22. OPERATING SEGMENTS

Operating segments

The Company discloses segment information as reflected in the management information systems reports that its chief operating decision maker uses in making decisions and to report certain entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets or reports material revenues.

The Company currently has three reportable segments: South African transaction processing, International transaction processing and Financial inclusion and applied technologies. The South African transaction processing and Financial inclusion and applied technologies segments operate mainly within South Africa and the International transaction processing segment operates mainly within South Korea, Hong Kong and the European Union. The Company's reportable segments offer different products and services and require different resources and marketing strategies and share the Company's assets.

The South African transaction processing segment currently consists mainly of a welfare benefit distribution service provided to the South African government, an ATM infrastructure deployed in South Africa, and transaction processing for retailers, utilities, and banks. Fee income is earned based on the number of recipient cardholders paid. Fee income is also earned from customers utilizing our ATM infrastructure. Utility providers and banks are charged a fee for transaction processing services performed on their behalf at retailers. This segment has an individually significant customer that accounts for more than 10% of the total revenue of the Company. For the year ended June 30, 2018, there was one such customer, providing 19% of total revenue (2017: one such customer, providing 22% of total revenue; 2016: one such customer, providing 21% of total revenue). During the year ended June 30, 2018, the operating segment incurred a goodwill impairment loss of $1.1 million (refer to Note 10).

The International transaction processing segment consists mainly of activities in South Korea from which the Company generates revenue from the provision of payment processing services to merchants and card issuers. This segment generates fee revenue from the provision of payment processing services and to a lesser extent from the sale of goods, primarily point of sale terminals, to customers in South Korea. Fees generated from payment services processing and other processing activities by Transact24 and Masterpayment are included in this segment. During the year ended June 30, 2018, the operating segment incurred a goodwill impairment loss of $19.9 million (refer to Note 10).

The Financial inclusion and applied technologies segment derives revenue from the provision of short-term loans as a principal and the provision of bank accounts, as a fixed monthly fee per account is charged for the maintenance of these accounts. This segment also includes fee income and associated expenses from merchants and card holders using the Company's merchant acquiring system, the sale of prepaid products (electricity and airtime) as well as the sale of hardware and software. Finally, the Company earns premium income from the sale of life insurance products through its insurance business. DNI was acquired on June 30, 2018, and has been allocated to the Financial inclusion and applied technologies segment. DNI did not contribute to segment performance during the year ended June 30, 2018. DNI derives revenue from fees generated through the distribution of starter packs and from interest income earned through the provision of financing to Cell C in order for it to expand components of Cell C's telecommunications infrastructure in South Africa.

Corporate/eliminations includes the Company's head office cost center and the amortization of acquisition-related intangible assets. The $8.0 million paid to the Company's founder, former chief executive officer and former member of our board of directors during the year ended June 30, 2017, is also included in corporate/eliminations. The $1.9 million fair value gain resulting from the acquisition of Transact24 (refer to Note 3) and the $2.2 million gain resulting from the change in accounting for Finbond (refer to Note 16) that were recognized during the year ended June 30, 2016, have been allocated to corporate/elimination.

The reconciliation of the reportable segments revenue to revenue from external customers for the years ended June 30, 2018, 2017, and 2016, respectively, is as follows:


	Revenue
						From
		Reportable		Inter-		external
		Segment		segment		customers
South African transaction processing	$	268,047	$	29,949	$	238,098
International transaction processing		180,027		-		180,027
Financial inclusion and applied technologies		221,906		27,142		194,764
Total for the year ended June 30, 2018	$	669,980	$	57,091	$	612,889

South African transaction processing	$	249,144	$	24,518	$	224,626
International transaction processing		176,729		-		176,729
Financial inclusion and applied technologies		235,901		27,190		208,711
Total for the year ended June 30, 2017	$	661,774	$	51,708	$	610,066

South African transaction processing	$	212,574	$	17,615	$	194,959
International transaction processing		169,807		-		169,807
Financial inclusion and applied technologies		249,403		23,420		225,983
Total for the year ended June 30, 2016	$	631,784	$	41,035	$	590,749

The Company does not allocate interest income, interest expense or income tax expense to its reportable segments. The Company evaluates segment performance based on segment operating income before acquisition-related intangible asset amortization which represents operating income before acquisition-related intangible asset amortization and allocation of expenses allocated to Corporate/Eliminations, all under GAAP. The reconciliation of the reportable segments measure of profit or loss to income before income taxes for the years ended June 30, 2018, 2017, and 2016, respectively, is as follows:


		For the years ended June 30,
		2018			2017			2016
Reportable segments measure of profit or loss	$	85,690		$	130,799		$	129,774
Operating income: Corporate/Eliminations		(26,741	)		(33,756	)		(15,406	)
Interest income		17,885			20,897			15,292
Interest expense		(8,941	)		(3,484	)		(3,423	)
Income before income taxes	$	67,893		$	114,456		$	126,237

The following tables summarize segment information which is prepared in accordance with GAAP for the years ended June 30, 2018, 2017, and 2016:


		For the years ended June 30,
		2018			2017			2016
Revenues
South African transaction processing	$	268,047		$	249,144		$	212,574
International transaction processing		180,027			176,729			169,807
Financial inclusion and applied technologies		221,906			235,901			249,403
Total		669,980			661,774			631,784
Operating income (loss)
South African transaction processing		42,796			59,309			51,386
International transaction processing		(12,478	)		13,705			23,389
Financial inclusion and applied technologies		55,372			57,785			54,999
Subtotal: Operating segments		85,690			130,799			129,774
Corporate/Eliminations		(26,741	)		(33,756	)		(15,406	)
Total		58,949			97,043			114,368
Depreciation and amortization
South African transaction processing		4,625			4,614			6,157
International transaction processing		17,627			21,366			21,852
Financial inclusion and applied technologies		1,441			1,422			1,158
Subtotal: Operating segments		23,693			27,402			29,167
Corporate/Eliminations		11,791			13,976			11,227
Total		35,484			41,378			40,394
Expenditures for long-lived assets
South African transaction processing		3,988			2,473			5,101
International transaction processing		4,397			7,745			28,029
Financial inclusion and applied technologies		1,264			977			2,667
Subtotal: Operating segments		9,649			11,195			35,797
Corporate/Eliminations		-			-			-
Total	$	9,649		$	11,195		$	35,797

The segment information as reviewed by the chief operating decision maker does not include a measure of assets per segment as all of the significant assets are used in the operations of all, rather than any one, of the segments. The Company does not have dedicated assets assigned to a particular operating segment. Accordingly, it is not meaningful to attempt an arbitrary allocation and segment asset allocation is therefore not presented.

It is impractical to disclose revenues from external customers for each product and service or each group of similar products and services.

Geographic Information

Revenues based on the geographic location from which the sale originated for the years ended June 30, 2018, 2017 and 2016, are presented in the table below:

		2018		2017		2016

South Africa	$	433,421	$	434,124	$	422,022
South Korea		153,314		153,403		158,609
Rest of world		26,154		22,539		10,118
Total	$	612,889	$	610,066	$	590,749

Long-lived assets based on the geographic location for the years ended June 30, 2018, 2017 and 2016, are presented in the table below:


	Long-lived assets
		2018		2017		2016

South Africa	$	498,418	$	74,370	$	69,213
South Korea		177,388		192,473		221,459
Rest of world		116,643		77,723		49,105
Total	$	792,449	$	344,566	$	339,777