Operating Segments

9 Months Ended

Mar. 31, 2021

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 nine months ended March 31, 2021, 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 sales 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.

The reconciliation of the reportable segment’s revenue to revenue from external customers for the three months ended March 31, 2021 and 2020, is as follows:

			Revenue (as restated)(1)
			Reportable Segment			Inter-segment		From external customers
Processing			$	18,747	$	1,274	$	17,473
Financial services				10,192		866		9,326
Technology				2,026		(3)		2,029
	Total for the three months ended March 31, 2021		$	30,965	$	2,137	$	28,828
Processing(1)			$	22,078	$	2,053	$	20,025
Financial services				11,683		937		10,746
Technology				4,040		197		3,843
		Total for the three months ended March 31, 2020	$	37,801	$	3,187	$	34,614

(1) Processing for the three months ended March 31, 2020 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 nine months ended March 31, 2021 and 2020, is as follows:

			Revenue (as restated)(1)
			Reportable Segment			Inter-segment		From external customers
Processing			$	61,243	$	3,440	$	57,803
Financial services				28,166		2,425		25,741
Technology				12,846		121		12,725
	Total for the nine months ended March 31, 2021		$	102,255	$	5,986	$	96,269
Processing(1)			$	75,395	$	6,430	$	68,965
Financial services				38,119		2,841		35,278
Technology				16,139		634		15,505
		Total for the nine months ended March 31, 2020	$	129,653	$	9,905	$	119,748

(1) Processing for the nine months ended March 31, 2020 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 nine months ended March 31, 2021 and 2020, is as follows:

				Three months ended				Nine months ended
				March 31,				March 31,
			2021		2020		2021		2020
Reportable segments measure of profit or loss			$	(12,796)	$	(13,150)	$	(31,068)	$	(23,673)
	Operating loss: Corporate/Eliminations			(1,496)		(1,062)		(9,204)		(7,395)
	Change in fair value of equity securities			10,814		-		25,942		-
	Gain on disposal of FIHRST			-		-		-		9,743
	Loss on disposal of equity-accounted investment - Bank Frick			(472)		-		(472)		-
	Loss on disposal of equity-accounted investment			-		-		(13)		-
	Interest income			606		570		1,934		2,015
	Interest expense			(744)		(1,886)		(2,168)		(6,362)
		Loss before income taxes	$	(4,088)	$	(15,528)	$	(15,049)	$	(25,672)

The following tables summarize segment information that is prepared in accordance with GAAP for the three and nine months ended March 31, 2021 and 2020:

				Three months ended				Nine months ended
				March 31,				March 31,
				2021		2020		2021		2020
						(as restated)(1)				(as restated)(1)
Revenues
	Processing			$	18,747	$	22,078	$	61,243	$	75,395
		All others			18,741		20,914		59,550		73,006
		IPG			6		1,164		1,693		2,389
	Financial services				10,192		11,683		28,166		38,119
	Technology				2,026		4,040		12,846		16,139
		Total			30,965		37,801		102,255		129,653
Operating (loss) income
	Processing				(10,816)		(12,394)		(28,498)		(23,747)
		All others			(7,484)		(9,219)		(17,747)		(15,679)
		IPG			(3,332)		(3,175)		(10,751)		(8,068)
	Financial services				(2,111)		(1,701)		(5,554)		(2,605)
	Technology				131		945		2,984		2,679
		Subtotal: Operating segments			(12,796)		(13,150)		(31,068)		(23,673)
		Corporate/Eliminations			(1,496)		(1,062)		(9,204)		(7,395)
			Total		(14,292)		(14,212)		(40,272)		(31,068)
Depreciation and amortization
	Processing				682		861		2,093		2,531
	Financial services				110		203		362		637
	Technology				248		-		413		168
		Subtotal: Operating segments			1,040		1,064		2,868		3,336
		Corporate/Eliminations			92		89		261		315
			Total		1,132		1,153		3,129		3,651
Expenditures for long-lived assets
	Processing				533		542		885		2,856
	Financial services				97		3		148		134
	Technology				19		-		2,914		-
		Subtotal: Operating segments			649		545		3,947		2,990
		Corporate/Eliminations			-		-		-		-
			Total	$	649	$	545	$	3,947	$	2,990

(1) Revenues-Processing-All others for the three and nine months ended March 31, 2020 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.