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Operating Segments
 6 Months Ended
Dec. 31, 2021
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 six months ended December 31, 2021, 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 December 31, 2021 and 2020, is as follows:

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

Reportable Segment

 

 

Inter-segment

 

 

From external customers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer

$

16,639

 

$

-

 

$

16,639

 

Merchant

 

14,102

 

 

23

 

 

14,079

 

Other

 

396

 

 

-

 

 

396

 

 

Total for the three months ended December 31, 2021

$

31,137

 

$

23

 

$

31,114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer

$

16,259

 

$

-

 

$

16,259

 

Merchant

 

15,206

 

 

38

 

 

15,168

 

Other

 

878

 

 

-

 

 

878

 

 

 

Total for the three months ended December 31, 2020

$

32,343

 

$

38

 

$

32,305

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

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

Reportable Segment

 

 

Inter-segment

 

 

From external customers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer

$

33,803

 

$

-

 

$

33,803

 

Merchant

 

31,174

 

 

182

 

 

30,992

 

Other

 

823

 

 

-

 

 

823

 

 

Total for the six months ended December 31, 2021

$

65,800

 

$

182

 

$

65,618

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer

$

31,631

 

$

-

 

$

31,631

 

Merchant

 

33,452

 

 

76

 

 

33,376

 

Other

 

2,434

 

 

-

 

 

2,434

 

 

 

Total for the six months ended December 31, 2020

$

67,517

 

$

76

 

$

67,441

 

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 six months ended December 31, 2021 and 2020, is as follows:

 

 

 

 

 

Three months ended

 

 

Six months ended

 

 

 

 

 

December 31,

 

 

December 31,

 

 

 

 

2021

 

2020

 

2021

 

2020

 

Reportable segments measure of profit or loss

$

(3,633)

 

$

(8,326)

 

$

(11,059)

 

$

(14,557)

 

 

Operating loss: Corporate/Eliminations

 

(4,235)

 

 

(4,743)

 

 

(6,215)

 

 

(7,539)

 

 

Lease adjustments

 

(833)

 

 

(1,062)

 

 

(1,757)

 

 

(1,887)

 

 

Depreciation and amortization

 

(726)

 

 

(1,074)

 

 

(1,621)

 

 

(1,997)

 

 

Change in fair value of equity securities

 

-

 

 

15,128

 

 

-

 

 

15,128

 

 

Unrealized loss related to fair value adjustment to currency options

 

(2,429)

 

 

-

 

 

(2,429)

 

 

-

 

 

Loss on disposal of equity-accounted investment - Bank Frick

 

-

 

 

(13)

 

 

-

 

 

(13)

 

 

Interest income

 

313

 

 

717

 

 

702

 

 

1,328

 

 

Interest expense

 

(765)

 

 

(677)

 

 

(1,581)

 

 

(1,424)

 

 

 

Loss before income taxes

$

(12,308)

 

$

(50)

 

$

(23,960)

 

$

(10,961)

The following tables summarize supplemental segment information for the three and six months ended December 31, 2021 and 2020:

 

 

 

 

 

 

 

 

 

Three months ended

 

Six months ended

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

 

 

 

 

 

 

 

2021

 

2020

 

2021

 

2020

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer

$

16,639

 

$

16,259

 

$

33,803

 

$

31,631

 

 

Merchant

 

14,102

 

 

15,206

 

 

31,174

 

 

33,452

 

 

Other

 

396

 

 

878

 

 

823

 

 

2,434

 

 

 

Total

 

31,137

 

 

32,343

 

 

65,800

 

 

67,517

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer

 

(4,551)

 

 

(5,214)

 

 

(14,005)

 

 

(11,785)

 

 

Merchant

 

795

 

 

1,227

 

 

2,680

 

 

4,198

 

 

Other

 

123

 

 

(4,339)

 

 

266

 

 

(6,970)

 

 

 

Segment Adjusted EBITDA

 

(3,633)

 

 

(8,326)

 

 

(11,059)

 

 

(14,557)

 

 

 

Corporate/Eliminations

 

(4,235)

 

 

(4,743)

 

 

(6,215)

 

 

(7,539)

 

 

 

 

Subtotal

 

(7,868)

 

 

(13,069)

 

 

(17,274)

 

 

(22,096)

 

 

 

 

 

Less: Lease adjustments

 

833

 

 

1,062

 

 

1,757

 

 

1,887

 

 

 

 

 

Less: Depreciation and amortization

 

726

 

 

1,074

 

 

1,621

 

 

1,997

 

 

 

 

 

 

Total operating loss

 

(9,427)

 

 

(15,205)

 

 

(20,652)

 

 

(25,980)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer

 

499

 

 

804

 

 

1,151

 

 

1,477

 

 

Merchant

 

196

 

 

163

 

 

406

 

 

311

 

 

Other

 

15

 

 

19

 

 

30

 

 

40

 

 

 

Subtotal: Operating segments

 

710

 

 

986

 

 

1,587

 

 

1,828

 

 

 

Corporate/Eliminations

 

16

 

 

88

 

 

34

 

 

169

 

 

 

 

Total

 

726

 

 

1,074

 

 

1,621

 

 

1,997

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures for long-lived assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer

 

168

 

 

3,002

 

 

810

 

 

3,244

 

 

Merchant

 

20

 

 

21

 

 

76

 

 

31

 

 

Other

 

1

 

 

-

 

 

1

 

 

23

 

 

 

Subtotal: Operating segments

 

189

 

 

3,023

 

 

887

 

 

3,298

 

 

 

Corporate/Eliminations

 

-

 

 

-

 

 

-

 

 

-

 

 

 

 

Total

$

189

 

$

3,023

 

$

887

 

$

3,298

17.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.