The following discussion should be read in conjunction with our Annual Report on
Form 10-K for the year ended
Forward-looking statements
Some of the statements in this Form 10-Q constitute forward-looking statements.
These statements relate to future events or our future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause
our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed, implied or inferred by these
forward-looking statements. Such factors include, among other things, those
listed under Item 1A.-"Risk Factors" in our Annual Report on Form 10-K for the
year ended
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we do not know whether we can achieve positive future results, levels of activity, performance, or goals. Actual events or results may differ materially. We undertake no obligation to update any of the forward-looking statements after the date of this Form 10-Q to conform those statements to reflect the occurrence of unanticipated events, except as required by applicable law.
You should read this Form 10-Q and the documents that we reference herein and
the documents we have filed as exhibits hereto and thereto and which we have
filed with the
Recent Developments
Adopting a new brand and identity
As we embarked on creating a world class financial technology platform and repositioning ourselves for growth, it became evident we required a new identity that would resonate with our customers and employees. It was important for our new identity to authentically express our commitment to the local communities we serve and our ambition to drive financial inclusion by giving ordinary people and small businesses access to essential financial services.
For thousands of years livestock have been seen as a symbol of security,
community and wealth and protecting one's livestock was central to preserving
the dignity and pride of a community. To ensure the best possible protection, an
enclosure commonly known as a "kraal" in
As Lesaka, we are on a mission to build and protect the financial wellbeing of our communities and our intention is to protect the vulnerable and underserved, by providing widespread access to essential financial services.
Update on our strategic focus areas
In the prior quarter we communicated the following four key pillars, that remain critical to the successful transformation of our company, to becoming a leading South African full-service fintech platform:
?Growing the existing merchant business; ?Returning the consumer business to breakeven; ?Transforming our organization into a world class fintech platform; and ?Strengthening our relationships with key stakeholders.
Focused effort throughout the third quarter to deliver on each of these pillars delivered positive momentum, repositioning the business to capture the long-term growth opportunities across both our merchant and consumer businesses.
Growing the existing Merchant business
On
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There are approximately 1.4 million informal and approximately 700,000 formal
micro, small and medium enterprises ("MSME") in
Mr.
Refer to Note 20 to our unaudited condensed consolidated financial statements for additional information related to the acquisition.
Returning the Consumer business to breakeven
We have made significant progress in returning the Consumer segment to
break-even and are encouraged with the Segment Adjusted EBITDA loss of
The Consumer segment continues to show considerable improvement in performance from a year ago and positive momentum was achieved during the third quarter of fiscal 2022, through focusing on the three levers previously communicated: ?Increasing active EPE account numbers, through driving customer acquisition; ?Improving ARPU, underpinned by increased cross selling; and ?Optimizing the cost structure, in line with a focus on customer centricity.
Progress on driving customer acquisition
We grew our total customer base by approximately 38,300 net active customers of which around 9,700 were EPE lite customers and around 28,600 were EPE customers, ending the quarter with just over 1.1 million active customers. This active account growth is slower than what we had anticipated. We did, however, register 136,000 gross account openings during the quarter, and have initiated a workstream focusing on improving account activation and utilization. This included the introduction of a dedicated call center focused on assisting customers with activating their accounts and proactively resolving any issues they may be facing during the activation process. Additionally, our salesforce is now incentivized on account activations and not account openings.
Utilizing improved data analytics and ongoing market research, we continue to
gain better insights into our customers and their needs, allowing us to develop
effective marketing campaigns and incentives to drive customer growth. A
promotional campaign was launched late
Progress on cross selling
ARPU remains broadly in line with our targeted ARPU range. We had approximately
415,000 active loans at the end of the quarter, representing a 38% penetration
of our active EPE customer base, with a total loan book of
Our funeral insurance product provides an important growth opportunity for our
cross-selling strategy, with penetration levels averaging 18% of the active
account base. Over 5,500 new standalone policies were initiated during the
quarter, growing the total number of active policies to approximately 247,300,
up 3.8% compared with
A delivery of fifty-two ATMs were received during the quarter. These ATMs will provide additional cross-selling opportunities as the year progresses, as they are enabled to include the added functionality of selling value added services, loans and insurance. Their "through the wall" installations allow them to be deployed in locations which are accessible to customers 24/7.
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Progress on cost optimization
In order to optimize the overall cost base and to move the business towards a
sales-focused and client solution driven financial services organization, we
launched Project Spring during the 2022 financial year. Project Spring focused
on the restructuring of our financial services business and the rationalization
of the distribution network. Pursuant to Project Spring, a detailed review of
the distribution network was performed, to identify underperforming branches and
optimize our points of presence, while a significant exercise is underway to
ensure our ATM footprint meets the needs of our customer base. We also embarked
on a retrenchment process pursuant to Section 189A of the South African Labour
Relations Act ("Labour Act"). The Section 189A process requires an employer,
before retrenching, to consult with any person affected by the retrenchment
process for 60 days. We commenced this process on
The Section 189A process, which is now complete, was a difficult and uncertain time for many employees.
Significant progress has been made on optimizing the cash distribution and ATM network. Our large fleet of mobile ATMs and the associated distribution and security costs have been eliminated. Following a review of the ATM placements, over 50% of our ATM network are now positioned in retailers, providing greater footfall and longer operating hours compared to our branches.
We estimate that the aggregate annualized cost saving for Project Spring is over
Transforming our organization into a world class fintech platform
Building a world class fintech platform requires highly talented people, an environment where they can outperform and a clear vision and strategy, where everyone is aligned and understands their role in achieving that vision.
On
The majority of the new senior leadership team has been finalized and have all now commenced their employment contracts. The leadership team has deep and relevant experience to deliver on the mission of the Company, with the necessary governance structures in place.
Further to the
Improving stakeholder engagements
We continue to build our relationship with SASSA, through proactive engagement at a local, provincial and national level, to gain a better understanding of their needs and how we can help and improve the delivery of social grants to over 12 million grant recipients. Good progress has been made in this regard during the quarter.
Investments
There has been no change to the carrying value of our investment in MobiKwik
during this quarter. MobiKwik filed its draft red herring prospectus in
On
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Impact of COVID-19
While we have not experienced significant disruptions thus far from the COVID-19
outbreak, we are unable to accurately predict the impact that COVID-19 will have
due to numerous uncertainties, including the severity of the disease, the
duration of the outbreak, actions that may be taken by governmental authorities,
the impact on our customers and other factors identified in Part I, Item 1A.
"Risk Factors- We are unable to ascertain the full impact the COVID-19 pandemic
will have on our future financial position, operations, cash flows and stock
price" in our Annual Report on Form 10-K for the year ended
Critical Accounting Policies
Our unaudited condensed consolidated financial statements have been prepared in
accordance with
Critical accounting policies are those that reflect significant judgments or
uncertainties and may potentially result in materially different results under
different assumptions and conditions. We have identified the following critical
accounting policies that are described in more detail in our Annual Report on
Form 10-K for the year ended
?Valuation of investment in Cell C; ?Recoverability of equity-accounted investments and other equity securities; ?Business combinations and the recoverability of goodwill; ?Intangible assets acquired through acquisitions; ?Deferred taxation; ?Stock-based compensation; and ?Accounts receivable and allowance for doubtful accounts receivable.
Recent accounting pronouncements adopted
Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of accounting pronouncements adopted, including the dates of adoption and the effects on our unaudited condensed consolidated financial statements.
Recent accounting pronouncements not yet adopted as of
Refer to Note 1 to our unaudited condensed consolidated financial statements for
a full description of recent accounting pronouncements not yet adopted as of
Currency Exchange Rate Information
Actual exchange rates
The actual exchange rates for and at the end of the periods presented were as follows: Table 1 Three months ended Nine months ended Year ended March 31, March 31, June 30, 2022 2021 2022 2021 2021 ZAR : $ average exchange rate 15.2360 14.9650 15.0965 15.8390 15.4146 Highest ZAR : $ rate during period 15.9536 15.4724 16.2968 17.6866 17.6866 Lowest ZAR : $ rate during period 14.4916 14.4689 14.1630 14.4689 13.4327 Rate at end of period 14.5526 14.8278 14.5526 14.8278 14.3010 44
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[[Image Removed: Picture 2]]
Translation exchange rates for financial reporting purposes
We are required to translate our results of operations from ZAR to
Three months ended Nine months ended Year ended Table 2 March 31, March 31, June 30, 2022 2021 2022 2021 2021 Income and expense items:$1 = ZAR 15.6119 14.9575 14.9875 16.1174 15.7162 Balance sheet items:$1 = ZAR 14.5526 14.8278 14.5526 14.8278 14.3010 Results of Operations
The discussion of our consolidated overall results of operations is based on
amounts as reflected in our unaudited condensed consolidated financial
statements which are prepared in accordance with
Our operating segment revenue presented in "-Results of operations by operating segment" represents total revenue per operating segment before intercompany eliminations. A reconciliation between total operating segment revenue and revenue presented in our unaudited condensed consolidated financial statements is included in Note 17 to those statements. Our CODM 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"). We do 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 our 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. A reconciliation of this Segment Adjusted EBITDA to the nearest GAAP measure (net income (loss) before income tax) is included in Note 17 to our unaudited condensed consolidated financial statements. Unless otherwise stated, reference to EBITDA in the discussion below relates to Segment Adjusted EBITDA.
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We analyze our business and operations in terms of three inter-related but independent operating segments: (1) Consumer, (2) Merchant and (3) Other. In addition, corporate and corporate office activities that are impracticable to allocate directly to any of the other operating segments, as well as any inter-segment eliminations, are included in Corporate/Eliminations.
Third quarter of fiscal 2022 compared to third quarter of fiscal 2021
The following factors had a significant impact on our results of operations during the third quarter of fiscal 2022 as compared with the same period in the prior year:
?Higher revenue: Our revenues increased 27% in ZAR primarily due to an increase in hardware sales, an increase in merchant transaction processing fees, and moderate increases in lending and insurance revenues, which was partially offset by lower prepaid airtime sales; ?Lower operating losses: Operating losses decreased, delivering an improvement of 31% in ZAR compared with the prior period primarily due to an increase in revenue, the closure of the loss-making IPG operations and the implementation of various cost reduction initiatives in our Consumer business. During the quarter, we recorded a reorganization charge of$5.9 million related to the retrenchment process we commenced inJanuary 2022 ; and ?Foreign exchange movements: TheU.S. dollar was 4% stronger against the ZAR during the third quarter of fiscal 2022, which impacted our reported results.
Consolidated overall results of operations
This discussion is based on the amounts prepared in accordance with
The following tables show the changes in the items comprising our statements of
operations, both in
Table 3 In United States Dollars Three months ended March 31, 2022 2021 $ '000 $ '000 change Revenue 35,202 28,828 22% Cost of goods sold, IT processing, servicing and support 23,008 23,096 (0%) Selling, general and administration 15,184 18,892 (20%) Depreciation and amortization 463 1,132 (59%) Reorganization costs 5,852 - nm Transaction costs related toConnect Group acquisition 116 - nm Operating loss (9,421) (14,292) (34%) Change in fair value of equity securities - 10,814 nm Gain related to fair value adjustment to currency options 6,120 - nm Loss on disposal of equity-accounted investment 346 - nm Gain on disposal of equity securities 720 - nm Loss on disposal of equity-accounted investment - Bank Frick - 472 nm Interest income 761 606 26% Interest expense 691 744 (7%) Loss before income tax expense (2,857) (4,088) (30%) Income tax expense 470 2,171 (78%) Net loss before earnings from equity-accounted investments (3,327) (6,259) (47%) Earnings from equity-accounted investments - 55 nm Net loss attributable to us (3,327) (6,204) (46%) 46
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Table 4 In South African Rand Three months ended March 31, 2022 2021 ZAR '000 ZAR '000 change Revenue 549,571 431,195 27% Cost of goods sold, IT processing, servicing and support 359,199 345,458 4% Selling, general and administration 237,051 282,577 (16%) Depreciation and amortization 7,228 16,932 (57%) Reorganization costs 91,361 - nm Transaction costs related toConnect Group acquisition 1,811 - nm Operating loss (147,079) (213,772) (31%) Change in fair value of equity securities - 161,750 nm Gain related to fair value adjustment to currency options 95,545 - nm Loss on disposal of equity-accounted investment 5,402 - nm Gain on disposal of equity securities 11,241 - nm Loss on disposal of equity-accounted investment - Bank Frick - 7,060 nm Interest income 11,881 9,064 31% Interest expense 10,788 11,128 (3%) Loss before income tax expense (44,602) (61,146) (27%) Income tax expense 7,338 32,473 (77%) Net loss before earnings from equity-accounted investments (51,940) (93,619) (45%) Earnings from equity-accounted investments - 823 nm Net loss attributable to us (51,940) (92,796) (44%)
The increase in revenue was primarily due to an increase in hardware sales, an increase in merchant transaction processing fees, and moderate increases in lending and insurance revenues, which was partially offset by lower prepaid airtime sales.
The increase in cost of goods sold, IT processing, servicing and support was primarily due to higher costs related to hardware sales and higher expenses related to an increase in merchant transaction processing activities, which was partially offset by the implementation of various cost reduction initiatives in our Consumer business, as well as a lower cost of prepaid airtime.
In ZAR, the decrease in selling, general and administration expense was due to both lower IPG-related expenses incurred following its closure and some benefits from our cost reduction initiatives, which were partially offset by higher employee-related expenses related to the growth in our senior management team, and the year-over-year impact of inflationary increases on employee-related expenses.
Depreciation and amortization decreased primarily due to lower overall depreciation related to tangible assets that were fully depreciated during the last 12 months.
We embarked on a retrenchment process on
Transaction costs related to the
Our operating loss margin for the third quarter of fiscal 2022 and 2021 was (22.9%) and (41.8%), respectively. We discuss the components of operating loss margin under "-Results of operations by operating segment."
The change in fair value of equity securities during the third quarter of fiscal
2021, represents a non-cash fair value adjustment gain related to MobiKwik. We
continue to carry our investment in Cell C at
Gain related to fair value adjustment to currency options represents the net
mark-to-market adjustments to foreign exchange option contracts entered into in
We recorded a gain of
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We recorded a loss of
We recorded a loss of
Interest on surplus cash increased to
Interest expense decreased to
Fiscal 2022 tax expense was
Our effective tax rate for fiscal 2021 was impacted by the tax effect on the change in the fair value of our equity securities, which is at a lower tax rate than the South African statutory rate, the tax charge related to our profitable South African operations, non-deductible expenses, the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities.
Table 5 Three months ended March 31, 2022 2021 $ % $ '000 $ '000 change Bank Frick - 177 nm Share of net income - 177 nm Other - (122) nm Share of net loss - (122) nm Total loss from equity-accounted investments - 55 nm
Results of operations by operating segment
The composition of revenue and the contributions of our business activities to operating (loss) income are illustrated below:
Table 6 In United States Dollars Three months ended March 31, 2022 % of 2021 % of Operating Segment $ '000 total $ '000 total % change Consolidated revenue: Consumer 16,429 47% 16,236 56% 1% Merchant 18,478 52% 12,171 42% 52% Other 397 1% 421 1% (6%) Subtotal: Operating segments 35,304 100% 28,828 99% 22% Corporate/Eliminations (102) - - 1% nm Total consolidated revenue 35,202 100% 28,828 100% 22% Segment Adjusted EBITDA: Consumer (6,866) 85% (7,610) 63% (10%) Merchant 1,271 (16%) 273 (2%) 366% Other 87 (1%) (3,315) 27% nm Total Segment Adjusted EBITDA (5,508) 68% (10,652) 88% (48%) Corporate/eliminations (2,560) 32% (1,404) 12% 82% Subtotal (8,068) 100% (12,056) 100% (33%) Less: Lease adjustments 890 1,104 Less: Depreciation and amortization 463 1,132 Total consolidated operating loss (9,421) (14,292) 48
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Table 7 In South African Rand Three months ended March 31, 2022 % of 2021 % of Operating Segment ZAR '000 total ZAR '000 total % change Consolidated revenue: Consumer 256,488 47% 242,850 56% 6% Merchant 288,477 52% 182,048 42% 58% Other 6,198 1% 6,297 1% (2%) Subtotal: Operating segments 551,163 100% 431,195 99% 28% Corporate/Eliminations (1,592) - - 1% nm Total consolidated revenue 549,571 100% 431,195 100% 27% Segment Adjusted EBITDA: Consumer (107,191) 85% (113,827) 63% (6%) Merchant 19,843 (16%) 4,083 (2%) 386% Other 1,358 (1%) (49,584) 27% nm Total Segment Adjusted EBITDA (85,990) 68% (159,328) 88% (46%) Corporate/eliminations (39,966) 32% (21,000) 12% 90% Subtotal (125,956) 100% (180,328) 100% (30%) Less: Lease adjustments 13,895 16,513 Less: Depreciation and amortization 7,228 16,932 Total consolidated operating loss (147,079) (213,773)
Consumer
Segment revenue increased primarily due to higher lending and insurance revenues
and moderately higher account holder fees. We embarked on a retrenchment process
during the third quarter of fiscal 2022 and recorded an expense of
Our EBITDA loss margin (calculated as EBITDA loss divided by revenue) for the third quarter of fiscal 2022 and 2021 was (41.8%) and (46.9%), respectively.
The table below presents EBITDA for our Consumer operating segment and illustrates EBITDA for the third quarter of fiscal 2022 including and excluding the reorganization costs: Table 8 In South African Rand Three months ended March 31, 2022 2021 Operating Segment ZAR '000 ZAR '000 % change EBITDA: Consumer (107,191) (113,827) (6%) Reorganization costs 91,361 - nm Consumer excluding reorganization costs (15,830) (113,827) (86%) EBITDA margin: Consumer (42%) (47%) Consumer excluding reorganization costs (6%) (47%)
Merchant
Segment revenue increased due to an increase in hardware sales and processing fees, which was partially offset by fewer prepaid airtime sales. The increase in segment EBITDA is primarily due to the increase in hardware sales.
Our EBITDA margin for the third quarter of fiscal 2022 and 2021 was 6.9% and 2.2%, respectively.
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Other
Other includes the activities of IPG in fiscal 2021 and our other business
outside
Segment revenue decreased due to lower revenue following the closure of IPG in fiscal 2021. We recorded an EBITDA contribution during the third quarter of fiscal 2022 following the closure of our loss-making activities performed through IPG.
Our EBITDA (loss) margin for the Other segment was 21.9% and (787.4%) during the third quarter of fiscal 2022 and 2021, respectively.
Corporate/Eliminations
Our corporate expenses generally include acquisition-related intangible asset amortization; expenses incurred related to corporate actions; expenditures related to compliance with the Sarbanes-Oxley Act of 2002; non-employee directors' fees; certain employee and executive bonuses; stock-based compensation; legal fees; audit fees; directors and officer's insurance premiums; elimination entries; and from fiscal 2022 our group CEO's compensation.
Our corporate expenses for fiscal 2022 increased compared with the prior period
due to higher employee costs, an increase in director and officer's insurance
premiums, and higher stock-based compensation charges. Fiscal 2021 includes an
unrealized foreign exchange gain of
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Year to date fiscal 2022 compared to year to date fiscal 2021
The following factors had a significant impact on our results of operations during the year to date fiscal 2022 as compared with the same period in the prior year:
?Lower revenue: Our revenues decreased 3% in ZAR, primarily due to lower prepaid airtime sales, which was partially offset by increase in hardware sales, an increase in merchant transaction processing fees, and moderate increases in lending and insurance revenues; ?Lower operating losses: Operating losses decreased, delivering an improvement of 31% in ZAR compared with the prior period primarily due to the closure of the loss-making IPG operations and the implementation of various cost reduction initiatives in our Consumer business. During the year to date fiscal 2022, we recorded a reorganization charge of$5.9 million related to the retrenchment process we commenced inJanuary 2022 ; ?Significant transaction costs: We expensed$1.8 million of transaction costs related to theConnect Group acquisition; and ?Foreign exchange movements: TheU.S. dollar was 4% weaker against the ZAR during the year to date fiscal 2022, which impacted our reported results.
Consolidated overall results of operations
This discussion is based on the amounts prepared in accordance with
The following tables show the changes in the items comprising our statements of operations, both inU.S. dollars and in ZAR: Table 9 In United States Dollars Nine months ended March 31, 2022 2021 $ '000 $ '000 change Revenue 100,820 96,269 5% Cost of goods sold, IT processing, servicing and support 67,795 73,895 (8%) Selling, general and administration 53,372 59,517 (10%) Depreciation and amortization 2,084 3,129 (33%) Reorganization costs 5,852 - nm Transaction costs related toConnect Group acquisition 1,790 - nm Operating loss (30,073) (40,272) (25%) Change in fair value of equity securities - 25,942 nm Gain related to fair value adjustment to currency options 3,691 - nm Loss on disposal of equity-accounted investment 346 13 2,562% Gain on disposal of equity securities 720 - nm Loss on disposal of equity-accounted investment - Bank Frick - 472 nm Interest income 1,463 1,934 (24%) Interest expense 2,272 2,168 5% Loss before income tax expense (26,817) (15,049) 78% Income tax expense 754 4,549 (83%) Net loss before loss from equity-accounted investments (27,571) (19,598) 41% Loss from equity-accounted investments (1,156) (20,098) (94%) Net loss attributable to us (28,727) (39,696) (28%) 51
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Table 10 In South African Rand Nine months ended March 31, 2022 2021 ZAR '000 ZAR '000 change Revenue 1,511,040 1,551,606 (3%) Cost of goods sold, IT processing, servicing and support 1,016,078 1,190,996 (15%) Selling, general and administration 799,912 959,260 (17%) Depreciation and amortization 31,233 50,431 (38%) Reorganization costs 87,706 - nm Transaction costs related toConnect Group acquisition 26,828 - nm Operating loss (450,717) (649,081) (31%) Change in fair value of equity securities - 418,118 nm Gain related to fair value adjustment to currency options 55,319 - nm
Loss on disposal of equity-accounted investment 5,186 210 2,370% Gain on disposal of equity securities
10,791 - nm Loss on disposal of equity-accounted investment - Bank Frick - 7,607 nm Interest income 21,927 31,171 (30%) Interest expense 34,052 34,943 (3%) Loss before income tax expense (401,918) (242,552) 66% Income tax expense 11,301 73,318 (85%) Net loss before loss from equity-accounted investments (413,219) (315,870) 31% Loss from equity-accounted investments (17,326) (323,928) (95%) Net loss attributable to us (430,545) (639,798) (33%)
The decrease in revenue was primarily due to lower prepaid airtime sales, which was partially offset by increase in hardware sales, an increase in merchant transaction processing fees, and moderate increases in lending and insurance revenues.
The decrease in cost of goods sold, IT processing, servicing and support was primarily due to the implementation of various cost reduction initiatives in our Consumer business, lower cost of prepaid airtime sales, which was partially offset by an increase in the cost of hardware sales, higher costs related to transaction fees and an increase in insurance-related claims experience.
In ZAR, the decrease in selling, general and administration expenses was primarily due to lower IPG-related expenses incurred following its closure and some benefits from our cost reduction initiatives, which were partially offset by higher employee-related expenses related to the growth in our senior management team, and the year-over-year impact of inflationary increases on employee-related expenses.
Depreciation and amortization decreased primarily due to lower overall depreciation related to tangible assets that were fully depreciated during the last twelve months.
Transaction costs related to
Our operating loss margin for the year to date fiscal 2022 and 2021 was (25.1%) and (35.5%), respectively. We discuss the components of operating loss margin under "-Results of operations by operating segment."
The change in fair value of equity securities during the year to date fiscal
2021, represents a non-cash fair value adjustment gain related to MobiKwik. We
continue to carry our investment in Cell C at
Gain related to fair value adjustment to currency options represents the
realized gain related to foreign exchange option contracts entered into in
We recorded a gain of
We recorded a loss of
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We recorded a loss of
Interest on surplus cash decreased to
Interest expense increased to
Fiscal 2022 tax expense was
Our effective tax rate for fiscal 2021 was impacted by the tax effect on the change in the fair value of our equity securities, which is at a lower tax rate than the South African statutory rate, the tax charge related to our profitable South African operations, non-deductible expenses, the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities, which was partially offset by the reversal of the deferred tax liability related to one of our equity-accounted investments following its impairment.
Table 11 Nine months ended March 31, 2022 2021 $ % $ '000 $ '000 change Finbond (1,156) (20,267) (94%) Share of net loss (1,156) (2,617) (56%) Impairment - (17,650) nm Bank Frick - 1,156 nm Share of net income - 1,156 nm Other - (987) nm Share of net loss - (439) nm Impairment - (548) nm (1,156) (20,098) (94%) 53
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Results of operations by operating segment
The composition of revenue and the contributions of our business activities to operating (loss) income are illustrated below:
Table 12 In United States Dollars Nine months ended March 31, 2022 % of 2021 % of Operating Segment $ '000 total $ '000 total % change Consolidated revenue: Consumer 50,232 50% 47,867 50% 5% Merchant 49,652 49% 45,623 47% 9% Other 1,220 1% 2,855 3% (57%) Subtotal: Operating segments 101,104 100% 96,345 100% 5% Corporate/Eliminations (284) - (76) - 274% Total consolidated revenue 100,820 100% 96,269 100% 5% Segment Adjusted EBITDA: Consumer (20,871) 82% (19,395) 57% 8% Merchant 3,951 (16%) 4,471 (13%) (12%) Other 353 (1%) (10,285) 30% nm Total Segment Adjusted EBITDA (16,567) 65% (25,209) 74% (34%) Corporate/eliminations (8,775) 35% (8,943) 26% (2%) Subtotal (25,342) 100% (34,152) 100% (26%) Less: Lease adjustments 2,647 2,991 Less: Depreciation and amortization 2,084 3,129 Total consolidated operating loss (30,073) (40,272) 54
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Table 13 In South African Rand Nine months ended March 31, 2022 % of 2021 % of Operating Segment ZAR '000 total ZAR '000 total % change Consolidated revenue: Consumer 752,852 50% 771,492 50% (2%) Merchant 744,159 49% 735,324 47% 1% Other 18,285 1% 46,015 3% (60%) Subtotal: Operating segments 1,515,296 100% 1,552,831 100% (2%) Corporate/Eliminations (4,256) - (1,225) - 247% Total consolidated revenue 1,511,040 100% 1,551,606 100% (3%) Segment Adjusted EBITDA: Consumer (312,804) 82% (312,597) 57% 0% Merchant 59,216 (16%) 72,060 (13%) (18%) Other 5,291 (1%) (165,768) 30% nm Total Segment Adjusted EBITDA (248,297) 65% (406,305) 74% (39%) Corporate/eliminations (131,515) 35% (144,138) 26% (9%) Subtotal (379,812) 100% (550,443) 100% (31%) Less: Lease adjustments 39,672 48,207 Less: Depreciation and amortization 31,233 50,431 Total consolidated operating loss (450,717) (649,081)
Consumer
The underlying decrease in revenue was primarily due to lower processing fees,
partially offset by higher insurance and lending revenue and account holder
fees. We embarked on a retrenchment process during the third quarter of fiscal
2022 and recorded an expense of
Our EBITDA loss margin for the year to date fiscal 2022 and 2021 was (41.5%) and (40.5%), respectively.
Merchant
Segment revenue increased due to an increase in hardware sales and processing fees, which was partially offset by fewer prepaid airtime sales. The decrease in segment EBITDA is primarily due to higher costs related to transaction fees and higher employee-related expenses.
Our EBITDA margin for the year to date fiscal 2022 and 2021 was 8.0% and 9.8%, respectively.
Other
Segment revenue decreased due to lower revenue following the closure of IPG in fiscal 2021. We recorded an EBITDA contribution during the year to date fiscal 2022 following the closure of our loss-making activities performed through IPG.
Our EBITDA (loss) margin for the Other segment was 28.9% and (360.2%) during the year to date fiscal 2022 and 2021, respectively.
Corporate/Eliminations
Our corporate expenses for fiscal 2022 decreased compared with fiscal 2021 due
to higher consulting fees incurred in fiscal 2021 and the inclusion of an
allowance on doubtful loans receivable from equity-accounted investments of
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Presentation of quarterly revenue and Segment Adjusted EBITDA by segment for fiscal 2021 and 2020
During the third quarter of fiscal 2022, our chief operating decision maker
changed our operating and internal reporting structures following the
establishment of a new management team and our decision to focus primarily on
the South African market. We have restated previously reported segment
information. The tables below present quarterly revenue and EBITDA generated by
our three reportable segments for fiscal 2021 and 2020, and reconciliations to
consolidated revenue and operating (loss) income, as well as the
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