Operating Segments

12 Months Ended

Jun. 30, 2022

Operating Segments [Abstract]

Operating Segments

21.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 year ended June 30, 2022, reflect these changes to the operating segments. Previously reported information has been restated.

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.

21.Operating segments (continued)

Operating segments (continued)

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 cash management and payment services to merchant customers through a digital vault (safe asset) which is located at the customer’s premises and through which the Company is able to provide the services which generate processing fee revenue. 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. During the year ended June 30, 2020, this operating segment incurred a goodwill impairment loss of $5.6 million (refer to Note 10).

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. The $17.5 million termination fee paid to terminate the Bank Frick option (refer to Note 9) during the year ended June 30, 2020, has been allocated to corporate/ elimination.

21.Operating segments (continued)

Operating segments (continued)

The reconciliation of the reportable segment’s revenue to revenue from external customers for the years ended June 30, 2022, 2021 and 2020, respectively, is as follows:

		Revenue
		Reportable Segment			Inter-segment		From external customers
Consumer		$	65,932	$	-	$	65,932
Merchant			155,366		384		154,982
Other			1,695		-		1,695
	Total for the year ended June 30, 2022	$	222,993	$	384	$	222,609
Consumer		$	66,149	$	-	$	66,149
Merchant			61,478		159		61,319
Other			3,318		-		3,318
	Total for the year ended June 30, 2021	$	130,945	$	159	$	130,786
Consumer		$	70,998	$	-	$	70,998
Merchant			68,659		399		68,260
Other			5,041		-		5,041
	Total for the year ended June 30, 2020	$	144,698	$	399	$	144,299

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 reflect lease charges 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.

21.Operating segments (continued)

Operating segments (continued)

The reconciliation of the reportable segments’ measures of profit or loss to income before income taxes for the years ended June 30, 2022, 2021 and 2020, respectively, is as follows:

			2022		2021		2020
Reportable segments measure of profit or loss			$	(10,424)	$	(31,949)	$	(20,828)
	Operating loss: Corporate/Eliminations			(18,241)		(13,428)		(8,773)
	Lease adjustments			(3,955)		(4,148)		(3,664)
	Depreciation and amortization			(7,575)		(4,347)		(4,647)
	Impairment loss			-		-		(6,336)
	Gain related to fair value adjustment to currency options			3,691		-		-
	Gain on disposal of equity securities			720		-		-
	Loss on disposal of equity-accounted investment (Note 9)			(376)		(13)
	Change in fair value of equity securities (Note 3)			-		49,304		-
	Loss on disposal of equity-accounted investment - Bank Frick (Note 9)			-		(472)
	Gain on disposal of FIHRST (Note 3)			-		-		9,743
	Loss on disposal of DNI interest as an equity method investment (Note 3)			-		-		(1,010)
	Loss on deconsolidation of CPS (Note 3)			-		-		(7,148)
	Termination fee to cancel Bank Frick option			-		-		(17,517)
	Interest income			2,089		2,416		2,805
	Interest expense			(5,829)		(2,982)		(7,641)
		Loss before income taxes	$	(39,900)	$	(5,619)	$	(65,016)

The following tables summarize segment information for the years ended June 30, 2022, 2021 and 2020:

						2022		2021		2020
Reportable segment revenue
	Consumer					$	65,932	$	66,149	$	70,998
	Merchant						155,366		61,478		68,659
	Other						1,695		3,318		5,041
		Total reportable segment revenue					222,993		130,945		144,698
Segment Adjusted EBITDA
	Consumer(1)						(22,232)		(26,303)		(13,989)
	Merchant						11,305		4,728		5,176
	Other						503		(10,374)		(12,015)
		Total Segment Adjusted EBITDA					(10,424)		(31,949)		(20,828)
		Corporate/Eliminations					(18,241)		(13,428)		(8,773)
			Subtotal				(28,665)		(45,377)		(29,601)
				Less: Lease adjustments			3,955		4,148		3,664
				Less: Depreciation and amortization			7,575		4,347		4,647
					Total operating loss		(40,195)		(53,872)		(44,248)
Depreciation and amortization
	Consumer						1,660		3,071		3,220
	Merchant						2,128		795		534
	Other						58		122		502
		Subtotal: Operating segments					3,846		3,988		4,256
		Corporate/Eliminations					3,729		359		391
			Total				7,575		4,347		4,647
Expenditures for long-lived assets
	Consumer						1,712		3,433		2,540
	Merchant						2,811		829		1,193
	Other						35		23		702
		Subtotal: Operating segments					4,558		4,285		4,435
		Corporate/Eliminations					-		-		-
			Total			$	4,558	$	4,285	$	4,435

(1) Consumer Segment Adjusted EBITDA for the year ended June 30, 2022, includes reorganization costs of $5.9 million (refer also Note 1).

21.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.

Long-lived assets based on their geographic location as of June 30, 2022, 2021 and 2020, are presented in the table below:

		Long-lived assets
		2022		2021		2020
South Africa		$	359,725	$	50,754	$	68,521
Liechtenstein - investment in Bank Frick (Note 9)			-		-		29,739
India - investment in MobiKwik (Note 9)			76,297		76,297		26,993
Rest of world			2,811		6,962		9,119
	Total	$	438,833	$	134,013	$	134,372