Lesaka(LSAK) - 2025 Q4 - Annual Report

Currency and Economic Impact - Fluctuations in the South African rand (ZAR) significantly impact reported revenue and net income, complicating performance evaluations across reporting periods[118] - The company faces risks related to fluctuations in currency exchange rates, particularly the U.S. dollar/ZAR exchange rate[153] - The U.S. dollar to the ZAR exchange rate has fluctuated significantly over the past three years, impacting the company's results of operations[355] - The company uses forward contracts to limit exposure to currency exchange risk primarily with the euro, renminbi, and U.S. dollar[353] - The company had no outstanding foreign exchange contracts as of June 30, 2025 and 2024[354] Regulatory Compliance and Risks - Compliance with various regulatory regimes may incur significant additional costs, and failure to comply could result in shutdowns, fines, or civil liability[127] - Proposed regulatory changes to the national payments system may lead to increased operating costs and affect business conduct[140] - The South African Financial Advisory and Intermediary Services Act requires registration as a financial service provider, and loss of licenses could halt financial services operations[134] - The company is subject to extensive regulations regarding anti-corruption laws, which could impose substantial penalties for non-compliance[130] - Proposed regulations by the South African Reserve Bank aim to establish a robust regulatory framework for the national payment system, potentially increasing operational costs[142] - Compliance with the National Credit Amendment Bill in South Africa may adversely impact the company's micro-lending operations[145] - The company is subject to varying international privacy and data protection regulations, which could result in substantial compliance costs[144] Financial Performance and Control - The company identified material weaknesses in its internal control over financial reporting, which could adversely affect the accuracy and reliability of its financial statements[155] - The company restated its quarterly financial statements for the quarters ended September 30, 2024, December 31, 2024, and March 31, 2025, due to material misstatements[163] - The company maintains credit risk policies to minimize overall credit risk, focusing on counterparties with a credit rating of "B" or better[359] - The company is exposed to credit risk in its Consumer microlending activities, which provides unsecured short-term loans[361] - The company monitors investments for impairment and makes appropriate reductions in carrying value when necessary[366] Shareholder and Stock Information - Approximately 31% of the company's outstanding common stock is owned by two shareholders, Value Capital Partners (19%) and IFC Investors (12%) as of June 30, 2025[149] - The company issued an aggregate of 1,989,162 additional shares to IFC Investors on October 1, 2024, as part of the Adumo transaction agreement[148] - The existence of a put right granted to IFC Investors could adversely impact the company's liquidity and capital resources[148] Economic Conditions and Interest Rates - High inflation and interest rates in South Africa may increase operating costs and reduce profitability, with inflation rates historically higher than those in developed economies[124] - The estimated annual expected interest charge on South African borrowings is $23,987,000, with a hypothetical 1% increase resulting in an additional $2,262,000, bringing the total to $26,249,000[358] - Interest rates in South Africa are expected to decline by a further 25 basis points in the first quarter of calendar 2026[356] - Interest rates applicable to borrowings fluctuate based on changes in the South African prime and 3-month JIBAR interest rates[357] Operational Structure - The company operates its EasyPay Everywhere (EPE) solution through a third-party bank arrangement, limiting control and economic benefits[132] - The company does not engage in extensive currency hedging, relying primarily on economic hedging through forward contracts for inventory purchases[119] Stock Price Volatility - The company's stock price experienced significant volatility during the 2025 fiscal year, ranging from a low of $3.39 to a high of $5.60[147]