LESAKA TECHNOLOGIES INCLSAK
LESAKA TECHNOLOGIES INC Income Taxes Disclosure
18. INCOME TAXES
Income tax expense
The table below presents the components of (loss) income before income tax (benefit) expense for the years ended June 30, 2025,
2024 and 2023:
2025
2024
2023
South Africa
$
(34,317)
$
(4,405)
$
(21,308)
United States
(12,322)
(8,705)
(10,755)
Other
(1)
(59,307)
312
(203)
Loss before income tax (benefit) expense
$
(105,946)
$
(12,798)
$
(32,266)
(1) Amount for the year ended June 30, 2025, includes the impact of the change in fair value of equity securities discussed in
Note 6 related to MobiKwik.
Presented below is income tax expense (benefit) by location of the taxing jurisdiction for the years ended June 30, 2025, 2024
and 2023:
2025
2024
2023
Current tax expense
$
5,757
$
5,766
$
6,317
South Africa
5,582
5,634
6,317
Other
175
132
-
Deferred tax (benefit) expense
(23,955)
(2,712)
(7,442)
South Africa
(13,817)
(2,716)
(7,490)
United States
(10,120)
-
-
Other
(18)
4
48
Foreign tax credits generated – United States
-
309
115
Change in tax rate – South Africa
-
-
(1,299)
Income tax (benefit) expense
$
(18,198)
$
3,363
$
(2,309)
There were
no
The South African corporate income tax rate reduced from
28
% to
27
%, effective from July 1, 2022, for all of the Company’s South
African subsidiaries with income tax years commencing on July 1, 2022. The change in the income tax rate was enacted on January
5, 2023, and accordingly all deferred taxes assets and liabilities were remeasured to the new tax rate on that date. This resulted in the
inclusion of an income tax benefit of $
1.3
of operations for the year ended June 30, 2023, as a result of the reversal of a portion of the deferred tax assets and liabilities recognized
as of December 31, 2022.
18. INCOME TAX (continued)
Income tax expense (continued)
The Company’s current tax expense for the year ended June 30, 2025, was higher than the previous year due to the higher taxable
income generated by the Company’s subsidiaries during the year ended June 30, 2025, primarily due to the acquisition of Adumo and
Recharger, and improved profitability generated from the Consumer operating segment, compared with the year ended June 30, 2024.
The Company’s deferred tax (benefit) expense for the year ended June 30, 2025, was higher compared with the previous year
due to reversal of the deferred tax liability (a benefit) related to the change in the carrying amount of our entire investment in
MobiKwik, the inclusion of the deferred tax benefit recorded during the year ended June 30, 2025, related to the amortization of
intangible assets recognized due to the acquisition of Adumo and Recharger and the reversal of $
12.8
valuation allowances created in prior years following (i) an improvement in profitability of certain of the Company’s subsidiaries and
(ii) a change in judgment on the need for a valuation allowance of $
11.4
achieved sustainable profitability. During the year the Company recognized a benefit for operating loss carryforwards generated of
$
6.8
valuation allowance related to an operating loss carryforward of $
6.0
considering both positive and negative evidence, that the operating loss carryforward would not be realized.
The Company’s deferred tax (benefit) expense for the year ended June 30, 2024, was lower compared with the previous year due
to the inclusion of the deferred tax benefit recorded during the year ended June 30, 2023, related to the amortization of intangible
assets recognized due to the acquisition of Connect. Deferred tax expense (benefit) for the year ended June 30, 2024, also includes
lower prepaid expense balances as of June 30, 2024 which reduces the deferred tax benefit.
During the years ended June 30, 2025, 2024 and 2023, the Company incurred net operating losses through certain of its South
African wholly-owned subsidiaries and recorded a deferred tax benefit related to these losses. However, the Company has created a
valuation allowance for certain of these net operating losses which reduced the deferred tax benefit recorded. Net operating losses and
associated valuation allowance created during the year ended June 30, 2025, were lower then in previous periods due to the
improvement in operating performance by the Company’s subsidiaries.
A reconciliation of income taxes, calculated at the fully-distributed South African income tax rate to the Company’s effective
tax rate, for the years ended June 30, 2025, 2024 and 2023, is as follows:
2025
2024
2023
Income taxes at South African income tax rates
27.00
%
27.00
%
27.00
%
Non-deductible interest expense
(1.29)
%
(24.55)
%
-
Movement in valuation allowance
5.62
%
(22.15)
%
(17.66)
%
Non-deductible transaction costs
(4.19)
%
(5.91)
%
-
Goodwill impairment
(4.22)
%
-
-
Capital gains tax rate differential
-
1.62
%
(0.51)
%
Prior year adjustments
0.22
%
(1.37)
%
7.60
%
Non-deductible items
(3.23)
%
(1.11)
%
(13.28)
%
Foreign tax credits
0.03
%
0.19
%
-
Foreign tax rate differential
(2.77)
%
-
(0.02)
%
Change in tax laws – South Africa
-
-
4.03
%
Effective tax rate
17.17
%
(26.28)
%
7.16
%
Percentages included in the 2024 column in the reconciliation of income taxes presented above are specifically impacted by the
loss incurred by the Company during the years ended June 30, 2024. For instance, for the year ended June 30, 2024, income tax
expense of $
3.4
26.28
%) multiplied by the loss before tax (benefit) expense of $(
12,798
).
Movement in the valuation allowance for the year ended June 30, 2025, includes the impact of the reversal of the allowances
created in previous periods related to certain net operating loss carryforwards which the Company believes are no longer required
following improved and sustained profitability generated by certain of the Company’s subsidiaries. Non-deductible items for the year
ended June 30, 2025, includes transactions costs and interest expense incurred which the Company cannot deduct for income tax
purposes.
18. INCOME TAX (continued)
Income tax expense (continued)
Movement in the valuation allowance for the year ended June 30, 2024, includes allowances created related to certain net operating
loss carryforwards generated during the year. Non-deductible items for the year ended June 30, 2024, includes transactions costs and
interest expense incurred which the Company cannot deduct for income tax purposes
Movement in the valuation allowance for the year ended June 30, 2023, includes allowances created related to certain net operating
losses incurred during the year. Non-deductible items for the year ended June 30, 2023, includes the goodwill impairment loss
recognized and interest expense incurred which the Company cannot deduct for income tax purposes.
Deferred tax assets and liabilities
Deferred taxes reflect the temporary differences between the financial statement carrying amount and tax bases of assets and
liabilities and carryforwards measured using enacted tax rates in effect for the year in which the items are expected to reverse. The
primary components of the temporary differences and carryforwards that gave rise to the Company’s deferred tax assets and liabilities
as of June 30, and their classification, were as follows:
June 30,
June 30,
2025
2024
Total deferred tax assets
Equity investments
$
29,475
$
28,786
Capital loss carryforwards
7,094
9,253
Net operating loss carryforwards
63,740
42,025
Foreign tax credit carryforwards
12,300
32,527
Provisions and accruals
6,648
3,294
Other
4,604
4,494
Total deferred tax assets before valuation allowance
123,861
120,379
Valuation allowances
(107,252)
(114,687)
Total deferred tax assets, net of valuation allowance
16,609
5,692
Total deferred tax liabilities:
Intangible assets
36,403
29,918
Equity investments
-
10,354
Other
1,573
102
Total deferred tax liabilities
37,976
40,374
Reported as
Long-term deferred tax assets, net
12,554
3,446
Long-term deferred tax liabilities, net
33,921
38,128
Net deferred tax liabilities
$
21,367
$
34,682
Decrease in total net deferred tax liabilities
Equity investments, an asset
Equity investments as of June 30, 2025 and 2024, comprises the temporary differences arising from the difference between the
amount paid for Cell C in August 2017 and the its financial statements carrying amount as of the respective year end, of $
0.0
(nil), and the difference between the amount paid for CPS in 2004 and the its financial statement carrying amount as of the respective
year end, of $
0.0
African Rand against the United States dollar.
Capital loss carryforwards
Capital loss carryforwards as of June 30, 2025 and 2024, comprises the temporary differences arising from the disposal of
Finbond which resulted in the generation of capital loss carryforwards in South Africa of $
17.7
in the United States of $
15.5
United States expired after five years, between 2026 and 2030. The change in Capital loss carryforwards also includes the impact of
currency changes between the South African Rand against the United States dollar.
18. INCOME TAX (continued)
Deferred tax assets and liabilities (continued)
Decrease in total net deferred tax liabilities (continued)
Foreign tax credit carryforwards
Foreign tax credit carryforwards as of June 30, 2025 and 2024, comprises foreign tax credits generated from distributions from
Lesaka’s subsidiaries. The tax credits as of June 30, 2025, expire in June 2026. During the year ended June 30, 2025, foreign tax
credits of $
20.2
Net operating loss carryforwards
Net operating loss carryforwards have increased primarily due to pre-existing net operating loss carryforwards recognized by
certain subsidiaries as of the acquisition date of these subsidiaries, as well as due to losses incurred by certain of the Company’s
subsidiaries and the impact of currency changes between the South African Rand against the United States dollar, which was partially
offset by net operating losses carryforwards utilized during the year following improved profitability generated by certain of the
Company’s subsidiaries.
Intangibles assets
Intangible assets include intangible assets recognized related to the acquisition of Adumo and Recharger during the year
ended June 30, 2025 (refer to Note 3), and Connect during the year ended June 30, 2022 and have increased compared to June 30,
2024, due to the acquisition of Adumo and Recharger, which was partially offset by the amortization of the intangible assets.
Equity investments
Equity investment includes our investment in MobiKwik (refer to Note 9) as of June 30, 2024. The Company disposed of its
entire investment in MobiKwik during the year ended June 30, 2025, and have released the deferred tax liability previously recognized.
Decrease in valuation allowance
At June 30, 2025, the Company had deferred tax assets of $
16.6
5.7
Management believes, based on the weight of available positive and negative evidence it is more likely than not that the Company
will realize the benefits of these deductible temporary differences and carryforwards, net of the valuation allowance. However, the
amount of the deferred tax asset considered realizable could be adjusted in the near term if estimates of taxable income are revised.
18. INCOME TAX (continued)
Deferred tax assets and liabilities (continued)
Decrease in valuation allowance (continued)
At June 30, 2025, the Company had a valuation allowance of $
107.3
114.7
assets to the estimated realizable value. The movement in the valuation allowance for the years ended June 30, 2025, 2024 and 2023,
is presented below:
Total
Equity
investments
Capital loss
carry-
forwards
Net
operating
loss carry-
forwards
Foreign tax
credit
carry-
forwards
Other
July 1, 2023
$
109,120
$
27,782
$
8,485
$
38,381
$
32,599
$
1,873
Charged to statement of operations
5,061
-
665
3,163
-
1,233
Reversed to statement of operations
(1,865)
-
-
(1,793)
(72)
-
Foreign currency adjustment
2,371
1,004
103
1,215
-
49
Net change in the valuation allowance
5,567
1,004
768
2,585
(72)
1,282
June 30, 2024
114,687
28,786
9,253
40,966
32,527
3,155
Charged to statement of operations
6,241
-
977
4,063
-
1,201
Reversed to statement of operations
(12,846)
-
-
(10,685)
-
(2,161)
Utilized
(25,528)
-
(3,226)
(2,002)
(20,227)
(73)
Acquired in business combinations
22,976
-
-
20,354
-
2,622
Foreign currency adjustment
1,722
690
90
887
-
55
Net change in the valuation allowance
(7,435)
690
(2,159)
12,617
(20,227)
1,644
June 30, 2025
$
107,252
$
29,476
$
7,094
$
53,583
$
12,300
$
4,799
Net operating loss carryforwards and foreign tax credit carryforwards
South Africa
Net operating loss carryforwards generated in South Africa of $
212.1
carryforward that may be used against future taxable income is limited to 80% of taxable income before the net operating loss
deduction.
United States
Net operating loss carryforwards generated in the United States of $
30.8
carryforward that may be used against future taxable income is limited to 80% of taxable income before the net operating loss
deduction.
Lesaka had
no
Unrecognized tax benefits
As of June 30, 2025 and 2024, the Company had
no
South Africa, Botswana, Namibia and in the U.S. federal jurisdiction. As of June 30, 2025, the Company’s South African subsidiaries
are no longer subject to income tax examination by the South African Revenue Service for periods before June 30, 2020. The Company
is subject to income tax in other jurisdictions outside South Africa, none of which are individually material to its financial position,
statement of cash flows, or results of operations.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Sep 29, 2025 | Showing above |
| 2024 | Sep 11, 2024 | |
| 2023 | Sep 12, 2023 | |
| 2022 | Sep 9, 2022 | |
| 2021 | Sep 13, 2021 | |
| 2020 | Sep 10, 2020 | |
| 2019 | Oct 25, 2019 | |
| 2018 | Sep 12, 2018 | |
| 2017 | Aug 24, 2017 | |
| 2016 | Aug 25, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.