Operating Segments

9 Months Ended

Mar. 31, 2022

Operating Segments [Abstract]

Operating Segments

17.Operating segments

Change to internal reporting structure and restatement of previously reported information

During November 2021, the Company’s chief operating decision maker changed the Company’s operating and internal reporting structures following the establishment of a new management team and the Company’s decision to focus primarily on the South African market. The chief operating decision maker has decided to analyze the Company’s operating performance primarily based on operational lines which group financial services provided to customers (consumers) into the Consumer operating segment and goods and services provided to corporate and other juristic entities into the Merchant operating segment.

Reallocation of certain activities among operating segments

During the second quarter of fiscal 2022, the Company reorganized its operating segments by combining financial services provided to consumers (primarily individuals) from the Financial services operating segment with processing activities provided for customers within the Consumer operating segment, and by allocating processing activities performed for merchants (primarily corporate and juristic customers) from the Processing operating segment to the Merchant operating segment. Sales of hardware and licenses to customers (primarily corporate entities) included in the Technology operating segment have been allocated to the Merchant operating segment. Lastly, processing activities performed outside of South Africa have been allocated from the Processing operating segment to the Other operating segment. Segment results for the three and nine months ended March 31, 2022, reflect these changes to the operating segments. Previously reported information has been restated.

17.Operating segments (continued)

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: Consumer, Merchant and Other. Consumer and Merchant operate mainly within South Africa and certain of the Company’s current and legacy activities outside of South Africa have been allocated to our Other operating segment. The Company’s reportable segments offer different products and services and require different resources and marketing strategies but share the Company’s assets.

The Consumer 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. 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 or POS. 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 Merchant segment includes activities related to the provision of goods and services provided to corporate and other juristic entities. The Company earns fees 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. This segment also 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.

The Other segment includes our operations outside South Africa and IPG’s processing activities for the applicable period through to the year ended June 30, 2021.

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

17.Operating segments (continued)

Operating segments (continued)

The reconciliation of the reportable segment’s revenue to revenue from external customers for the three months ended March 31, 2022 and 2021, is as follows:

			Revenue
			Reportable Segment			Inter-segment		From external customers
Consumer			$	16,429	$	-	$	16,429
Merchant				18,478		102		18,376
Other				397		-		397
	Total for the three months ended March 31, 2022		$	35,304	$	102	$	35,202
Consumer			$	16,236	$	-	$	16,236
Merchant				12,171		-		12,171
Other				421		-		421
		Total for the three months ended March 31, 2021	$	28,828	$	-	$	28,828

The reconciliation of the reportable segment’s revenue to revenue from external customers for the nine months ended March 31, 2022 and 2021, is as follows:

			Revenue
			Reportable Segment			Inter-segment		From external customers
Consumer			$	50,232	$	-	$	50,232
Merchant				49,652		284		49,368
Other				1,220		-		1,220
	Total for the nine months ended March 31, 2022		$	101,104	$	284	$	100,820
Consumer			$	47,867	$	-	$	47,867
Merchant				45,623		76		45,547
Other				2,855		-		2,855
		Total for the nine months ended March 31, 2021	$	96,345	$	76	$	96,269

The Company evaluates segment performance based on segment earnings before interest, tax, depreciation and amortization (“EBITDA”), adjusted for items mentioned in the next sentence (“Segment Adjusted EBITDA”). The Company does not allocate depreciation and amortization, impairment of goodwill or other intangible assets, certain lease charges (“Lease adjustments”), non-recurring items (including gains or losses on disposal of investments, fair value adjustments to equity securities, fair value adjustments to currency options), interest income, interest expense, income tax expense or loss from equity-accounted investments to its reportable segments. The Lease adjustments reflects lease charge excluded from the calculation of Segment Adjusted EBITDA and are therefore reported as a reconciling item to reconcile the reportable segments Segment Adjusted EBITDA to the Company’s loss before income tax expense.

17.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, 2022 and 2021, is as follows:

				Three months ended				Nine months ended
				March 31,				March 31,
			2022		2021		2022		2021
Reportable segments measure of profit or loss			$	(5,508)	$	(10,652)	$	(16,567)	$	(25,209)
	Operating loss: Corporate/Eliminations			(2,560)		(1,404)		(8,775)		(8,943)
	Lease adjustments			(890)		(1,104)		(2,647)		(2,991)
	Depreciation and amortization			(463)		(1,132)		(2,084)		(3,129)
	Change in fair value of equity securities			-		10,814		-		25,942
	Gain related to fair value adjustment to currency options			6,120		-		3,691		-
	Gain on disposal of equity securities			720		-		720		-
	Loss on disposal of equity-accounted investment - Bank Frick			-		(472)		-		(472)
	Loss on disposal of equity-accounted investment			(346)		-		(346)		(13)
	Interest income			761		606		1,463		1,934
	Interest expense			(691)		(744)		(2,272)		(2,168)
		Loss before income taxes	$	(2,857)	$	(4,088)	$	(26,817)	$	(15,049)

17.Operating segments (continued)

Operating segments (continued)

The following tables summarize supplemental segment information for the three and nine months ended March 31, 2022 and 2021:

						Three months ended				Nine months ended
						March 31,				March 31,
						2022		2021		2022		2021
Revenues
	Consumer					$	16,429	$	16,236	$	50,232	$	47,867
	Merchant						18,478		12,171		49,652		45,623
	Other						397		421		1,220		2,855
		Total					35,304		28,828		101,104		96,345
Segment Adjusted EBITDA
	Consumer(1)						(6,866)		(7,610)		(20,871)		(19,395)
	Merchant						1,271		273		3,951		4,471
	Other						87		(3,315)		353		(10,285)
		Total Segment Adjusted EBITDA					(5,508)		(10,652)		(16,567)		(25,209)
		Corporate/Eliminations					(2,560)		(1,404)		(8,775)		(8,943)
			Subtotal				(8,068)		(12,056)		(25,342)		(34,152)
				Less: Lease adjustments			890		1,104		2,647		2,991
				Less: Depreciation and amortization			463		1,132		2,084		3,129
					Total operating loss		(9,421)		(14,292)		(30,073)		(40,272)
Depreciation and amortization
	Consumer						226		798		1,377		2,275
	Merchant						207		176		613		487
	Other						13		66		43		106
		Subtotal: Operating segments					446		1,040		2,033		2,868
		Corporate/Eliminations					17		92		51		261
			Total				463		1,132		2,084		3,129
Expenditures for long-lived assets
	Consumer						713		99		1,523		3,343
	Merchant						120		550		196		581
	Other						1		-		2		23
		Subtotal: Operating segments					834		649		1,721		3,947
		Corporate/Eliminations					-		-		-		-
			Total			$	834	$	649	$	1,721	$	3,947

(1) Consumer Segment Adjusted EBITDA for the three and nine months ended March 31, 2022, includes reorganization costs of $5.9 million (refer also Note 1).

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.