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Operating Segments

3 Months Ended

Sep. 30, 2020

17.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 entity, 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 months ended September 30, 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 and share the Company’s assets.

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
			Reportable Segment			Inter-segment		From external customers

Processing			$	24,483	$	988	$	23,495
Financial services				8,265		745		7,520
Technology				6,211		113		6,098
	Total for the three months ended September 30, 2020		$	38,959	$	1,846	$	37,113

Processing			$	30,017	$	2,202	$	27,815
Financial services				14,168		953		13,215
Technology				7,209		301		6,908
		Total for the three months ended September 30, 2019	$	51,394	$	3,456	$	47,938

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.

The reconciliation of the reportable segments measures of profit or loss to loss before income tax (benefit) expense for the three months ended September 30, 2020 and 2019, is as follows:

				Three months ended
				September 30,
			2020		2019

Reportable segments measure of profit or loss			$	(7,898)	$	(4,015)
	Operating income: Corporate/Eliminations			(2,877)		(2,421)
	Interest income			611		363
	Interest expense			(747)		(1,347)
		Loss before income tax (benefit) expense	$	(10,911)	$	(7,420)

17.Operating segments (continued)

Operating segments (continued)

The following tables summarize segment information that is prepared in accordance with GAAP for the three months ended September 30, 2020 and 2019:

					Three months ended
					September 30,
					2020		2019
Revenues
	Processing			$	24,483	$	30,017
		IPG			1,209		793
		All others			23,274		29,224
	Financial services				8,265		14,168
	Technology				6,211		7,209
		Total			38,959		51,394

Operating (loss) income
	Processing				(7,301)		(5,505)
		IPG			(2,772)		(1,973)
		All others			(4,529)		(3,532)
	Financial services				(2,372)		345
	Technology				1,775		1,145
		Subtotal: Operating segments			(7,898)		(4,015)
		Corporate/Eliminations			(2,877)		(2,421)
			Total		(10,775)		(6,436)

Depreciation and amortization
	Processing				704		823
	Financial services				136		218
	Technology				2		166
		Subtotal: Operating segments			842		1,207
		Corporate/Eliminations			81		117
			Total		923		1,324

Expenditures for long-lived assets
	Processing				246		2,068
	Financial services				28		79
	Technology				1		2
		Subtotal: Operating segments			275		2,149
		Corporate/Eliminations			-		-
			Total	$	275	$	2,149

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.