Operating Segments

12 Months Ended

Jun. 30, 2020

22. 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 while 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 an ATM infrastructure deployed in South Africa, transaction processing for retailers, utilities, and banks, and a welfare benefit distribution service provided to the South African government through September 30, 2018. The welfare benefit distribution services ceased following the SASSA contract expiration on September 30, 2018. Fee income is 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. Fee income was also earned based on the number of recipient cardholders paid through September 30, 2018. There were no individually significant customers providing more than 10% of total revenue during the years ended June 30, 2020 and 2019, respectively. This segment had an individually significant customer that accounted for more than 10% of the total revenue of the Company during the year ended June 30, 2018 (19%). During the years ended June 30, 2020, 2019 and 2018, the operating segment incurred goodwill impairment losses of $5.6 million, $1.2 million and $1.1 million, respectively (refer to Note 10).

The International transaction processing segment consists mainly of activities in South Korea from which the Company generated revenue from the provision of payment processing services to merchants and card issuers. The Company’s South Korean business has been reported as a discontinued operation following its disposal in March 2020 (refer to Note 3). Accordingly, the Company’s South Korean business did not contribute to segment performance during the last four months of the year ended June 30, 2020. This segment included 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 up until the sale of our Korean operations. Fees generated from payment services processing and other processing activities by the IPG are included in this segment. During the year ended June 30, 2019 and 2018, the operating segment incurred goodwill impairment losses of $7.0 million and $19.9 million, respectively (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 was allocated to the Financial inclusion and applied technologies segment. DNI contributed to segment performance for the first nine months of the year ended June 30, 2019. DNI has been reported as a discontinued operation following its disposal of the Company’s controlling interest in March 2019 (refer to Note 3). Accordingly, DNI did not contribute to segment performance during the year ended June 30, 2020, the last three months of the year ended June 30, 2019 and during the year ended June 30, 2018.

22. Operating segments (continued)

Operating segments (continued)

DNI primarily derived revenue from fees generated through the distribution of starter packs and, to a less extent, 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. During the year ended June 30, 2019, the operating segment incurred a goodwill impairment loss of $6.2 million (refer to Note 10).

Corporate/eliminations includes the Company’s head office cost center and the amortization of acquisition-related intangible assets. The $17.5 million termination fee paid to terminate the Bank Frick option (refer to Note 10) during the year ended June 30, 2020, has been allocated to corporate/ elimination. The $5.3 million impairment loss related to the impairment of DNI intangible assets (refer to Note 3) during the year ended June 30, 2019, has been allocated to corporate/ elimination.

The reconciliation of the reportable segment’s revenue to revenue from external customers for the years ended June 30, 2020, 2019 and 2018, respectively, is as follows:

				Revenue
				Reportable Segment		Corporate/ Eliminations (Note 14)		Inter-segment		From external customers

South African transaction processing				$	73 796	$	0	$	7 956	$	65 840
International transaction processing					90 416		-		-		90 416
	Continuing				5 041		-		-		5 041
	Discontinued				85 375		-		-		85 375
Financial inclusion and applied technologies					82 342		-		2 226		80 116
	Total for the years ended June 30, 2020				246 554		-		10 182		236 372
		Continuing			161 179		-		10 182		150 997
		Discontinued		$	85 375	$	-	$	-	$	85 375

South African transaction processing				$	96 038	$	-	$	6 990	$	89 048
International transaction processing					148 268		-		-		148 268
	Continuing				9 842		-		-		9 842
	Discontinued				138 426		-		-		138 426
Financial inclusion and applied technologies					146 184		-		2 801		143 383
	Continuing				89 847		-		2 801		87 046
	Discontinued				56 337		-		-		56 337
Reportable segments					390 490		-		9 791		380 699
Corporate/Eliminations – revenue refund (Note 14)					-		(19 709)		-		(19 709)
		Total for the years ended June 30, 2019			390 490		(19 709)		9 791		360 990
			Continuing		195 727		(19 709)		9 791		166 227
			Discontinued	$	194 763	$	-	$	-	$	194 763

South African transaction processing				$	268 047	$	-	$	29 949	$	238 098
International transaction processing					180 027		-		-		180 027
	Continuing				26 713		-		-		26 713
	Discontinued				153 314		-		-		153 314
Financial inclusion and applied technologies					221 906		-		27 142		194 764
	Continuing				221 906		-		27 142		194 764	-
												-
		Total for the years ended June 30, 2018			669 980		-		57 091		612 889
			Continuing		516 666		-		57 091		459 575
			Discontinued	$	153 314	$	-	$	-	$	153 314

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 measures of profit or loss to income before income taxes for the years ended June 30, 2020, 2019 and 2018, respectively, is as follows:

			2020		2019⁽¹⁾		2018

Reportable segments measure of profit or loss			$	(20 247)	$	(42 692)	$	85 690
	Less: Discontinued operations: reportable segments' measure of profit or loss			(14 568)		(43 739)		(17 977)
	Continuing operations: reportable segments' measure of profit or loss			(34 815)		(86 431)		67 713
	Continuing operations : Operating income - Corporate/Eliminations			(9 433)		(48 501)		(13 904)
	Change in fair value of equity securities			-		(167 459)		32 473
	Gain on disposal of FIHRST (Note 3)			9 743		-		-
	(Loss) Gain on disposal of DNI interest as an equity method investment (Note 3)			(1 010)		177		-
	Loss on deconsolidation of CPS (Note 3)			(7 148)		-		-
	Termination fee to cancel Bank Frick option			(17 517)		-		-
	Interest income			2 805		5 424		16 845
	Interest expense			(7 641)		(9 860)		(8 569)
	Impairment of Cedar Cellular Note			-		(12 793)		-
		Loss before income taxes	$	(65 016)	$	(319 443)	$	94 558

(1) - Operating loss: Corporate/Eliminations includes $34.0 million related to the accrual referred to in Note 13.

The following tables summarize segment information for the years ended June 30, 2020, 2019 and 2018:


							2020		2019		2018
Revenues
	South African transaction processing						$	73 796	$	96 038	$	268 047
	International transaction processing							90 416		148 268		180 027
		Continuing						5 041		9 842		26 713
		Discontinued						85 375		138 426		153 314
	Financial inclusion and applied technologies							82 342		146 184		221 906
		Continuing						82 342		89 847		221 906
		Discontinued						-		56 337		-

				Total				246 554		390 490		669 980
						Continuing		161 179		195 727		516 666
						Discontinued		85 375		194 763		153 314

Operating (loss) income
	South African transaction processing ⁽¹⁾							(19 575)		(30 771)		42 796
	International transaction processing							2 051		2 837		(12 478)
		Continuing						(12 517)		(16 502)		(30 455)
		Discontinued						14 568		19 339		17 977
	Financial inclusion and applied technologies⁽¹⁾							(2 723)		(14 758)		55 372
		Continuing ⁽¹⁾						(2 723)		(39 158)		55 372
		Discontinued						-		24 400		-

			Subtotal: Operating segments					(20 247)		(42 692)		85 690
			Corporate/Eliminations					(15 217)		(70 816)		(26 741)
				Continuing				(9 433)		(48 501)		(13 904)
				Discontinued				(5 784)		(22 315)		(12 837)

					Total ⁽¹⁾			(35 464)		(113 508)		58 949
						Continuing ⁽¹⁾		(44 248)		(134 932)		53 809
						Discontinued		8 784		21 424		5 140

Depreciation and amortization
	South African transaction processing							2 512		3 612		4 625
	International transaction processing							4 405		9 962		17 627
		Continuing						502		254		750
		Discontinued						3 903		9 708		16 877
	Financial inclusion and applied technologies							1 368		1 968		1 441
		Continuing						1 368		1 355		1 441
		Discontinued						-		613		-

			Subtotal: Operating segments					8 285		15 542		23 693
			Corporate/Eliminations					5 014		21 807		11 791
				Continuing				265		6 882		3 657
				Discontinued				4 749		14 925		8 134

					Total			13 299		37 349		35 484
						Continuing		4 647		12 103		10 473
						Discontinued		8 652		25 246		25 011

Expenditures for long-lived assets
	South African transaction processing							3 443		3 590		3 988
	International transaction processing							2 206		3 607		4 397
		Continuing						703		664		139
		Discontinued						1 503		2 943		4 258
	Financial inclusion and applied technologies							289		2 219		1 264
		Continuing						289		1 488		1 264
		Discontinued						-		731		-

			Subtotal: Operating segments					5 938		9 416		9 649
			Corporate/Eliminations					-		-		-
					Total			5 938		9 416		9 649
						Continuing		4 435		5 742		5 391
						Discontinued	$	1 503	$	3 674	$	4 258

(1) South African transaction processing and Financial inclusion and applied technologies include retrenchment costs for the year ended June 30, 2019, of: $4,665 and $1,604, respectively, for total retrenchment costs for the year ended June 30, 2019, of $6,269. The retrenchment costs are included in selling, general and administration expense on the consolidated statement of operations for the year ended June 30, 2019.

The segment information as reviewed by the chief operating decision maker does not include a measure of segment 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.

Geographic Information

Long-lived assets based on the geographic location for the years ended June 30, 2020, 2019 and 2018, are presented in the table below:


		Long-lived assets
		2020		2019		2018
				(as restated)^(A)		(as restated)^(B)

South Africa		$	68 521	$	141 235	$	493 902
Liechtenstein - investment in Bank Frick (Note 10)			29 739		47 240		48 129
India - investment in MobiKwik (Note 10)			26 993		26 993		26 917
South Korea (Note 3)			-		149 390		177 388
Rest of world			9 119		9 739		41 597
	Total	$	134 372	$	374 597	$	787 933

22. Operating segments (continued)

(A) The South Africa and total amounts have been restated by $ 2 689 to correct the misstatement discussed in Note 1.

(B) The South Africa and total amounts have been restated by $ 2 540 to correct the misstatement discussed in Note 1.