, 2022.

The loan conversion rate continues to improve following the implementation of more targeted loan campaigns over the last quarter.

The portfolio loss ratio, calculated as the loans written off during the period as a percentage of the total loan book, remains encouragingly low at around 1.00% for the quarter (i.e., approximately 4% per annum).

approximately 222,000

consumer loan

increasing 20% to

ZAR 423 million

as at September

30, 2023, compared

million as of

September 30,

amended our credit scoring or other lending criteria to grow our Consumer lending book.

implementation

lending campaigns during the current quarter.

The portfolio loss ratio,

calculated as the loans

written off during the

period as a percentage

of the total loan book,

remains flat at approximately 6% on an annualized basis, compared to the fourth

quarter of fiscal 2023.

EasyPay Insurance

Our insurance product sales continue to grow and is a material contributor to improvement in overall average revenue per user (“ARPU”).

We have been able to improve customer penetration to approximately 28% of our active permanent grant account base as of March 31, 2023 compared to 18% in the comparable period ended March 31, 2022.

Over 36,000 new policies were written during the third quarter of fiscal 2023, compared to approximately 5,500 in the comparable period ended March 31, 2022.

This grew the total number of active policies to approximately 309 000 policies, up 25% compared with March 2022;

We have experienced a reduction in the number of insurance claims incurred following the cancellation of certain of our offerings and as a result of reduction in the number of pandemic-related deaths.

Average revenue per user

ARPU for our permanent client base has increased to ZAR 78 for the third quarter of fiscal 2023, from ZAR 74 in the second quarter of fiscal 2023.

Impact of loadshedding

The trading environment remains challenging, including daily power cuts (known as load-shedding in South Africa).

This could adversely impact our customers, especially in Merchant, where they lose valuable trading hours if they do not have access to alternative power supplies and back-up facilities to process electronic payments and value-added services.

Despite these challenges, our businesses have been relatively unaffected by load-shedding;

this is because our customer base is geographically diversified, and the rotational nature of load-shedding results in localized power cuts over shorter periods.

Our teams have delivered growth in the Merchant and Consumer divisions, despite the impact of load shedding, demonstrating the resilience of our business model, and the validity of our offering and purpose to our target market.

Our insurance product sales continue to grow and

is a material contributor to the

improvement in our overall ARPU.

have been able

to improve customer penetration

to more than 30%

of our active permanent

grant account base

as of September

30, 2023, compared

to below 25% as

of September 30, 2022.

Approximately 37,500 new

approximately 25,000

comparable period

number of active policies has

grown by 34% to approximately

359,000 policies as of September

30, 2023, compared

to September 30, 2022.

approximately ZAR 74 in the first quarter of fiscal 2023.

Economic Environment and Impact of loadshedding

Overall, we have

seen no significant change

in the operating environment

during the quarter.

The trading environment

compounded by daily power cuts (known as load-shedding

in South Africa), although we did see a reduction in load shedding

this quarter.

Power disruptions adversely impact our customers, especially in our Merchant Division, where they lose valuable trading

hours if they

access to alternative power

supplies and back-up

facilities to process electronic

payments and value-added

geographically

rotational nature

of load-shedding

localized power

periods, allowing

trading hours.

Notwithstanding

resilience of our business model, which is firmly underpinned by the relevance

and value of our offering to our target

Critical Accounting Policies

Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S.

GAAP, which requires management to make estimates and assumptions about future events that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities.

As future events and their effects cannot be determined with absolute certainty, the determination of estimates requires management’s judgment based on a variety of assumptions and other determinants such as historical experience, current and expected market conditions and certain scientific evaluation techniques.

Critical accounting policies are those that reflect significant judgments or uncertainties and may potentially result in materially different results under different assumptions and conditions.

We have identified the following critical accounting policies that are described in more detail in our Annual Report on Form 10-K for the year ended June 30, 2022:

Our unaudited condensed consolidated

financial statements have been

prepared in accordance with U.S.

which requires

determination

historical experience, current and expected market conditions and certain scientific evaluation techniques.

Critical accounting policies

significant judgments

or uncertainties

potentially result

in materially

results under

policies that

Annual Report on Form 10-K for the year ended June 30, 2023:

Business Combinations and the Recoverability of Goodwill;

1 unchanged sentence

Revenue recognition – principal versus agent considerations;

Valuation of investment in Cell C;

of investment in Cell C;

Recoverability of equity securities and equity-accounted investments;

3 unchanged sentences

Recent accounting pronouncements adopted

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of accounting pronouncements adopted, including the dates of adoption and the effects on our unaudited condensed consolidated financial statements.

Recent accounting pronouncements not yet adopted as of March 31, 2023

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of March 31, 2023, including the expected dates of adoption and effects on our financial condition, results of operations and cash flows.

Refer to Note

our unaudited condensed

consolidated financial statements

description of accounting

pronouncements

adopted, including the dates of adoption and the effects on

our unaudited condensed consolidated financial statements.

Recent accounting pronouncements not yet adopted

as of September 30, 2023

pronouncements

condition, results of operations and cash flows.

Currency Exchange Rate Information

Actual exchange rates

The actual exchange rates for and at the end of the periods presented were as follows:

The actual exchange rates for and at the end of the periods presented were

Three months ended

Nine months ended

September 30,

$ average exchange rate

3 unchanged sentences

Rate at end of period

Translation exchange rates for financial reporting purposes

We are required to translate our results of operations from ZAR to U.S.

Translation exchange

rates for financial reporting purposes

We are required

to translate our results of operations from ZAR to U.S.

dollars on a monthly basis.

Thus, the average rates used to translate this data for the three and nine months ended March 31, 2023 and 2022, vary slightly from the averages shown in the table above.

The translation rates we use in presenting our results of operations are the rates shown in the following table:

Thus, the average rates used

ended September

vary slightly

averages shown

following table:

Three months ended

Nine months ended

September 30,

Income and expense items:

Balance sheet items:

We have translated the results of operations

and operating segment information for the three months ended September 30, 2023,

provided in the

tables below using

the actual average

exchange rates per

2023, August 2023,

and September

2023) between the USD and ZAR in order to

reduce the reconciliation of information presented to our chief

operating decision maker.

compared with

significant, however,

presentation using

the average exchange

month compared

average exchange

quarter improves the accuracy of the information presented

in our external financial reporting and leads to fewer differences

our external reporting measures which are supplementally presented in ZAR, and our internal management information, which is also

presented in ZAR.

Results of Operations

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.

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.

Our operating segment revenue presented in “—Results of operations by operating segment” represents total revenue per operating segment before intercompany eliminations.

A reconciliation between total operating segment revenue and revenue presented in our unaudited condensed consolidated financial statements is included in Note 17 to those statements.

Our chief operating decision maker is our Group Chief Executive Officer and he evaluates segment performance based on segment earnings before interest, tax, depreciation and amortization (“EBITDA”), adjusted for items mentioned in the next sentence (“Segment Adjusted EBITDA”).

We do not allocate once-off items (as defined below), stock-based compensation charges, depreciation and amortization, impairment of goodwill or other intangible assets, certain lease charges (“Lease adjustments”), other items (including gains or losses on disposal of investments, fair value adjustments to equity securities, fair value adjustments to currency options), interest income, interest expense, income tax expense or loss from equity-accounted investments to our reportable segments.

Once-off items represents non-recurring expense items, including costs related to acquisitions and transactions consummated or ultimately not pursued.

The Lease adjustments reflect lease charges and the Stock-based compensation adjustments reflect stock-based compensation expense and are both excluded from the calculation of Segment Adjusted EBITDA and are therefore reported as reconciling items to reconcile the reportable segments’ Segment Adjusted EBITDA to our loss before income tax expense.

Group Adjusted EBITDA represents Segment Adjusted EBITDA after deducting group costs.

Unless otherwise stated, reference to EBITDA in the discussion below refers to Segment Adjusted EBITDA.

Refer also “Results of Operations—Use of Non-GAAP Measures” below.

Fiscal 2023 includes Connect for the entire quarter and year to date of fiscal 2023, and this business is not included in the results for fiscal 2022.

We analyze our business and operations in terms of two inter-related but independent operating segments:

(1) Merchant Division and (2) Consumer Division.

In addition, corporate activities that are impracticable to allocate directly to the operating segments, as well as any inter-segment eliminations, are included in Group costs.

Inter-segment revenue eliminations are included in Corporate/ Eliminations.

Third quarter of fiscal 2023 compared to third quarter of fiscal 2022

The following factors had a significant impact on our results of operations during the third quarter of fiscal 2023 as compared with the same period in the prior year:

Higher revenue:

Our revenues increased 337% in ZAR, primarily due to the contribution from the Connect Group (“Connect”) in our Merchant Division, and an increase in account fees and insurance revenues in our Consumer division, which was partially offset by lower hardware sales revenue in our POS hardware distribution business given the lumpy nature of bulk sales;

Lower operating losses:

Operating losses decreased, delivering an improvement of 77% in ZAR compared with the prior period primarily due to the contribution from Connect, and the implementation of various cost reduction initiatives in Consumer, which was partially offset by an increase in acquisition related intangible asset amortization;

Higher net interest charge:

The net interest charge increased to ZAR 80.1 million from net interest received of ZAR 1.1 million due to the additional borrowings incurred in order to fund the acquisition of Connect as well as the debt acquired within the Connect business itself;

Foreign exchange movements:

dollar was 15% stronger against the ZAR during the third quarter of fiscal 2023 compared to the prior period, which impacted our reported results.

Consolidated overall results of operations

This discussion is based on the amounts prepared in accordance with U.S.

The following tables show the changes in the items comprising our statements of operations, both in U.S.

dollars and in ZAR:

In United States Dollars

Three months ended March 31,

Cost of goods sold, IT processing, servicing and support

Selling, general and administration (1)

Depreciation and amortization

Reorganization costs (1)

Transaction costs related to Connect Group acquisition

Operating loss

Gain related to fair value adjustment to currency options

Net loss on disposal of equity-accounted investments

Gain on disposal of equity securities

Interest income

Interest expense

Loss before income tax (benefit) expense

Income tax (benefit) expense

Net loss before earnings from equity-accounted investments

Earnings from equity-accounted investments

Net loss attributable to us

(1) Reorganization costs have been increased by $42,000 and selling, general and administration has been decreased by $42,000 during the three and nine months ended March 31, 2022, to adjust for a misallocation between the two captions.

In South African Rand

Three months ended March 31,

Cost of goods sold, IT processing, servicing and support

Selling, general and administration

Depreciation and amortization

Reorganization costs

Transaction costs related to Connect Group acquisition

Operating loss

Gain related to fair value adjustment to currency options

Net loss on disposal of equity-accounted investments

Gain on disposal of equity securities

The discussion

consolidated overall

operations is

unaudited condensed

consolidated financial

statements which

in accordance

operations both

dollars, as presented in the unaudited condensed consolidated

financial statements, and supplementally in ZAR, because ZAR is

the functional

which contribute

significant impact of currency

fluctuations between the U.S.

dollar and ZAR on

our reported results and because

we use the U.S.

as our reporting

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.

operating segment before intercompany

eliminations.

A reconciliation between

total operating segment revenue and

revenue, as well

reconciliation

unaudited condensed consolidated financial

statements in Note

operating decision maker

allocate once

defined below),

compensation charges,

and amortization,

impairment of goodwill or

other intangible assets, certain

lease charges (“Lease

adjustments”), other items (including

gains or losses

of investments,

adjustments to

equity securities,

adjustments to

currency options),

interest income,

Interest expense

Loss before income tax (benefit) expense

Income tax (benefit) expense

Net loss before earnings from equity-accounted investments

Earnings from equity-accounted investments

Net loss attributable to us

The increase in revenue was primarily due to the inclusion of Connect, which has substantial low margin prepaid airtime sales in addition to its core processing revenue, and an increase in account fees and insurance revenues which was partially offset by lower ad hoc hardware sales revenue.

The increase in cost of goods sold, IT processing, servicing and support was primarily due to the inclusion of Connect, which were partially offset by the benefits of various cost reduction initiatives in Consumer and lower insurance-related claims.

In ZAR, the increase in selling, general and administration expenses was primarily due to higher employee-related expenses related to the expansion of our senior management team, the year-over-year impact of inflationary increases on employee-related expenses and the inclusion of expenses related to Connect’s operations, which were partially offset by the benefits of various cost reduction initiatives in Consumer.

Depreciation and amortization expense increased in the third quarter of fiscal 2023 compared with the third quarter of fiscal 2022 due to the inclusion of acquisition-related intangible asset amortization related to intangible assets identified pursuant to the Connect acquisition, as well as the inclusion of depreciation expense related to Connect’s property, plant and equipment.

We embarked on a retrenchment process on January 10, 2022, and incurred reorganization expenses of $5.9 million during the third quarter of fiscal 2022.

Transaction costs related to the Connect Group acquisition include fees paid to external service providers for various advisory services procured during the third quarter of fiscal 2022.

Our operating loss margin for the third quarter of fiscal 2023 and 2022 was (1.4%) and (26.8%), respectively.

We discuss the components of operating loss margin under “—Results of operations by operating segment.”

We did not record any changes in the fair value of equity interests in MobiKwik and Cell C during the third quarter of fiscal 2023 or 2022, respectively.

We continue to carry our investment in Cell C at $0 (zero).

Refer to Note 4 for the methodology and inputs used in the fair value calculation for Cell C.

The gain related to fair value adjustment to currency options represents the net mark-to-market adjustments to foreign exchange option contracts entered into in November 2021 in order to manage the risk of currency volatility and to fix the USD amount to be utilized for part of the Connect Group purchase consideration settlement.

The foreign exchange option contract matured on February 24, 2022.

Refer to Note 4 to our unaudited condensed consolidated financial statements for additional information related to these currency options.

We recorded a loss of $0.3 million during each of the third quarter of fiscal 2023 and 2022, respectively, related to the disposal of a minor portion of our investment in Finbond.

We recorded a gain of $0.7 million related to the disposal of our entire interest in an equity security during the third quarter of fiscal 2022.

Interest on surplus cash decreased to $0.5 million (ZAR 8.4 million) from $0.8 million (ZAR 11.9 million), primarily due to lower overall surplus cash balances following the acquisition of Connect.

Interest expense increased to $5.0 million (ZAR 89.4 million) from $0.7 million (ZAR 10.8 million), primarily as a result of additional interest expense incurred related to borrowings obtained to partially fund the acquisition of Connect, interest expenses incurred in Connect to fund our cash management, digitization and VAS offerings, and a higher utilization of our facilities to fund our ATMs, which was also coupled with an increase in the interest rate on those ATM facilities.

Fiscal 2023 tax benefit was $0.9 million (ZAR 15.4 million) compared to the tax expense of $0.5 million (ZAR 7.3 million) in fiscal 2022.

Our effective tax rate for fiscal 2023 was impacted by a reduction in the enacted South African corporate income tax rate from 28% to 27% from January 2023 (but backdated to July 1, 2022), the tax expense recorded by our profitable South African operations, a deferred tax benefit related to acquisition-related intangible asset amortization, non-deductible expenses, the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities.

Our effective tax rate for fiscal 2022 was impacted by the tax expense recorded by our profitable South African operations, non-deductible expenses, the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities.

Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first quarter and its annual results during our fourth quarter.

The table below presents the relative (loss) earnings from our equity-accounted investments:

Three months ended March 31,

Total loss from equity-accounted investments

Results of operations by operating segment

The composition of revenue and the contributions of our business activities to operating loss are illustrated below:

In United States Dollars

Three months ended March 31,

Operating Segment

Consolidated revenue:

Operating segments

Corporate/Eliminations

Total consolidated revenue

Segment Adjusted EBITDA:

Consumer excluding reorganization costs

Reorganization costs

Total Segment Adjusted EBITDA

Group Adjusted EBITDA

interest expense, income tax expense or loss

from equity-accounted investments to our reportable segments.

Once-off items

Stock-based compensation

Lease adjustments

Depreciation and amortization

Total consolidated operating loss

In South African Rand

Three months ended March 31,

Operating Segment

Consolidated revenue:

non-recurring

costs related

or ultimately

Lease adjustments reflect lease charges and the Stock-based compensation adjustments reflect stock-based compensation expense and

are both excluded from the calculation of Segment Adjusted EBITDA and

are therefore reported as reconciling items to reconcile the

reportable segments’ Segment Adjusted EBITDA to our loss before income

Operations—Use of Non-GAAP Measures” below.

and 2023 includes Connect for the entire quarter.

We analyze our business and operations in terms of two

inter-related but independent operating segments:

(1) Merchant Division

Consumer Division.

corporate activities

impracticable to

allocate directly

operating segments,

Corporate/Eliminations

Total consolidated revenue

Segment Adjusted EBITDA:

Consumer excluding reorganization costs

Reorganization costs

Total Segment Adjusted EBITDA

Group Adjusted EBITDA

Once-off items

Stock-based compensation

Lease adjustments

Depreciation and amortization

Total consolidated operating loss

Segment revenue increased due to the contribution from Connect, which was partially offset was partially offset by lower hardware sales revenue given the lumpy nature of bulk sales.

The increase in EBITDA is primarily due to the inclusion of Connect, which was partially offset by lower hardware sales.

Connect records a significant proportion of its airtime sales in revenue and cost of sales, while only earning a relatively small margin.

This significantly depresses the EBITDA margins shown by the business.

Our EBITDA (loss) margin (calculated as EBITDA (loss) divided by revenue) for the third quarter of fiscal 2023 and 2022 was 7.0% and 7.6%, respectively.

Segment revenue increased primarily due to higher insurance revenues, higher revenue from account holder fees given the increase in number of accounts and modest lending revenue growth.

We embarked on a retrenchment process during Q3 2022 and recorded an expense of $5.9 million which is included in the EBITDA loss for that period.

The cost reduction initiatives we initiated in fiscal 2022 delivered a significant reduction in the Consumer Division’s operating expenses which resulted in a positive Segment Adjusted EBITDA contribution compared with a Segment Adjusted EBITDA loss in Q2, fiscal 2022.

Specifically, Q2, FY 2022 included expenses associated with discontinuing a mobile distribution network, and since then we have streamlined our branch network through reductions in certain expenses including employee-related costs, security, guarding and premises costs.

Our EBITDA margin for the third quarter of fiscal 2023 and 2022 was 10.4% and (40.9%), respectively.

Our group costs primarily include employee related costs in relation to employees specifically hired for group roles and costs related directly to managing the US-listed entity;

expenditures related to compliance with the Sarbanes-Oxley Act of 2002;

non-employee directors’ fees;

group and US-listed related audit fees;

and directors’ and officers’ insurance premiums.

Our group costs for fiscal 2023 increased compared with the prior period due to higher employee costs and an increase in directors’ and officers’ insurance premiums.

Year to date fiscal 2023 compared to year to date fiscal 2022

The following factors had a significant impact on our results of operations during the year to date fiscal 2023 as compared with the same period in the prior year:

well as any inter-segment eliminations, are included in Group costs.

Inter-segment revenue eliminations are included

in Eliminations.

First quarter of fiscal 2024 compared to first quarter

of fiscal 2023

The following factors had a significant impact on

our results of operations during the first

quarter of fiscal 2024 as compared with

the same period in the prior year:

Higher revenue:

Our revenues increased 355% in ZAR, primarily due to the contribution from Connect in Merchant and an increase in account fees and insurance revenues in Consumer;

Lower operating losses:

Operating losses decreased, delivering an improvement of 66% in ZAR compared with the prior period primarily due to the contribution from Connect, strong hardware sales, and the implementation of various cost reduction initiatives in Consumer, which was partially offset by an increase in acquisition related intangible asset amortization;

Higher net interest charge:

The net interest charge increased to ZAR 211.3 million from ZAR 12.1 million due to the additional borrowings incurred in order to fund the acquisition of Connect as well as the debt acquired within the Connect business itself;

Foreign exchange movements:

dollar was 16% stronger against the ZAR during the year to date fiscal 2023 compared to the prior period, which impacted our reported results.

Our revenues increased 19% in

ZAR, primarily due to an increase in

low margin prepaid airtime sales and

other value added services, as well as

higher transaction, insurance and lending revenues, which was partially offset by lower

hardware sales revenue in our POS hardware distribution business given the

lumpy nature of bulk sales;

Operating income generated:

Operating income was

achieved following years

of operating losses as

a result of the

cost reduction initiatives in Consumer implemented in prior periods

as well as the contribution from Connect;

interest charge:

interest charge

million) from

62.1 million) primarily due to higher interest rates;

compared to the prior period, which adversely impacted our U.S.

reported results.

Consolidated overall results of operations

This discussion is based on the amounts prepared in accordance with U.S.

The following tables show the changes in the items comprising our statements of operations, both in U.S.

The following tables show the changes in the items comprising our statements of operations,

dollars and in ZAR:

In United States Dollars

Nine months ended March 31,

Three months ended September 30,

Cost of goods sold, IT processing, servicing and support

1 unchanged sentence

Depreciation and amortization

Reorganization costs (1)

Transaction costs related to Connect Group acquisition

Operating loss

Gain related to fair value adjustment to currency options

Net loss on disposal of equity-accounted investments

Gain on disposal of equity securities

Operating income (loss)

Reversal of allowance of EMI doubtful debt receivable

Net gain on disposal of equity-accounted investments

Interest income

Interest expense

Loss before income tax (benefit) expense

Income tax (benefit) expense

Loss before income tax expense

Income tax expense

Net loss before loss from equity-accounted investments

1 unchanged sentence

Net loss attributable to us

(1) Reorganization costs have been increased by $42,000 and selling, general and administration has been decreased by 42,000 during the three and nine months ended March 31, 2022, to adjust for a misallocation between the two captions.

In South African Rand

Nine months ended March 31,

Three months ended September 30,

Cost of goods sold, IT processing, servicing and support

1 unchanged sentence

Depreciation and amortization

Reorganization costs

Transaction costs related to Connect Group acquisition

Operating loss

Gain related to fair value adjustment to currency options

Net loss on disposal of equity-accounted investments

Gain on disposal of equity securities

Operating income (loss)

Reversal of allowance of EMI doubtful debt receivable

Net gain on disposal of equity-accounted investments

Interest income

Interest expense

Loss before income tax (benefit) expense

Income tax (benefit) expense

Loss before income tax expense

Income tax expense

Net loss before loss from equity-accounted investments

1 unchanged sentence

Net loss attributable to us

The increase in revenue was primarily due to the inclusion of Connect, which has substantial low margin prepaid airtime sales in addition to its core processing revenue and an increase in account fees and insurance revenues.

Depreciation and amortization expense increased in the year to date fiscal 2023 compared with the year to date fiscal 2022 due to the inclusion of acquisition-related intangible asset amortization related to intangible assets identified pursuant to the Connect acquisition, as well as the inclusion of depreciation expense related to Connect’s property, plant and equipment.

We embarked on a retrenchment process on January 10, 2022, and incurred reorganization expenses of $5.9 million during the year to date fiscal 2022

Transaction costs related to the Connect Group acquisition include fees paid to external service providers for various advisory services procured during fiscal 2022.

Our operating loss margin for the year to date fiscal 2023 and 2022 was (1.4%) and (26.8%), respectively.

We discuss the components of operating loss margin under “—Results of operations by operating segment.”

We did not record any changes in the fair value of equity interests in MobiKwik and Cell C during the year to date fiscal 2023 and 2022, respectively.

We continue to carry our investment in Cell C at $0 (zero).

Refer to Note 4 for the methodology and inputs used in the fair value calculation for Cell C.

The gain related to fair value adjustment to currency options represents the realized gain related to foreign exchange option contracts entered into in November 2021 in order to manage the risk of currency volatility and to fix the USD amount to be utilized for part of the Connect Group purchase consideration settlement.

The foreign exchange option contract matured on February 24, 2022.

We recorded a net loss of $0.2 million comprising a loss of $0.4 million related to the disposal of a minor portion of our investment in Finbond and a $0.25 million gain related to the disposal of our entire interest in Carbon during the year to date fiscal 2023.

Refer to Note 5 to our unaudited condensed consolidated financial statements for additional information regarding this disposal.

We recorded a loss of $0.3 million related to the disposal of a minor portion of our investment in Finbond during the third quarter of fiscal 2022.

We recorded a gain of $0.7 million related to the disposal of our entire interest in an equity security during the third quarter of fiscal 2022.

In ZAR, interest on surplus cash increased to $1.3 million (ZAR 22.1 million) from $1.5 million (ZAR 21.9 million), primarily due to the inclusion of Connect, which was partially offset by lower overall surplus cash balances following the acquisition of Connect.

Interest expense increased to $13.4 million (ZAR 233.3 million) from $2.3 million (ZAR 34.1 million), primarily as a result of additional interest expense incurred related to borrowings obtained to partially fund the acquisition of Connect, interest expenses incurred in Connect to fund our cash management, digitization and VAS offerings, and a higher utilization of our facilities to fund our ATMs, which was also coupled with an increase in the interest rate on these ATM facilities.

Fiscal 2023 tax benefit was $0.5 million (ZAR 8.1 million) compared to the tax expense of $0.8 million (ZAR 11.3 million) in fiscal 2022.

Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first quarter and its annual results during our fourth quarter.

The table below presents the relative (loss) earnings from our equity-accounted investments:

Nine months ended March 31,

Revenue increased

0.4 billion),

18.7%), primarily

prepaid airtime sales

and other value-added

services, as well

as higher transaction, insurance

and lending revenues, which

was partially

offset by lower hardware sales revenue in our POS hardware distribution

business given the lumpy nature of bulk sales.

Cost of goods sold, IT processing, servicing and support increased by $7.0 million

(ZAR 0.3 billion), or 6.9% (in ZAR, 16.4%),

primarily due to the increase in low margin prepaid airtime sales, which were partially offset by

the benefits of various cost reduction

initiatives in Consumer and lower insurance-related claims.

Selling, general and administration expenses decreased by $0.4 million, or 1.8%,

and in ZAR increased by ZAR 27.0 million, or

In ZAR, the increase was primarily due

to higher employee-related expenses related to the expansion

of our senior management

year-over-year

employee-related

Connect’s operations, which were

partially offset by the benefits of various cost reduction initiatives in

Depreciation and amortization expense

decreased by $0.1 million, or 2.4%

and in ZAR increased by

ZAR 6.4 million or 6.2%.

In the ZAR, the increase was due to an increase in depreciation expense related

to additional POS devices deployed.

Our operating income (loss) margin for the first quarter of fiscal 2024 and 2023 was

0.2% and (3.7%), respectively.

the components of operating loss margin under “—Results of operations

by operating segment.”

We did not record any changes in the fair value of equity interests in MobiKwik and Cell C

during the first quarter of fiscal 2024

or 2023, respectively.

continue to carry our investment in Cell

C at $0 (zero).

Refer to Note

4 for the methodology and inputs used

in the fair value calculation for Cell C.

a gain of $0.3 million related to

the disposal of our entire interest

in Carbon during the first

quarter of fiscal 2023.

Refer to Note 5 to our unaudited condensed consolidated financial statements for

additional information regarding this disposal.

Interest on surplus cash increased

to $0.4 million (ZAR 8.4

million) from $0.4 million (ZAR

7.0 million), primarily due to

interest rates.

expense increased

91.4 million)

69.1 million),

higher overall interest rates and higher overall borrowings

during the first quarter of fiscal 2024 compared with comparable

the prior quarter, which was partially offset

by lower interest expense incurred on certain of our borrowing for which we were able to

negotiate lower rates of interest during the latter half of fiscal 2023.

Fiscal 2024 tax expense was $(0.3) million (ZAR (4.8) million) compared to $0.0

million (ZAR 0.5 million) in fiscal 2023.

effective tax rate for fiscal 2024 was impacted

by the tax expense recorded by our profitable South

African operations, a deferred tax

benefit related

to acquisition-related

intangible asset

amortization, non-deductible

expenses, the

on-going losses

of our South African businesses

and the associated valuation allowances

created related to the deferred

tax assets recognized regarding

net operating losses incurred by these entities.

Our effective

expense recorded

profitable South

African operations,

deferred tax benefit related to acquisition-related intangible asset amortization, non-deductible expenses, the on-going losses incurred

by certain of our

South African businesses and

the associated valuation allowances

created related to the

deferred tax assets recognized

regarding net operating losses incurred by these entities.

the Johannesburg

Stock Exchange

its six-month

results during

results during our fourth quarter.

The table below presents the relative (loss) earnings from our equity-accounted

Three months ended September 30,

Share of net loss

loss from equity-accounted investments

Results of operations by operating segment

The composition of revenue and the contributions of our business activities to operating loss are illustrated below:

The composition of revenue and the contributions of our business activities to operating

loss are illustrated below:

In United States Dollars

Nine months ended March 31,

Three months ended September 30,

Operating Segment

1 unchanged sentence

Operating segments

Corporate/Eliminations

Total consolidated revenue

consolidated revenue

Segment Adjusted EBITDA:

Consumer excluding reorganization costs

Reorganization costs

Total Segment Adjusted EBITDA

Group Adjusted EBITDA (non-GAAP)

(1) Segment Adjusted EBITDA for Merchant includes retrenchments costs of $0.2 million and Consumer includes retrenchment

costs of $0.1 million for the three months ended September 30, 2023.

(2) Group Adjusted EBITDA

Once-off items

Stock-based compensation

Lease adjustments

Depreciation and amortization

Total consolidated operating loss

is a non-GAAP measure, refer

to reconciliation below at

“—Results of Operations—Use of

GAAP Measures”.

In South African Rand

Nine months ended March 31,

Three months ended September 30,

Operating Segment

1 unchanged sentence

Operating segments

Corporate/Eliminations

Total consolidated revenue

consolidated revenue

Segment Adjusted EBITDA:

Consumer excluding reorganization costs

Reorganization costs

Total Segment Adjusted EBITDA

Group Adjusted EBITDA (non-GAAP)

retrenchments

retrenchment costs of ZAR 1.5 million for the three months ended September 30,

(2) Group Adjusted EBITDA

Once-off items

Stock-based compensation

Lease adjustments

Depreciation and amortization

Total consolidated operating loss

Segment revenue and EBITDA increased due to the contribution from Connect.

Our EBITDA margin for the year to date fiscal 2023 and 2022 was 7.3% and 8.9%, respectively.

Segment revenue increased primarily due to higher insurance revenues and higher account holder fees, though this was partially offset by lower ATM transaction fees.

We embarked on a retrenchment process during the third quarter of fiscal 2022 and recorded an expense of $5.9 million which is included in EBITDA loss.

The cost reduction initiatives we initiated in fiscal 2022 delivered a significant reduction in Consumer’s operating expenses which resulted in a significantly lower EBITDA loss compared with fiscal 2022.

Specifically, expenses associated with operating a mobile distribution network were discontinued in early fiscal 2022, and we have streamlined our fixed distribution network through reductions in certain expenses including employee-related costs, security, guarding and premises costs.

Our EBITDA loss margin (calculated as EBITDA loss divided by revenue) for the year to date fiscal 2023 and 2022 was 1.8% and (40.7%), respectively.

Our group costs for fiscal 2023 increased compared with the prior period due to higher employee costs and an increase in directors’ and officers’ insurance premiums, which were partially offset by lower consulting fees.

is a non-GAAP measure, refer

to reconciliation below at

“—Results of Operations—Use of

GAAP Measures”.

Segment revenue

increased due

to the increase

in low margin

prepaid airtime

sales and other

value-added services,

partially offset by lower

hardware sales revenue given

the lumpy nature of bulk sales.

The increase in Segment Adjusted

primarily due to the higher sales activity, which was partially offset by lower hardware sales.

Connect records a significant proportion

of its airtime sales in revenue and cost of sales, while only earning a relatively small

This significantly depresses the Segment

Adjusted EBITDA margins shown by the business.

Adjusted EBITDA margin

(calculated as Segment

Adjusted EBITDA

divided by revenue)

for the first

fiscal 2024 and 2023 was

7.2%, respectively.

Segment revenue increased

primarily due to

more transaction fees

generated from the

higher EPE account

holders base, higher

insurance revenues, and an increase

in lending revenue as

a result of an

increase in loan originations.

This increase in revenue,

with the cost reduction

initiatives initiated in fiscal

2022 and through

fiscal 2023, have

translated into a turnaround

in the Consumer

Division and the realization of sustained positive Segment Adjusted EBITDA

for four consecutive quarters.

Our Segment Adjusted EBITDA (loss) margin for the first quarter of fiscal 2024 and 2023

respectively.

costs primarily

include employee

related costs

specifically hired

Sarbanes-Oxley

employee directors’ fees;

group and US-listed related audit

and directors’ and officers’ insurance premiums.

Our group costs for

fiscal 2024 decreased compared

with the prior period

due to lower external

audit, legal and consulting

and lower provision for executive bonuses, which was partially offset

by higher employee costs.

Use of Non-GAAP Measures

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.

Group Adjusted EBITDA

Group Adjusted EBITDA is earnings before interest, tax, depreciation and amortization (“EBITDA”), adjusted for non-operational transactions (including loss on disposal of equity-accounted investments, gain related to fair value adjustments to currency options), (earnings) loss from equity-accounted investments, stock-based compensation charges, lease adjustments and once-off items.

Lease adjustments reflect lease charges and once-off items represents non-recurring expense items, including costs related to acquisitions and transactions consummated or ultimately not pursued.

Management believes that the operating income before depreciation and amortization and Group Adjusted EBITDA enhance its own evaluation, as well as an investor’s understanding, of our financial performance.

The table below presents the reconciliation between GAAP net loss attributable to Lesaka to Group Adjusted EBITDA:

Three months ended March 31,

Nine months ended March 31,

securities laws

require that when

we publish any

non-GAAP measures, we

disclose the reason

for using these

measures and provide reconciliations to the most directly comparable GAAP measures.

The presentation of Group Adjusted EBITDA

understanding

Non-GAAP Measures

operational transactions (including loss on disposal

of equity-accounted investments, gain related to

fair value adjustments to currency

options), (earnings) loss from

equity-accounted investments, stock-based compensation charges, lease

adjustments and once-off items.

non-recurring

acquisitions and transactions consummated or ultimately not pursued.

The table below presents the reconciliation between GAAP net loss attributable

to Lesaka to Group Adjusted EBITDA:

Three months ended

September 30,

Loss attributable to Lesaka - GAAP

5 unchanged sentences

Interest income

Gain on disposal of equity securities

Net loss on disposal of equity-accounted investment

Gain related to fair value adjustment to currency options

Operating loss

Reversal of allowance for doubtful EMI loan receivable

Net gain on disposal of equity-accounted investment

Operating income (loss)

PPA amortization

(amortization of acquired intangible assets)

Depreciation and amortization

2 unchanged sentences

Once-off items

Unrealized Loss FV for currency adjustments

Group Adjusted EBITDA - Non-GAAP

Segment Adjusted EBITDA - measure of segment performance

Consumer excluding reorganization costs

Reorganization costs

(1) The table below presents the components of once-off

items for the periods presented:

Three months ended

September 30,

Transaction costs

Expenses incurred related to closure of legacy businesses

Total once-off

Once-off items are non-recurring in nature, however, certain

items may be reported in

multiple quarters.

For instance, transaction

costs include costs incurred related to acquisitions and

transactions consummated or ultimately not pursued.

The transactions can span

costs related

the acquisition

number of quarters, and the transactions are generally non-recurring.

process of deregistering/ liquidation and therefore we consider these costs non

-operational and ad hoc in nature.

Liquidity and Capital Resources

As of March 31, 2023, our cash and cash equivalents were $49.4 million and comprised of U.S.

dollar-denominated balances of $7.4 million, ZAR-denominated balances of ZAR 713.4 million ($40.1 million), and other currency deposits, primarily Botswana pula, of $1.9 million, all amounts translated at exchange rates applicable as of March 31, 2023.

The increase in our unrestricted cash balances from June 30, 2022, was primarily due to the utilization of our available borrowings and a positive contribution from Connect, which was partially offset by the utilization of cash reserves to fund certain scheduled repayments of our borrowings, purchase ATMs and safe assets, and to make an investment in working capital in our Consumer and Merchant operations.

We generally invest any surplus cash held by our South African operations in overnight call accounts that we maintain at South African banking institutions, and any surplus cash held by our non-South African companies in U.S.

dollar-denominated money market accounts.

Historically, we have financed most of our operations, research and development, working capital, and capital expenditures, as well as acquisitions and strategic investments, through internally generated cash and our financing facilities.

When considering whether to borrow under our financing facilities, we consider the cost of capital, cost of financing, opportunity cost of utilizing surplus cash and availability of tax efficient structures to moderate financing costs.

For instance, in fiscal 2022, we obtained loan facilities from RMB to fund a portion of our acquisition of Connect, with the balance being funded from cash resources.

Following the acquisition of Connect, we now utilize a combination of short and long-term facilities to fund our operating activities and a long-term asset-backed facility to fund the acquisition of POS devices and safe assets.

Refer to Note 12 to our consolidated financial statements for the year ended June 30, 2022, for additional information related to our borrowings.

Available short-term borrowings

Summarized below are our short-term facilities available and utilized as of March 31, 2023:

As of September 30, 2023, our

cash and cash equivalents were $35.1

million and comprised of U.S.

dollar-denominated balances

of $2.2 million,

ZAR-denominated balances of

ZAR 586.7 million

($31.0 million), and

other currency deposits,

primarily Botswana

pula, of $1.9

million, all amounts

translated at exchange

rates applicable as

of September 30,

in our unrestricted

cash balances from

June 30, 2023,

was primarily due

to a positive contribution

from our Merchant

and Consumer operations,

was partially offset

by the utilization

of cash reserves

to fund certain

scheduled repayments of

our borrowings,

purchase ATMs

safe assets, and to make an investment in working capital.

invest any surplus cash held by our

South African operations in overnight

call accounts that we maintain at

African banking institutions,

and any surplus

our non-South African

dollar-denominated money market

Historically,

we have financed

operations, research and

development, working capital,

and capital expenditures,

whether to borrow under our financing

facilities, we consider the cost

of capital, cost of financing, opportunity cost

of utilizing surplus

availability of

tax efficient

structures to

moderate financing

loan facilities

acquisition of

the acquisition

combination of

facilities to

activities and

the acquisition

consolidated financial

statements for

for additional

information related to our borrowings.

Available short-term

Summarized below are our short-term facilities available and utilized as of

September 30, 2023:

RMB Facility E

Total short-term facilities available, comprising:

Overdraft restricted as to use (1)

short-term facilities

available, comprising:

Overdraft restricted as to

Total overdraft

Indirect and derivative facilities (2)

Total short-term facilities available

Utilized short-term facilities:

Overdraft restricted as to use (1)

Indirect and derivative facilities (2)

Total short-term facilities available

Interest rate, based on South African prime rate

(1) Overdraft may only be used to fund ATMs and upon utilization is considered restricted cash.

(2) Indirect and derivative facilities may only be used for guarantees, letters of credit and forward exchange contracts to support guarantees issued by RMB and Nedbank to various third parties on our behalf.

Indirect and derivative

facilities available

Utilized short-term

Overdraft restricted as to

Indirect and derivative

facilities available

South African prime rate

(1) Overdraft may only be used to fund ATMs

and upon utilization is considered restricted cash.

(2) Indirect and derivative facilities may only be used for guarantees, letters of credit and forward

exchange contracts to support

guarantees issued by RMB and Nedbank to various third parties on our behalf.

Long-term borrowings

We have aggregate long-term borrowing outstanding of ZAR 2.7 billion ($150.5 million translated at exchange rates as of March 31, 2023) as described in Note 8.

These borrowings include outstanding long-term borrowings obtained by Lesaka SA of ZAR 1.1 billion, including accrued interest, to partially fund the acquisition of Connect.

In contemplation of the Connect transaction, Connect obtained total facilities of approximately ZAR 1.3 billion, which were utilized to repay its existing borrowings, to fund a portion of its capital expenditures and to settle obligations under the transaction documents, and which has subsequently been upsized for its operational requirements and has an outstanding balance as of March 31, 2023, of ZAR 1.4 billion, We also have a revolving credit facility, of ZAR 300.0 million which is utilized to fund a portion of our merchant finance loans receivable book.

September 30, 2023)

as described in Note

These borrowings

include outstanding long-term

borrowings obtained by Lesaka

ZAR 1.0 billion,

including accrued

interest, which

partially fund

the acquisition of

credit facility.

facility during

September 30,

remaining balance available for utilization in the future.

In contemplation of the Connect transaction, Connect obtained

total facilities

of approximately

ZAR 1.3 billion,

utilized to repay

its existing borrowings,

its capital expenditures

and to settle

obligations under the

transaction documents,

and which has

subsequently been

upsized for its

operational requirements

and has an outstanding balance as of September 30,

2023, of ZAR 1.2 billion, We

also have a revolving credit facility,

million which is utilized to fund a portion of our merchant finance loans receivable

Restricted cash

We have credit facilities with RMB in order to access cash to fund our ATMs in South Africa.

Our cash, cash equivalents and restricted cash presented in our consolidated statement of cash flows as of March 31, 2023, includes restricted cash of approximately $37.7 million related to cash withdrawn from our debt facility to fund ATMs.

This cash may only be used to fund ATMs and is considered restricted as to use and therefore is classified as restricted cash on our consolidated balance sheet.

We have also entered into cession and pledge agreements with Nedbank related to our Nedbank indirect credit facilities and we have ceded and pledged certain bank accounts to Nedbank.

The funds included in these bank accounts are restricted as they may not be withdrawn without the express permission of Nedbank.

Our cash, cash equivalents and restricted cash presented in our consolidated statement of cash flows as of March 31, 2023, includes restricted cash of approximately $0.2 million that has been ceded and pledged.

facilities with RMB

to access cash

in South Africa.

Our cash, cash

equivalents and

approximately

cash withdrawn

debt facility

and is considered restricted as to use and therefore is classified as restricted cash on

our consolidated balance sheet.

also entered into cession and pledge

agreements with Nedbank related to

our Nedbank indirect credit facilities

have ceded and pledged

certain bank accounts to

The funds included

in these bank accounts

are restricted as they

be withdrawn without the express

permission of Nedbank.

cash equivalents and restricted

cash presented in our consolidated

September 30,

2023, includes

approximately

Cash flows from operating activities

Third quarter

Net cash used in operating activities during the third quarter of fiscal 2023 was $5.1 million (ZAR 91.6 million) compared to net cash used in operating activities of $8.8 million (ZAR 137.0 million) during the third quarter of fiscal 2022 .

Excluding the impact of income taxes, our cash used in operating activities during the third quarter of fiscal 2023 was impacted by growth in our consumer and merchant finance loans receivable books and working capital movements within our merchant business (primarily an increase in inventory and prepayments made to secure prepaid airtime inventory as well as a release (decrease) in accounts payable balances following an unwind of previous quarter balances), which was partially offset by the positive contribution from Connect.

During the third quarter of fiscal 2023, we paid second provisional South African tax payments of $0.3 million (ZAR 5.1 million) related to certain Connect entities’ 2023 tax year that had not yet been aligned with ours.

During the third quarter of fiscal 2022, we paid first provisional South African tax payments of $0.1 million (ZAR 2.2 million) related to our 2022 tax year.

Taxes paid during the third quarter of fiscal 2023 and 2022 were as follows:

Three months ended March 31,

First provisional payments

Second provisional payments

Tax refund received

Total South African taxes paid

Foreign taxes paid

Total tax paid

Net cash used in operating activities during the year to date fiscal 2023 was $9.3 million (ZAR 162.7 million) compared to $30.5 million (ZAR 457.2 million) during the year to date fiscal 2022 .

Excluding the impact of income taxes, our cash used in operating activities during the third quarter of fiscal 2023 was impacted by growth in our consumer and merchant finance loans receivable books and working capital movements within our merchant business (primarily an increase in inventory and prepayments made to secure prepaid airtime inventory), which was partially offset by the positive contribution from Connect.

During the year to date fiscal 2023, we paid first provisional South African tax payments of $3.0 million (ZAR 50.8 million) related to our 2023 tax year, and additional second provisional South African tax payments of $0.5 million (ZAR 8.5 million) related to our 2022 tax year and as discussed above.

During the year to date fiscal 2022, we paid first provisional South African tax payments of $0.6 million (ZAR 9.1 million) related to our 2022 tax year and received tax refunds of $0.2 million (ZAR (3.2) million).

Taxes paid during the year to date fiscal 2023 and 2022 were as follows:

Nine months ended March 31,

First quarter

Net cash provided

by operating activities

during the first

quarter of fiscal

2024 was $3.4

million (ZAR 63.1

million) compared

to net cash used

in operating activities of

$7.7 million (ZAR 131.2

million) during the first

quarter of fiscal 2023.

Excluding the impact

processing activities closing on a Saturday and settled in the following week.

During the first quarter of fiscal

2024, we paid first provisional South

African tax payments of $0.6 million

(ZAR 10.9 million)

first provisional

million (ZAR 8.2 million) related to our 2023 tax year, and additional

second provisional South African tax payments of $0.2 million

(ZAR 3.4 million) related to our 2022 tax year.

Taxes paid during

the first quarter of fiscal 2024 and 2023 were as follows:

Three months ended September 30,

First provisional payments

Second provisional payments

Taxation paid related to prior years

Taxation paid related

to prior years

Tax refund received

Total South African taxes paid

Total South African

Foreign taxes paid

Total tax paid

Cash flows from investing activities

Third quarter

Cash used in investing activities for the third quarter of fiscal 2023 included capital expenditures of $4.7 million (ZAR 84.6 million), primarily due to the acquisition of safe assets and POS devices.

During the third quarter of fiscal 2023, we received proceeds of $0.3 million related to the sale of minor positions in Finbond.

Cash used in investing activities for the third quarter of fiscal 2022 included capital expenditures of $0.8 million (ZAR 13.0 million), primarily due to the acquisition of ATMs.

During the third quarter of fiscal 2022, we received proceeds of $1.5 million from sale of property, plant and equipment, and $0.8 million and $0.7 million, respectively, related to the sale of minor positions in Finbond and from the disposal of our entire interest in Revix.

Cash used in investing activities for the year to date fiscal 2023 included capital expenditures of $13.2 million (ZAR 229.9 million), primarily due to the acquisition of safe assets, POS devices and computer equipment.

During the year to date fiscal 2023, we received proceeds of $0.25 million related to the first tranche (of two) from the disposal of our entire equity interest in Carbon and $0.4 million related to the sale of minor positions in Finbond.

Cash used in investing activities for the year to date fiscal 2022 included capital expenditures of $1.7 million (ZAR 25.8 million), primarily due to the roll out of our new express branches, acquisitions of ATMs and the acquisition of computer equipment.

During the year to date fiscal 2022, we received a scheduled payment of $7.5 million related to the sale of Bank Frick in fiscal 2021, proceeds from sale of property, plant and equipment of $3.5 million, and proceeds of $0.8 million and $0.7 million, respectively, related to the sale of minor positions in Finbond and from the disposal of our entire interest in Revix.

First quarter

million), primarily due to the acquisition of safe assets and POS devices.

million), primarily due to the acquisition of safe assets, POS devices and computer equipment.

During the first quarter of fiscal 2023,

we received proceeds $0.25 million related

to the first tranche (of two) from

the disposal of our entire interest

tranche, of $0.25 million, was received in October 2023.

Cash flows from financing activities

Third quarter

During the third quarter of fiscal 2023 , we utilized approximately $128.2 million from our South African overdraft facilities to fund our ATMs and our cash management business through Connect, and repaid $136.0 million of those facilities.

We utilized approximately $12.9 million of our long-term borrowings to fund our merchant finance loans receivable business, to fund the acquisition of certain capital expenditures and for working capital requirements.

We repaid approximately $2.0 million of long-term borrowings in accordance with our repayment schedule.

We received $0.1 million from the exercise of stock options.

We also paid $0.2 million to repurchase shares from employees in order for the employees to settle taxes due related to the vesting of shares of restricted stock and to settle the strike price due and taxes due related to the exercise of stock options.

During the third quarter of fiscal 2022, we utilized approximately $95.0 million from our South African overdraft facilities to fund our ATMs and repaid $100.8 million of those facilities.

During the year to date fiscal 2023 , we utilized approximately $441.5 million from our South African overdraft facilities to fund our ATMs and our cash management business through Connect, and repaid $448.3 million of those facilities.

We utilized approximately $23.0 million of our long-term borrowings to fund our merchant finance loans receivable business, to fund the acquisition of certain capital expenditures and for working capital requirements.

We repaid approximately $5.3 million of long-term borrowings in accordance with our repayment schedule.

We received $0.4 million from the exercise of stock options.

We also paid $0.5 million to repurchase shares from employees in order for the employees to settle taxes due related to the vesting of shares of restricted stock and to settle the strike price due and taxes due related to the exercise of stock options.

During the year to date fiscal 2022, we received $0.8 million from the exercise of stock options, and utilized approximately $406.4 million from our South African overdraft facilities to fund our ATMs and repaid $372.5 million of these facilities.

First quarter

first quarter

approximately $59.6

African overdraft

facilities to

approximately $2.5 million of our long-term borrowings to fund

the acquisition of certain capital expenditures and for working

requirements.

repaid approximately

$2.6 million of

long-term borrowings in

accordance with our

repayment schedule as

to settle a portion of our revolving credit facility utilized.

first quarter

of fiscal 2023,

we utilized approximately

$146.1 million

from our South

African overdraft

facilities to

approximately

capital expenditures.

repaid approximately

in accordance

repayment schedule.

We paid $0.2 million to repurchase shares from an employee in order for the employee to settle taxes due related

to the vesting of shares of restricted stock.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

We have no off

-balance sheet arrangements.

Capital Expenditures

We expect capital spending for the fourth quarter of fiscal 2023 to primarily include spending for POS devices, safe assets, vehicles, computer and office equipment, as well as for our ATM infrastructure and branch network in South Africa.

Our capital expenditures for the third quarter of fiscal 2023 and 2023 are discussed under “—Liquidity and Capital Resources—Cash flows from investing activities.” All of our capital expenditures for the past three fiscal years were funded through internally generated funds, or, following the Connect acquisition, our asset-backed borrowing arrangement.

We had outstanding capital commitments as of March 31, 2023, of $3.1 million.

We expect to fund these expenditures through internally generated funds and available facilities.

expect capital

spending for the

second quarter of

to primarily include

spending for acquisition

of POS devices,

computer software,

office equipment,

infrastructure and

branch network

Our capital expenditures

for the first

quarter of fiscal 2024

discussed under “—Liquidity and

Capital Resources—

from investing

activities.” All

capital expenditures

through internally

commitments as of September 30, 2023, of $0.7 million.

We expect to fund these expenditures through internally generated funds and

available facilities.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis