Operating Segments

6 Months Ended

Dec. 31, 2020

Operating Segments [Abstract]

Operating Segments

18.Operating segments

Change to internal reporting structure and restatement of previously reported information

During September 2020, the Company’s chief operating decision maker changed the Company’s operating and internal reporting structures following the Company’s decisions to focus primarily on the South African market and to exit its operating activities performed through IPG. The chief operating decision maker has decided to analyze the Company’s operating performance primarily based on reported information for statutory entities, statutory groups, clustered statutory entities or clustered statutory groups, with certain reallocations, based on the activity of the reporting unit. Previously reported information has been restated.

Reallocation of certain activities among operating segments

During the first quarter of fiscal 2021, the Company reorganized its operating segments by combining what were previously the South African transaction processing segment and the International transaction processing segment into what is now the Processing segment and bifurcating what was previously the Financial inclusion and applied technologies segment into what are now the Financial services segment and the Technology segment. Segment results for the three and six months ended December 31, 2020 reflect these changes to the 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, and the countries in which the entity holds material assets or reports material revenues.

The Company currently has three reportable segments: Processing, Financial services and Technology. All three segments operate mainly within South Africa and certain of our activities outside of South Africa have been allocated to Processing. The Company’s reportable segments offer different products and services and require different resources and marketing strategies but share the Company’s assets.

18.Operating segments (continued)

Operating segments (continued)

The Processing segment includes fees earned by the Company from processing activities performed for its customers and revenue generated from the distribution of prepaid airtime. The Company provides its customers with transaction processing services that involve the collection, transmittal and retrieval of all transaction data. Customers that have a bank account managed by the Company are issued cards that can be utilized to withdraw funds at an ATM or to transact at a merchant point of sale device (“POS”). The Company earns processing fees from transactions processed for these customers. The Company also earns fees on transactions performed by other banks’ customers utilizing its ATM, POS or bill payment infrastructure. The Processing segment includes IPG’s processing activities.

The Financial services segment includes activities related to the provision of financial services to customers, including a bank account, loans and insurance products. The Company charges monthly administration fees for all bank accounts. The Company provides short-term loans to customers in South Africa for which it earns initiation and monthly service fees. The Company writes life insurance contracts, primarily funeral-benefit policies, and policy holders pay the Company a monthly insurance premium.

The Technology segment includes sale of hardware and licenses to customers. Hardware includes the sale of POS devices, SIM cards and other consumables which can occur on an ad hoc basis. Licenses include the right to use certain technology developed by the Company.

Corporate/Eliminations includes the Company’s head office cost center and the amortization of acquisition-related intangible assets.

			Revenue (as restated)(1)
			Reportable Segment			Inter-segment		From external customers
Processing			$	19,990	$	1,178	$	18,812
Financial services				9,709		814		8,895
Technology				4,609		11		4,598
	Total for the three months ended December 31, 2020		$	34,308	$	2,003	$	32,305
Processing(1)			$	25,022	$	2,175	$	22,847
Financial services				12,268		951		11,317
Technology				4,890		136		4,754
		Total for the three months ended December 31, 2019	$	42,180	$	3,262	$	38,918

(1) Processing for the three months ended December 31, 2019 has been restated for the error described in Note 1.

The reconciliation of the reportable segment’s revenue to revenue from external customers for the six months ended December 31, 2020 and 2019, is as follows:

			Revenue (as restated)(1)
			Reportable Segment			Inter-segment		From external customers
Processing			$	42,496	$	2,166	$	40,330
Financial services				17,974		1,559		16,415
Technology				10,820		124		10,696
	Total for the six months ended December 31, 2020		$	71,290	$	3,849	$	67,441
Processing(1)			$	53,317	$	4,377	$	48,940
Financial services				26,436		1,904		24,532
Technology				12,099		437		11,662
		Total for the six months ended December 31, 2019	$	91,852	$	6,718	$	85,134

(1) Processing for the six months ended December 31, 2019 has been restated for the error described in Note 1.

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 expenses allocated to Corporate/Eliminations, all under GAAP.

18.Operating segments (continued)

Operating segments (continued)

The reconciliation of the reportable segments measures of profit or loss to income before income taxes for the three and six months ended December 31, 2020 and 2019, is as follows:

				Three months ended				Six months ended
				December 31,				December 31,
			2020		2019		2020		2019
Reportable segments measure of profit or loss			$	(10,374)	$	(6,508)	$	(18,272)	$	(10,523)
	Operating loss: Corporate/Eliminations			(4,831)		(3,912)		(7,708)		(6,333)
	Change in fair value of equity securities			15,128		-		15,128		-
	Gain on disposal of FIHRST			-		9,743		-		9,743
	Loss on disposal of equity-accounted investment			(13)		-		(13)		-
	Interest income			717		1,082		1,328		1,445
	Interest expense			(677)		(3,129)		(1,424)		(4,476)
		Income (Loss) before income taxes	$	(50)	$	(2,724)	$	(10,961)	$	(10,144)

The following tables summarize segment information that is prepared in accordance with GAAP for the three and six months ended December 31, 2020 and 2019:

				Three months ended				Six months ended
				December 31,				December 31,
				2020		2019		2020		2019
						(as restated)(1)				(as restated)(1)
Revenues
	Processing			$	19,990	$	25,022	$	42,496	$	53,317
		All others			19,512		24,590		40,809		52,092
		IPG			478		432		1,687		1,225
	Financial services				9,709		12,268		17,974		26,436
	Technology				4,609		4,890		10,820		12,099
		Total			34,308		42,180		71,290		91,852
Operating (loss) income
	Processing				(10,381)		(5,848)		(17,682)		(11,353)
		IPG			(4,647)		(2,920)		(7,419)		(4,893)
		All others			(5,734)		(2,928)		(10,263)		(6,460)
	Financial services				(1,071)		(1,249)		(3,443)		(904)
	Technology				1,078		589		2,853		1,734
		Subtotal: Operating segments			(10,374)		(6,508)		(18,272)		(10,523)
		Corporate/Eliminations			(4,831)		(3,912)		(7,708)		(6,333)
			Total		(15,205)		(10,420)		(25,980)		(16,856)
Depreciation and amortization
	Processing				707		847		1,411		1,670
	Financial services				116		216		252		434
	Technology				163		2		165		168
		Subtotal: Operating segments			986		1,065		1,828		2,272
		Corporate/Eliminations			88		109		169		226
			Total		1,074		1,174		1,997		2,498
Expenditures for long-lived assets
	Processing				106		246		352		2,314
	Financial services				23		52		51		131
	Technology				2,894		(2)		2,895		-
		Subtotal: Operating segments			3,023		296		3,298		2,445
		Corporate/Eliminations			-		-		-		-
			Total	$	3,023	$	296	$	3,298	$	2,445

(1) Revenues-Processing-All others for the three and six months ended December 31, 2019 have been restated for the error described in Note 1.

18.Operating segments (continued)

Operating segments (continued)

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.