Net 1 UEPS Technologies, Inc.

Basis and comparability:

FY2022: includes Connect only from 14 Apr 2022.

FY2025: figures are as revised in the FY2026 release. Originally reported FY2025 figures were: net loss US$(87.5)M; Group Adjusted EBITDA US$50.7M; operating loss US$(27.1)M [S5]. The revision corrected a deferred-tax error and certain classifications [S1].

Agent vs principal: FY2025 interim periods were restated to grossing-up treatment. FY2024 and earlier annual revenue was not restated in the sources reviewed. GAAP revenue growth across FY2024–FY2025 therefore contains a presentation effect.

Adjusted EBITDA definition: FY2022 is "Adjusted EBITDA" under the earlier definition. Management later cited FY2022 Group Adjusted EBITDA of ZAR -328M [S6].

Income statement: notes and sources

Sources: FY2022 [S7]; FY2023–FY2024 [S6]; FY2025 (revised) and FY2026 [S1]. Gross profit is computed as revenue less "cost of goods sold, IT processing, servicing and support". EBITDA (operating income plus D&A) is computed. FY2022–FY2023 per-share adjustments are "fundamental" EPS, the earlier non-GAAP definition. The FY2024 adjusted EPS of US$0.04 is from the FY2025 release [S5]; the FY2024 release showed US$0.06 fundamental EPS [S6].

Margins and growth

All values computed.

Key figures in ZAR

Sources and derivations:

• FY2022 and FY2023 revenue are computed as USD revenue × the average rate. The FY2024 revenue of about ZAR 10.6bn is as reported [S6][S21].

• FY2025 figures are revised [S1]. The originally reported FY2025 values were Group Adjusted EBITDA ZAR 922M and adjusted EPS ZAR 2.29 [S5].

• FY2022 Group Adjusted EBITDA (ZAR -328M) is per management [S6]. FY2022–FY2024 net income in ZAR is from [S6][S7].

Balance sheet

Sources: FY2022 [S7]; FY2023–FY2024 [S6]; FY2025 (revised) and FY2026 [S1].

Notes:

• Short-term debt includes ATM funding facilities, which were US$51.3M in FY2022, US$23.0M in FY2023 and US$6.7M in FY2024.

• The FY2025 release reclassified US$11.8M of FY2024 long-term borrowings to current; the total is unchanged.

• Net debt is computed as total debt less unrestricted cash.

• FY2025 total equity of US$166.3M includes US$6.8M of non-controlling interest. Lesaka equity alone was US$159.4M. The NCI was bought out in FY2026.

• The 10-K states aggregate borrowings of ZAR 3.5bn (US$210.7M) at 30 Jun 2026, which excludes short-term overdraft facilities [S2]. Management cited gross debt of about ZAR 3.8bn including facilities [S3].

Cash flow

Sources: [S1][S5][S6][S7]; FCF lines computed.

Notes:

• FY2022 receivables movements are combined in a single line, so the loan-book figure is not separable for that year.

• Treasury-stock acquisitions include shares withheld or repurchased in connection with restricted-stock vesting. The purpose of the FY2025 outflow was not separately confirmed.

• In ZAR, FY2026 operating cash flow was ZAR 864M and capex was ZAR 421M, leaving about ZAR 443M of positive cash generation [S3].

Ratios (computed)

Methodology:

ROE: uses net income over average Lesaka equity.

ROA: uses average total assets.

ROIC: is operating income × (1 − 27% South African tax rate) ÷ (total debt + total equity + redeemable stock).

Debt to equity: uses total debt ÷ total equity.

Cash conversion cycle: is DSO + DIO − DPO, using trade receivables, inventory, trade payables and cost of revenue. It excludes settlement balances and finance loans. FY2022 is distorted by Connect's mid-April consolidation.

• Company-reported leverage is from [S3][S6].

Financial commentary

Revenue trajectory. The step change in FY2023 (+137% in USD) reflects the first full year of Connect. Since then, USD growth has been modest: +7% in FY2024, +17% in FY2025, +9% in FY2026. Underlying growth is better than the USD figures suggest, for three reasons:

• FX effects: the ZAR weakened in FY2024 and strengthened in FY2026, from 17.90 to 16.91 per US$.

• Deliberate run-off of low-margin pinned airtime: Merchant GAAP revenue fell 10% in ZAR in FY2026.

• Acquisitions: Adumo from October 2024; Recharger from March 2025.

On management's net-revenue measure, FY2026 growth was 20% in ZAR, of which part was inorganic [S1].

Profitability inflection. Gross margin widened from 20.9% (FY2023) to 32.0% (FY2026). This was driven by mix: more Consumer lending and insurance, more Enterprise utilities, and less pinned airtime. Group Adjusted EBITDA roughly tripled in USD between FY2023 and FY2026 (US$24.8M to US$75.7M), with the margin on net revenue reaching 20.2% for the year and 22.6% in Q4 [S1][S3].

GAAP operating income remains thin at 1.8% of revenue. The main reasons are:

• Purchase-price-allocation amortization of US$30.4M in FY2026.

• Stock-based compensation of US$7.0M.

• Heavy depreciation from vault and POS hardware.

FY2025 net loss. The FY2025 loss of US$(91.0)M was overwhelmingly non-operational:

• US$59.8M fair-value loss on the MobiKwik stake.

• US$18.9M impairments.

• US$16.2M transaction costs [S1][S4].

FY2026 net income. FY2026 net income of US$2.8M benefited from several non-recurring items:

• US$2.6M fair-value gain on equity securities.

• US$3.9M other income.

• US$1.5M allowance reversal.

The quality of the first GAAP profit is therefore modest. The run-rate is better: Q4 FY2026 alone generated US$3.2M net income on reduced one-offs [S1].

Balance sheet. Goodwill and intangibles of about US$339M represent 48% of total assets and 165% of total equity, so acquisition accounting dominates the balance sheet. Leverage was refinanced and lengthened in FY2025, when US$190M of long-term borrowings were drawn and US$150M repaid, a refinancing of the Connect-era facilities.

Net debt has been broadly flat in USD at about US$150M. Leverage fell from 2.9x to 1.9x because EBITDA grew [S3]. Roughly half of gross debt funds the lending books. That half is the slice management intends to migrate into deposit funding at Bank Zero [S3].

Cash generation. Reported free cash flow is depressed by loan-book growth, which is classified within operating cash flow. Before loan-book growth, FY2026 free cash flow was about US$62M. That equals about 82% of Group Adjusted EBITDA, a strong conversion figure. However, FY2026 also benefited from a working-capital release of about US$19.8M in payables [S1].

Watch-points:

• Capex is stepping up to about ZAR 450M operational plus ZAR 100M of once-off leasehold spend in FY2027 [S3].

• Group costs reset to about ZAR 350M [S3].

• Recurring accounting revisions in three consecutive annual cycles: interim restatements in FY2025; property, plant and equipment cost understatement; a VAT error on gaming vouchers; and deferred-tax and treasury-share presentation corrections in FY2026 [S1][S2][S5][S9].

Management guidance

FY2027 (ZAR, including Bank Zero from about December 2026):

Q1 FY2027: net revenue ZAR 1.58–1.66bn; EBITDA ZAR 200–240M; adjusted EPS ZAR 0.40–0.60. The quarter is depressed by seasonality and Merchant restructuring [S1].

FY2029 ambitions (not guidance): net revenue about ZAR 11bn; EBITDA margin above 25%; adjusted EPS above ZAR 18 [S3].

Bull case

1. Bank Zero transforms funding. About half of the roughly ZAR 3.8bn gross debt funds lending books. Moving those books onto deposits targeted at more than ZAR 1bn by December 2026 and more than ZAR 4bn by 2029 could cut interest cost materially and take leverage below 1x by June 2027. That would free capacity for buybacks or accretive M&A [S3].

2. The Consumer engine compounds. 2.1M consumers growing 11% a year, ARPU +15%, a loan book +40% and insurance policies +34% support Consumer margins trending above 35%. Bank Zero then opens about 12M salaried customers [S2][S3].

3. The valuation leaves room. At about 7.3x trailing EV/Adjusted EBITDA and about 9–10x forward adjusted P/E, against guided adjusted EPS growth of 15–31% in FY2027 and an aspiration of over 40% CAGR to FY2029, any credible delivery could drive a re-rating. Insiders bought heavily at about US$5.00 in December 2025 [S1][S3][S19].

Bear case

1. Merchant is structurally challenged. Despite volume growth, take rates in ADP, cash and acquiring are falling, corporate merchants fell 7%, and Q4 Merchant EBITDA fell 33%. Merchant is still the largest net-revenue segment, about 48% [S1][S3].

2. Earnings and reporting quality remain fragile. GAAP profit is marginal and partly non-recurring. Three successive cycles of restatement and revision (interim FY2025, PP&E, VAT, deferred tax) raise control-environment questions, just as a regulated bank must be integrated [S1][S2][S5].

3. Execution and regulatory risk is concentrated. The Bank Zero timing, capital requirements, and loan-book migration by Q4 FY2027 are all outside management's full control. The COFI Bill, SARB payment reforms and SASSA policy changes could raise costs or shrink the core grant market [S2][S3].

Catalysts and monitorables (next 12 months)

Analyst verdict

Lesaka has completed the hardest part of its turnaround, converting the loss-making Net1 legacy into a cash-generative, multi-segment fintech. Group Adjusted EBITDA has compounded from a ZAR 328M loss in FY2022 to ZAR 1.27bn in FY2026, leverage is below target at 1.9x, and the group recorded its first full-year GAAP profit [S1][S3][S6]. The Consumer division is the standout asset. It is a scaled, data-rich grant-beneficiary franchise with rising ARPU and cross-sell, and growth is coming from customer acquisition rather than pricing. Enterprise has moved from restructuring to genuine contribution.

The investment debate now turns on two questions. The first is whether Merchant can be stabilised. Volumes are growing, but take-rate erosion has produced declining Q4 profit, and Merchant still represents almost half of net revenue. Management has implemented a revised strategy and promises visible merchant-count acceleration from Q2 FY2027; until that appears, the segment caps the multiple.

The second question is whether Bank Zero can be closed and integrated cleanly. The funding arithmetic is compelling: migrating lending books to deposits could cut gross debt by about ZAR 1.5bn and take leverage below 1x. But completion, capital requirements and migration timing remain outside management's full control, and a bank raises the bar on controls. That bar matters given the company's recent record of accounting revisions.

On fundamentals, the shares look inexpensive at about 7x trailing EV/Adjusted EBITDA and around 9–10x forward adjusted earnings, if FY2027 guidance holds. Insider purchasing and anchor shareholders (VCP, IFC) add conviction. Coverage is thin, liquidity is modest, and GAAP earnings remain marginal, so the stock is best viewed as an execution-dependent re-rating opportunity rather than a quality compounder today.

Overall stance: constructive, with high execution risk. The thesis would be validated by Bank Zero completing by December 2026, Merchant KPIs inflecting in H2 FY2027, and no further reporting revisions.