What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2021-02-04 · 215 added, 191 removed, 355 unchanged (53% of the section changed)

13 unchanged sentences

Impact of COVID-19

The COVID-19 pandemic did not impact our South African operations as severely during the three and six months ended December 31, 2020, compared to the last four months of the year ended June 30, 2020.

However, on December 28, 2020, the country moved back to Level 3 restrictions which remain in place at the date of this report.

The COVID-19 pandemic did not impact our South African operations as severely during the three and nine months ended March 31, 2021, compared to the last four months of the year ended June 30, 2020.

South Africa has been at an adjusted Level 1 since March 1, 2021.

On December 28, 2020, the country moved back to Level 3 restrictions which remained in place through to February 28, 2021.

South Africa operates with a five-level COVID-19 alert system, with Level 1 being the least restrictive and Level 5 being the most restrictive.

The country went into lockdown (Level 5) towards the end of March 2020 and gradually eased restrictions for the remainder of the 2020 calendar year (to Level 4 from May 1, to Level 3 from June 1, to Level 2 from August 18 and to Level 1 from September 21).

The increase at the end of December 2020 back to Level 3 was in response to a second wave of infections, which has been more severe than the first wave.

While all our businesses continue to operate, we have increased preventive measures and it is unclear to what extent business activity levels will be affected.

We have already seen an increase in claims in our life insurance business, which we believe is linked to the second wave and there is a risk of increased credit losses in our micro lending business as a result of increased mortality rates.

Over the course of the pandemic to date, it is estimated that 2.2 million jobs have been lost in South Africa.

The increase at the end of December 2020 back to Level 3 was in response to a second wave of infections, which was more severe than the first wave.

The South Africa government commenced its vaccination program in early calendar 2021, with a stated goal of vaccinating 67% of the South African population by the end of the calendar year.

With the winter months approaching, there are concerns over the potential for a third wave, particularly as there have been several delays in the vaccination program to date.

Business and operations

During the second quarter of fiscal 2021, our operations largely operated as normal.

During the third quarter of fiscal 2021, our operations largely operated as normal.

Most of the impact of the pandemic on our operations resulted from the indirect effect of lower economic activity in the South African economy.

Our loan business has been able to originate loans normally and we have not seen any deterioration in collection levels over the period.

Our insurance business has seen a higher level of benefit claims during the six months ended December 31, 2020, with a marked increase in December, which appears to be directly linked to the second wave of the pandemic.

Our insurance business has seen a higher level of benefit claims during the nine months ended March 31, 2021, with marked increases between December 2020 and February 2021, which appear to be directly linked to the second wave of the pandemic.

We continue to incur direct expenditure on the purchase of sanitizers, masks and gloves for our employees and for the use of customers in our branches, but this is not significant in the context of our cost base.

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We continue to provide the necessary protective equipment and sanitization facilities for those employees that operate within our offices and operating locations.

Regrettably, three of our employees passed away during the second quarter of fiscal 2021 due to COVID-19.

Cash resources and liquidity

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Financial position and impairments

Except for the impact on Finbond’s business, we do not believe that the pandemic has significantly impacted the carrying value of long-lived assets and equity method investments to date.

Except for the impact on Finbond’s business in the first quarter of fiscal 2021, we do not believe that the pandemic has significantly impacted the carrying value of our long-lived assets and equity method investments to date.

Control environment

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Financial Services Activities in South Africa

We continue to focus on transitioning our South African financial inclusion activities towards a business-to-consumer, or B2C, model.

We continue to focus our South African financial inclusion activities on a business-to-consumer, or B2C, model.

We believe our EPE bank account, known in the communities it serves as ‘the green card’, has a strong brand position in our target market and benefits from significant loyalty.

We have been working on enhancing its presence through localized marketing which, when combined with some of the challenges of other service providers into this market, we expect to result in a return to growing customer numbers.

The first signs of progress in this regard were evident in the most recent quarter, as we achieved gross customer additions of approximately 62,000.

Net additions were approximately 44,000 customers though not all of these are income generating as yet due to delays in processing the transfer of grant income.

Our focus is now on accelerating the rate of customer acquisition to build critical mass.

These customers, many of whom are returning customers, will then have access to our suite of associated financial services products, which we expect to lift activity levels across many of our operations.

The customer additions for the quarter have been disappointing and below our expectations, primarily as we have not yet launched our primary marketing initiatives.

This has been delayed due to some internal management changes as well as an intention to sensitize key stakeholders to these initiatives.

Gross customer additions for the quarter were approximately 52,000 compared to the 62,000 of the previous quarter, while net additions amounted to 27,000 customers compared to the 44,000 of the previous quarter.

We continue to see delays in the transfer of income for a significant portion of these customers which means we are not seeing the full benefit of this customer growth in our financial performance.

To date only approximately 50% of these gross customer additions have become active and commenced transacting on their account.

We expect to be in a position to launch our new initiatives during the course of the fourth quarter and to then accelerate the growth in the customer base.

Processing Activities in South Africa

Our processing activities in South Africa are focused around our ATM network, which largely services a consumer base, and our transaction processing for businesses, anchored around our EasyPay offering.

As articulated in respect of our revised strategy, we aim to grow this business to business, or B2B, operation through the servicing of small and micro enterprises.

We have seen ongoing increases in the utilization of our ATM infrastructure over the last quarter, while our B2B operations have also performed in line with expectations.

Planning around the expansion of the processing business into the small and micro enterprises space is ongoing.

As articulated in respect of our revised strategy, we aim to grow our business to business, or B2B, operations through the servicing of small and micro enterprises.

We continue to see a steady growth in the number of customers utilizing our ATM infrastructure over the last quarter, though transaction volumes were lower than the previous quarter.

Our B2B operations performed broadly in line with expectations with volumes lower than the previous quarter in line with expected seasonal trends.

Opportunities related to the expansion of the processing business into the small and micro enterprises space have been identified and are being progressed.

International Activities

Bank Frick – Bank Frick exceeded expectations and performed well during the quarter.

While they have increased provisioning against some of their loan portfolio, the performance of the bank in other areas has been strong.

Nevertheless, with Europe in the grip of a second wave of infections, the performance of the bank is likely to face headwinds in the second half of fiscal 2021.

The recent performance of cryptocurrencies has assisted the bank’s performance as it benefits from higher transaction volumes in those markets.

In line with our new strategic direction, on February 3, 2021, we entered into a share sales agreement with the Frick Family Foundation, or KFS, to sell our entire interest, or 35%, in Bank Frick to KFS for $30 million.

Refer to Note 23 for additional information related to this transaction.

Carbon – Carbon continues to see the normalization of their lending business as the effects of the pandemic and the associated restrictions in Nigeria have reduced.

While revenue remains below the levels seen before the start of the pandemic, this is primarily due to lower disbursements on tighter lending criteria.

Disbursements are recovering, but the focus is on improved credit quality.

They are also benefiting from increased funding in the Nigerian market, resulting in lower cost of funding and less currency risk.

This should further be aided by the recent award of a micro-finance banking license, which will facilitate deposit taking that should further lower their cost of funding.

India – MobiKwik reported a strong sequential recovery during the December quarter driven by a confluence of strong festive spending and a robust secular adoption of electronic transactions following the impacts of Covid-19.

They continue to manage costs effectively and held the cash EBITDA loss under $1.0 million for the quarter once again.

We expect them to return towards breakeven as we proceed through calendar year 2021.

During the quarter, MobiKwik also raised approximately $7 million from new external shareholders at a valuation of approximately $375 million.

India – MobiKwik continues to experience strong sequential monthly revenue growth, assisted by rapid growth in users of their Buy Now Pay Later product.

The number of reported COVID-19 cases in India has increased significantly since the end of March 2021.

It is difficult to accurately predict the impact of this on MobiKwik’s business.

However, its management expects the impact to be somewhat mitigated by less stringent lockdowns in India compared with calendar 2020 and the availability of COVID-19 vaccines.

During the quarter, MobiKwik raised a further $7.2 million from new external shareholders at a valuation of approximately $480 million.

MobiKwik plans to use these funds to pursue an initial public offering.

We have increased the carrying value of our investment in MobiKwik following this transaction, refer to Note 6 to our unaudited condensed consolidated financial statements for the methodology and inputs used in the fair value calculation for MobiKwik.

Disposal of Bank Frick

Bank Frick – In line with our new strategic direction, on February 3, 2021, we entered into a share sale agreement with the Frick Family Foundation, or KFS, to sell our entire interest, or 35%, in Bank Frick to KFS for $30 million.

Refer to Note 6 for additional information related to this transaction.

Wind-down of IPG and status of Cell C recapitalization

IPG – The process to close our IPG business is well-advanced, with most employees leaving the organization during the second quarter of fiscal 2021.

Most processing activities also ceased and we expect to end all activities early in the third quarter of fiscal 2021 and should be largely complete with closure, from a cost perspective, by the end of fiscal 2021.

Cell C – We continued to carry the value of our Cell C investment at $0 (zero) as of December 31, 2020.

Cell C is focused on its recapitalization and its operational reorganization given its revised commercial model.

While it remains in default on its various lending arrangements, Cell C and its lenders are working constructively and continue to make good progress towards a recapitalization intended to ensure its long-term sustainability and allow Cell C to focus on its core business.

Succession plan for CEO

There were no substantial developments during the second quarter of fiscal 2021.

Smith assumed the role of interim CEO on October 1, 2020, following the departure of Mr.

Kotzé on September 30, 2020.

Smith will serve in this role until our board of directors finalizes the appointment of a permanent CEO.

In order to ensure a smooth transition, Mr.

Most processing activities also ceased during the second quarter of fiscal 2021 and we ended all activities early in the third quarter of fiscal 2021.

We should be largely complete with closure, from a cost perspective, by the end of fiscal 2021.

Cell C – We continued to carry the value of our Cell C investment at $0 (zero) as of March 31, 2021.

Cell C remains focused on its recapitalization and implementing various initiatives to improve its operational performance.

While it remains in default on its various lending arrangements, Cell C and its lenders continue to work constructively and are making steady progress towards its recapitalization.

Leadership changes

On May 1, 2021, Mr.

Lincoln Mali joined us as CEO of Net1 Southern Africa, a new position within our organization.

On March 15, 2021, Mr.

Nunthakumarin Pillay resigned his position as Managing Director:

Southern Africa after 21 years of service to our company in order to pursue other opportunities.

Pillay’s last day of employment was April 30, 2021.

We have reorganized certain of our internal business reporting lines following the resignation of Mr.

Pillay, but this is not expected to impact our business or processes significantly.

We continue the search for a Group CEO but there were no substantial developments regarding this process during the third quarter of fiscal 2021.

Smith continues in his role of interim Group CEO and will serve in this role until our board of directors finalizes the appointment of a permanent Group CEO.

In order to ensure a smooth transition, our former Group CEO, Mr.

Kotzé, agreed to provide consulting services to us through May 31, 2021.

1 unchanged sentence

In November 2020, we identified an error with respect to the recognition of certain revenue and related cost of goods sold, IT processing, servicing and support during our assessment and systems development of new products.

The error did not impact our operating income (loss), net income, balance sheet or cash flows.

We determined that the error impacted reported results for the period from July 1, 2018 to November 30, 2020.

The error impacted our reported results and we have restated our unaudited condensed consolidated statement of operations and certain note presentation for the three and six months ended December 31, 2019, refer to Note 1 to our unaudited condensed consolidated financial statements for additional information.

The error did not impact our operating loss, net loss, balance sheet or cash flows.

We determined that the error impacted our results for the period from July 1, 2018 to November 30, 2020.

The error impacted our reported results and we have restated our unaudited condensed consolidated statement of operations and certain note presentation for the three and nine months ended March 31, 2020, refer to Note 1 to our unaudited condensed consolidated financial statements for additional information.

The table presents the unaudited impact of the restatement on our revenue and related cost of goods sold, IT processing, servicing and support for the first quarter of fiscal 2021, fiscal 2020 and 2019, including each fiscal quarter within those fiscal years:

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Recent accounting pronouncements adopted

We did not adopt any new accounting pronouncement during the second quarter of fiscal 2021.

Recent accounting pronouncements not yet adopted as of December 31, 2020

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of December 31, 2020, including the expected dates of adoption and effects on our financial condition, results of operations and cash flows.

We did not adopt any new accounting pronouncement during the third quarter of fiscal 2021.

Recent accounting pronouncements not yet adopted as of March 31, 2021

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of March 31, 2021, including the expected dates of adoption and effects on our financial condition, results of operations and cash flows.

Currency Exchange Rate Information

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Three months ended

Six months ended

Nine months ended

$ average exchange rate

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dollars on a monthly basis.

Thus, the average rates used to translate this data for the three months ended December 31, 2020 and 2019, vary slightly from the averages shown in the table above.

Thus, the average rates used to translate this data for the three months ended March 31, 2021 and 2020, vary slightly from the averages shown in the table above.

The translation rates we use in presenting our results of operations are the rates shown in the following table:

Three months ended

Six months ended

Nine months ended

Income and expense items:

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We disposed of our Korean operation in the third quarter of fiscal 2020 and therefore it has been presented as a discontinued operation for fiscal 2020.

We disposed of FIHRST during the second quarter of fiscal 2020, and deconsolidated CPS in the fourth quarter of fiscal 2020, and therefore their contributions to our reported results are not included in the three and six months ended December 31, 2020.

We disposed of FIHRST during the third quarter of fiscal 2020, and deconsolidated CPS in the fourth quarter of fiscal 2020, and therefore their contributions to our reported results are not included in the three and nine months ended March 31, 2021.

We analyze our business and operations in terms of three inter-related but independent operating segments:

(1) Processing, (2) Financial services and (3) Technology.

In addition, corporate and corporate office activities that are impracticable to ascribe directly to any of the other operating segments, as well as any inter-segment eliminations, are included in Corporate/Eliminations.

Second quarter of fiscal 2021 compared to second quarter of fiscal 2020

The following factors had a significant impact on our results of operations during the second quarter of fiscal 2021 as compared with the same period in the prior year:

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 2021 compared to third quarter of fiscal 2020

The following factors had a significant impact on our results of operations during the third quarter of fiscal 2021 as compared with the same period in the prior year:

Lower revenue:

Our revenues decreased 12% in ZAR primarily due to fewer prepaid airtime sales and lower account fee revenue;

Our revenues decreased 19% in ZAR primarily due to fewer prepaid airtime and hardware sales and lower account fee revenue;

Ongoing operating losses:

Operating costs are largely in line with the prior period in ZAR due to the largely fixed cost nature of the costs base.

As a result, we continue to experience operating losses as a result of depressed revenues;

Adverse foreign exchange movements:

dollar was 6% stronger against the ZAR during the second quarter of fiscal 2021, which adversely impacted our reported results.

Operating costs are largely in line with the prior period in ZAR due to the largely fixed cost nature of the cost base.

As a result, we continue to experience operating losses because of depressed revenues;

Non-cash increase in fair value of MobiKwik:

We recorded a non-cash fair value gain during the third quarter of fiscal 2021 of $10.8 million related to the change in fair value of MobiKwik;

Foreign exchange movements:

dollar was 3% weaker against the ZAR during the third quarter of fiscal 2021, which impacted our reported results.

Consolidated overall results of operations

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In United States Dollars

Three months ended December 31,

Three months ended March 31,

(as restated) (B)

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Depreciation and amortization

Impairment loss

Operating loss

Change in fair value of equity securities

Gain on disposal of FIHRST

Loss on disposal of equity-accounted investment

Loss on disposal of equity-accounted investment - Bank Frick

Interest income

Interest expense

Income (Loss) before income tax (benefit) expense

Loss before income tax expense

Income tax expense

Net loss before (loss) earnings from equity-accounted investments

(Loss) earnings from equity-accounted investments

Net loss before earnings (loss) from equity-accounted investments

Earnings (Loss) from equity-accounted investments

Net loss from continuing operations

Net income from discontinued operations

Gain from disposal of discontinued operations, net of tax

Net (loss) income attributable to us

3 unchanged sentences

In South African Rand

Three months ended December 31,

Three months ended March 31,

(as restated) (B)

2 unchanged sentences

Depreciation and amortization

Impairment loss

Operating loss

Change in fair value of equity securities

Gain on disposal of FIHRST

Loss on disposal of equity-accounted investment

Loss on disposal of equity-accounted investment - Bank Frick

Interest income

Interest expense

Income (Loss) before income tax (benefit) expense

Loss before income tax expense

Income tax expense

Net loss before (loss) earnings from equity-accounted investments

(Loss) earnings from equity-accounted investments

Net loss before earnings (loss) from equity-accounted investments

Earnings (Loss) from equity-accounted investments

Net loss from continuing operations

Net income from discontinued operations

Gain from disposal of discontinued operations, net of tax

Net (loss) income attributable to us

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There was no impact on operating loss as a result of the restatement.

The decrease in revenue was primarily due to fewer prepaid airtime sales and lower account fee revenue.

The decrease in cost of goods sold, IT processing, servicing and support was primarily due to lower cost of prepaid airtime sales, which was partially offset by higher costs related to transaction fees.

In ZAR, the increase in selling, general and administration expense was primarily due to the year-over-year impact of inflationary increases on employee-related expenses and consulting fees.

Depreciation and amortization decreased primarily due to lower overall depreciation related to tangible assets that were fully depreciated during the second quarter of fiscal 2020.

Our operating loss margin for the second quarter of fiscal 2021 and 2020 was (47.1%) and (26.8%), respectively.

The decrease in revenue was primarily due to fewer prepaid airtime and hardware sales and lower account fee revenue.

The decrease in cost of goods sold, IT processing, servicing and support was primarily due to lower cost of prepaid airtime and hardware sales, which was partially offset by higher costs related to transaction fees and an increase in insurance-related claims experience.

In ZAR, the increase in selling, general and administration expense was primarily due to the year-over-year impact of inflationary increases on employee-related expenses and higher consulting fees.

Depreciation and amortization decreased primarily due to lower overall depreciation related to tangible assets that were fully depreciated during the third quarter of fiscal 2021.

During the third quarter of fiscal 2020, we recorded an impairment loss of $5.6 million related to the impairment of a portion of our EasyPay business unit’s allocated goodwill and a $0.7 million impairment loss related to our Maltese e-money license.

Our operating loss margin for the third quarter of fiscal 2021 and 2020 was (49.6%) and (41.1%), 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 second quarter of fiscal 2021 represents a non-cash fair value adjustment gain related to MobiKwik.

There was no change in the fair value of equity securities during the second quarter of fiscal 2020.

The change in fair value of equity securities during the third quarter of fiscal 2021 represents a non-cash fair value gain related to MobiKwik.

There was no change in the fair value of equity securities during the third quarter of fiscal 2020.

We continue to carry our investment in Cell C at $0 (zero).

Refer to Note 6 to our unaudited condensed consolidated financial statements for the methodology and inputs used in the fair value calculation for MobiKwik and Note 5 for the methodology and inputs used in the fair value calculation for Cell C.

We recorded a gain of $9.7 million related to the disposal of FIHRST during the second quarter of fiscal 2020.

Interest on surplus cash decreased to $0.7 million (ZAR 11.1 million) from $1.1 million (ZAR 15.8 million), primarily due to lower rates of interest earned on surplus cash, which was partially offset by higher average daily cash balances following the increase in our cash reserves as a result of the disposal of certain business in fiscal 2020.

Interest expense decreased to $0.7 million (ZAR 10.5 million) from $3.1 million (ZAR 45.7 million), primarily as a result of lower borrowings, a reduction in South African interest rates and lower interest expense as a result of lower utilization of our ATM facilities because we used our cash reserves to fund our ATMs.

We recorded a loss of $0.5 million related to the disposal of Bank Frick during the third quarter of fiscal 2021, refer to Note 6 to our unaudited condensed consolidated financial statements for additional information regarding this transaction.

In ZAR, interest on surplus cash increased slightly to $0.6 million (ZAR 9.1 million) from $0.6 million (ZAR 8.8 million), primarily due to higher average daily cash balances following the increase in our cash reserves as a result of the disposal of certain business in fiscal 2020, which was partially offset by lower rates of interest earned on surplus cash.

Interest expense decreased to $0.7 million (ZAR 11.1 million) from $1.9 million (ZAR 29.0 million), primarily as a result of lower borrowings, a reduction in South African interest rates and lower utilization of our ATM facilities because we used our cash reserves to fund our ATMs.

Fiscal 2021 tax expense was $2.2 million (ZAR 32.5 million) compared to $0.6 million (ZAR 9.8 million) in fiscal 2020.

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.

Our effective tax rate for fiscal 2020 was impacted by 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 South African businesses and non-deductible expenses.

The charge represents the tax expense recorded by our profitable businesses in South Africa.

DNI was sold in the fourth quarter of fiscal 2020 and was accounted for using the equity method during the second quarter of fiscal 2020.

Our effective tax rate for fiscal 2020, was impacted by non-deductible impairment losses, on-going losses incurred by IPG and certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding those net operating losses, non-deductible expenses, including transaction-related expenditure, and tax expense recorded by our profitable businesses in South Africa.

DNI was sold in the fourth quarter of fiscal 2020 and was accounted for using the equity method during the third quarter of fiscal 2020.

Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first quarter and its annual results during our fourth quarter.

The table below presents the relative (loss) earnings from our equity accounted investments:

Three months ended December 31,

Three months ended March 31,

Share of net income

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Share of net loss

Refer to Note 6 to our unaudited condensed consolidated financial statements for additional information related to the impairment of Finbond and our other equity-accounted investments.

Results of operations by operating segment

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In United States Dollars (1)

Three months ended December 31,

Three months ended March 31,

(as restated)

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Total consolidated operating loss

(1) Consolidated revenue-Processing-All others for the six months ended December 31, 2019 has been restated for the error described in Note 1 to the unaudited condensed consolidated financial statements .

(1) Consolidated revenue-Processing-All others for the three months ended March 31, 2020 has been restated for the error described in Note 1 to the unaudited condensed consolidated financial statements .

There was no impact on operating loss as a result of the restatement.

In South African Rand (1)

Three months ended December 31,

Three months ended March 31,

(as restated)

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Total consolidated operating loss

There was no impact on operating loss as a result of the restatement.

Excluding IPG, segment revenue decreased primarily due to fewer prepaid airtime sales and a modest reduction in volume-driven transaction fees.

Excluding IPG, Processing operating loss has been impacted by lower revenue and by an increase in transaction-based costs.

IPG incurred an operating loss but is in the process of being closed down.

Our operating loss margin (calculated as operating (loss) income divided by revenue) for the second quarter of fiscal 2021 and 2020 was (51.9%) and (23.4%), respectively.

Excluding IPG, our operating loss margin for the Processing segment was (29.4%) and (11.9%) during the second quarter of fiscal 2021 and 2020, respectively.

Excluding IPG, segment revenue decreased primarily due to fewer prepaid airtime sales and a reduction in volume-driven transaction fees.

Excluding IPG, Processing’s operating loss has been impacted by lower revenue and by an increase in transaction-based costs.

Our revenue for the three months ended March 31, 2020 was adversely impacted by ZAR 8.2 million ($0.5 million) as a result of the COVID-19 pandemic as we were unable to charge certain cash withdrawal fees to customers as a result of the lockdown during the last few days of March 2020.

Our operating loss for the three months ended March 31, 2020 also includes the impact of the $6.4 million impairment losses.

IPG’s operating loss for the quarter primarily related to the closure of its operations.

Our operating loss margin (calculated as operating (loss) income divided by revenue) for the third quarter of fiscal 2021 and 2020 was (57.7%) and (56.1%), respectively.

Excluding IPG, our operating loss margin for the Processing segment was (39.9%) and (44.1%) during the third quarter of fiscal 2021 and 2020, respectively.

Excluding the impairment losses, our operating loss and operating loss margin for the Processing segment was $6.1 million and (27.4%), respectively, during the third quarter of fiscal 2020.

Financial services

Segment revenue decreased due to lower account fee revenue whilst lending and insurance revenues increased modestly, in ZAR, compared to the prior period.

The reduction in operating loss is primarily due to an improvement of operating margin on certain products offered.

Our operating loss margin for the second quarter of fiscal 2021 and 2020 was (11.0%) and (10.2%), respectively.

Segment revenue was in line with 2020.

Operating income for the second quarter of fiscal 2021 improved compared with fiscal 2020 due to improved margins on various product lines within the segment.

Our operating income margin for the Technology segment was 23.4% and 12.0% during the second quarter of fiscal 2021 and 2020, respectively.

Segment revenue decreased due to lower account fee revenue and a modest reduction in lending revenue, whilst insurance revenues increased compared to the prior period.

The increase in operating loss is primarily due to the lower account fee revenue and the increase in insurance-related claims experienced this quarter attributed to the second wave of the pandemic.

Our operating loss margin for the third quarter of fiscal 2021 and 2020 was (20.7%) and (14.6%), respectively.

Segment revenue decreased significantly due to fewer hardware sales from one product line compared to the prior period, though partially offset by increases in other hardware product lines.

Operating income for the third quarter of fiscal 2021 was directly impacted by the lower revenue compared with fiscal 2020.

Our operating income margin for the Technology segment was 6.5% and 23.4% during the third quarter of fiscal 2021 and 2020, respectively.

Corporate/Eliminations

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and elimination entries.

Our corporate expenses increased primarily due to an allowance on doubtful loans receivable from equity-accounted investments created during the second quarter of fiscal 2021, and higher legal and consulting fees, which were partially offset by lower audit fees.

First half of fiscal 2021 compared to first half of fiscal 2020

The following factors had a significant impact on our results of operations during the first half of fiscal 2021 as compared with the same period in the prior year:

Our corporate expenses for fiscal 2020 includes a $0.7 million impairment loss and net unrealized foreign exchange gains of $1.9 million compared with net unrealized foreign exchange gains of $0.6 million recorded in fiscal 2021.

Year to date of fiscal 2021 compared to year to date of fiscal 2020

The following factors had a significant impact on our results of operations during the year to date of fiscal 2021 as compared with the same period in the prior year:

Lower revenue:

Our revenues decreased 9% in ZAR primarily due to fewer prepaid airtime sales and lower account fee revenue, which was partially offset by higher transaction fees;

Our revenues decreased 19% in ZAR primarily due to fewer prepaid airtime and hardware sales and lower account fee revenue, which was partially offset by higher transaction fees;

Ongoing operating losses:

Operating costs are largely in line with the prior period in ZAR due to the largely fixed cost nature of the costs base.

As a result, we continue to experience operating losses as a result of depressed revenues;

Adverse foreign exchange movements:

dollar was 14% stronger against the ZAR during the first half of fiscal 2021, which adversely impacted our reported results.

As a result, we continue to experience operating losses because of depressed revenues;

Non-cash increase in fair value of MobiKwik:

We recorded a non-cash fair value gain during the year to date of fiscal 2021 of $25.9 million related to the change in fair value of MobiKwik.

Consolidated overall results of operations

3 unchanged sentences

In United States Dollars

Six months ended December 31,

Nine months ended March 31,

(as restated) (B)

2 unchanged sentences

Depreciation and amortization

Impairment loss

Operating loss

1 unchanged sentence

Gain on disposal of FIHRST

Loss on disposal of equity-accounted investment - Bank Frick

Loss on disposal of equity-accounted investment

3 unchanged sentences

Income tax expense

Net loss before (loss) earnings from equity-accounted investments

(Loss) earnings from equity-accounted investments

Net loss before loss from equity-accounted investments

Loss from equity-accounted investments

Net loss from continuing operations

Net income from discontinued operations

Gain from disposal of discontinued operations, net of tax

Net (loss) income attributable to us

3 unchanged sentences

In South African Rand

Six months ended December 31,

Nine months ended March 31,

(as restated) (B)

2 unchanged sentences

Depreciation and amortization

Impairment loss

Operating loss

1 unchanged sentence

Gain on disposal of FIHRST

Loss on disposal of equity-accounted investment - Bank Frick

Loss on disposal of equity-accounted investment

3 unchanged sentences

Income tax expense

Net loss before (loss) earnings from equity-accounted investments

(Loss) earnings from equity-accounted investments

Net loss before loss from equity-accounted investments

Loss from equity-accounted investments

Net loss from continuing operations

Net income from discontinued operations

Gain from disposal of discontinued operations, net of tax

Net (loss) income attributable to us

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There was no impact on operating loss as a result of the restatement.

The decrease in revenue was primarily due to fewer prepaid airtime sales and lower account fee revenue, which was partially offset by higher transaction fees.

In ZAR, the increase in selling, general and administration expense was primarily due to an allowance on doubtful loans receivable from equity-accounted investments created during the second quarter of fiscal 2021 and an increase in consulting fees.

Depreciation and amortization decreased primarily due to lower overall depreciation related to tangible assets that were fully depreciated during the first half of fiscal 2020.

Our operating loss margin for the first half of fiscal 2021 and 2020 was (38.5%) and (19.8%), respectively.

The decrease in revenue was primarily due to fewer prepaid airtime and hardware sales and lower account fee revenue, which was partially offset by higher transaction fees.

The increase in selling, general and administration expense was primarily due to the year-over-year impact of inflationary increases on employee-related expenses, an allowance on doubtful loans receivable from equity-accounted investments created during the second quarter of fiscal 2021 and an increase in consulting fees.

Depreciation and amortization decreased primarily due to lower overall depreciation related to tangible assets that were fully depreciated during the year to date of fiscal 2021.

During the year to date fiscal 2020, we recorded an impairment loss of $5.6 million related to the impairment of a portion of our EasyPay business unit’s allocated goodwill and a $0.7 million impairment loss related to our Maltese e-money license.

Our operating loss margin for the year to date of fiscal 2021 and 2020 was (41.8%) and (25.9%), 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 first half of fiscal 2021 represents a non-cash fair value adjustment gain related to MobiKwik.

There was no change in the fair value of equity securities during the first half of fiscal 2020.

The change in fair value of equity securities during the year to date of fiscal 2021 represents a non-cash fair value gain related to MobiKwik.

There was no change in the fair value of equity securities during the year to date of fiscal 2020.

We continue to carry our investment in Cell C at $0 (zero).

We recorded a gain of $9.7 million related to the disposal of FIHRST during the first half of fiscal 2020.

Interest on surplus cash was $1.3 million (ZAR 21.9 million) compared to $1.4 million (ZAR 20.8 million) in the prior period, due primarily to the higher average daily cash balances following the increase in our cash reserves as a result of the disposal of certain business in fiscal 2020, which was partially offset by lower rates of interest earned on surplus cash.

Interest expense decreased to $1.4 million (ZAR 23.5 million) from $4.5 million (ZAR 64.5 million), primarily as a result of lower borrowings, a reduction in South African interest rates and lower interest expense as a result of lower utilization of our ATM facilities because we used our cash reserves to fund our ATMs.

We recorded a loss of $0.5 million related to the disposal of Bank Frick during the year to date fiscal 2021, refer to Note 6 to our unaudited condensed consolidated financial statements for additional information regarding this transaction.

We recorded a gain of $9.7 million related to the disposal of FIHRST during the year to date of fiscal 2020.

Interest on surplus cash was $1.9 million (ZAR 31.2 million) compared to $2.0 million (ZAR 32.2 million) in the prior period, due primarily to the higher average daily cash balances following the increase in our cash reserves as a result of the disposal of certain business in fiscal 2020, which was more than offset by lower rates of interest earned on surplus cash.

Interest expense decreased to $2.2 million (ZAR 34.9 million) from $6.4 million (ZAR 101.5 million), primarily as a result of lower borrowings, a reduction in South African interest rates and lower utilization of our ATM facilities because we used our cash reserves to fund our ATMs.

Fiscal 2021 tax expense was $4.5 million (ZAR 73.3 million) compared to $2.3 million (ZAR 37.0 million) in fiscal 2020.

The charge represents the tax expense recorded by our profitable businesses in South Africa.

DNI was sold in the fourth quarter of fiscal 2020 and was accounted for using the equity method during the first half of fiscal 2020.

Our effective tax rate for fiscal 2020, was impacted by the tax neutral disposal of FIHRST, non-deductible impairment losses, the on-going losses incurred by IPG and certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding those net operating losses, non-deductible expenses, including transaction-related expenditure, and the tax expense recorded by our profitable businesses, primarily in South Africa.

DNI was sold in the fourth quarter of fiscal 2020 and was accounted for using the equity method during the year to date of fiscal 2020.

Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first quarter and its annual results during our fourth quarter.

The table below presents the relative (loss) earnings from our equity accounted investments:

Six months ended December 31,

Nine months ended March 31,

Share of net income

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In United States Dollars (1)

Six months ended December 31,

Nine months ended March 31,

(as restated)

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Total consolidated operating loss

(1) Consolidated revenue-Processing-All others for the nine months ended March 31, 2020 has been restated for the error described in Note 1 to the unaudited condensed consolidated financial statements .

There was no impact on operating loss as a result of the restatement.

In South African Rand (1)

Three months ended December 31,

Three months ended March 31,

(as restated)

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Total consolidated operating loss

There was no impact on operating loss as a result of the restatement.

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Excluding IPG, Processing operating loss has been impacted by lower revenue and by an increase in transaction-based costs.

Our operating loss for the nine months ended March 31, 2020 also includes the impact of the $6.4 million impairment losses.

IPG incurred an operating loss but is in the process of being closed down.

Our operating loss margin for the first half of fiscal 2021 and 2020 was (41.6%) and (21.3%), respectively.

Excluding IPG, our operating loss margin for the Processing segment was (25.1%) and (12.4%) during the first half of fiscal 2021 and 2020, respectively.

Our operating loss margin for the year to date of fiscal 2021 and 2020 was (46.5%) and (31.5%), respectively.

Excluding IPG, our operating loss margin for the Processing segment was (29.8%) and (21.5%) during the year to date of fiscal 2021 and 2020, respectively.

Excluding the impairment losses, our operating loss and operating loss margin for the Processing segment was $17.4 million and (23.1%), respectively, during the third quarter of fiscal 2020.

Financial services

Segment revenue decreased due to lower account fee revenue, whilst lending revenues were relatively flat, and insurance revenues were moderately higher compared to the prior period.

Segment revenue decreased due to lower account fee revenue and a modest reduction in lending revenue, whilst insurance revenues increased compared to the prior period.

The segment incurred an operating loss compared with fiscal 2020 primarily due to the reduction in account fee revenue as well as higher employee-related costs and an increase in insurance claims experience.

Our operating loss margin for the first half of fiscal 2021 and 2020 was (19.2%) and (3.4%), respectively.

Segment revenue was modestly higher than in fiscal 2020.

Operating income for the first half of fiscal 2021 improved compared with fiscal 2020 due to improved margins on the sale of various product lines within the segment.

Our operating income margin for the Technology segment was 26.4% and 14.3% during the first half of fiscal 2021 and 2020, respectively.

Our operating loss margin for the year to date of fiscal 2021 and 2020 was (19.7%) and (6.8%), respectively.

Segment revenue was lower than in fiscal 2021 due to fewer hardware sales.

Operating income for the year to date of fiscal 2021 improved compared with fiscal 2020 due to improved margins on the sale of various product lines within the segment.

Our operating income margin for the Technology segment was 23.2% and 16.6% during the year to date of fiscal 2021 and 2020, respectively.

Corporate/Eliminations

Our corporate expenses increased primarily due to an allowance on doubtful loans receivable from equity-accounted investments created during the first half of fiscal 2021, and higher legal and consulting fees, which were partially offset by lower audit fees.

Our corporate expenses increased primarily due to an allowance on doubtful loans receivable from equity-accounted investments created during the year to date of fiscal 2021, and higher legal and consulting fees, which were partially offset by lower audit fees and an unrealized foreign exchange gain recognized in year to date fiscal 2020.

Presentation of quarterly revenue and operating (loss) income by segment for fiscal 2020 and 2019

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Liquidity and Capital Resources

At December 31, 2020, our cash and cash equivalents were $206.3 million and comprised of U.S.

dollar-denominated balances of $156.8 million, ZAR-denominated balances of ZAR 0.7 billion ($45.5 million), and other currency deposits, primarily Botswana pula, of $3.9 million, all amounts translated at exchange rates applicable as of December 31, 2020.

The decrease in our unrestricted cash balances from June 30, 2020, was primarily due to the payment of Federal income taxes, weak trading activities and an increase in our lending book, which was partially offset by the receipt of the outstanding proceeds related to the sale of our Korean business and the receipt of the outstanding loan related to the disposal of our remaining interest in DNI.

At March 31, 2021, our cash and cash equivalents were $207.8 million and comprised of U.S.

dollar-denominated balances of $171.2 million, ZAR-denominated balances of ZAR 0.5 billion ($34.1 million), and other currency deposits, primarily Botswana pula, of $2.4 million, all amounts translated at exchange rates applicable as of March 31, 2021.

The decrease in our unrestricted cash balances from June 30, 2020, was primarily due to the payment of Federal income taxes, weak trading activities and an increase in our lending book, which was partially offset by the receipt of the outstanding proceeds related to the sale of our Korean business, receipt of proceeds related to the disposal of Bank Frick and the receipt of the outstanding loan related to the disposal of our remaining interest in DNI.

We generally invest any surplus cash held by our South African operations in overnight call accounts that we maintain at South African banking institutions, and any surplus cash held by our non-South African companies in U.S.

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Available short-term borrowings

Summarized below are our short-term facilities available and utilized as of December 31, 2020:

Summarized below are our short-term facilities available and utilized as of March 31, 2021:

Total short-term facilities available, comprising:

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Indirect and derivative facilities (2)

RMB interest rate, based on South African prime rate

Interest rate, based on South African prime rate

Interest rate, based on South African prime rate less 1.15%

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We have credit facilities with RMB and Nedbank in order to access cash to fund our ATMs in South Africa.

Our cash, cash equivalents and restricted cash presented in our unaudited condensed consolidated statement of cash flows as of December 31, 2020, includes restricted cash of approximately $60.8 million related to cash withdrawn from our various debt facilities to fund ATMs.

Our cash, cash equivalents and restricted cash presented in our unaudited condensed consolidated statement of cash flows as of March 31, 2021, includes restricted cash of approximately $11.4 million related to cash withdrawn from our various debt facilities to fund ATMs.

This cash may only be used to fund ATMs and is considered restricted as to use and therefore is classified as restricted cash on our unaudited condensed consolidated balance sheet.

We have also entered into cession and pledge agreements with Nedbank related to certain of our Nedbank credit facilities and we have ceded and pledged certain bank accounts to Nedbank.

The funds included in these bank accounts are restricted as they may not be withdrawn without the express permission of Nedbank.

Cash flows from operating activities

Second quarter

Net cash used in operating activities during the second quarter of fiscal 2021 was $12.0 million (ZAR 185.3 million) compared to net cash provided by operating activities of $4.4 million (ZAR 64.5 million) during the second quarter of fiscal 2020 .

Excluding the impact of income taxes, our cash used in operating activities during the second quarter of fiscal 2021 was impacted by the cash losses incurred by the majority of our continuing operations and the growth in our lending book.

Our net cash provided by operating activities during the second quarter of fiscal 2020 includes the contribution from our Korean operations.

During the second quarter of fiscal 2021, we paid our first provisional South African tax payments of $0.7 million (ZAR 10.1 million) related to our 2021 tax year.

During the second quarter of fiscal 2020, we paid our first provisional South African tax payments of $0.7 million (ZAR 10.7 million) related to our 2020 tax year.

Third quarter

Net cash used in operating activities during the third quarter of fiscal 2021 was $8.3 million (ZAR 123.5 million) compared to $4.2 million (ZAR 64.5 million) during the third quarter of fiscal 2020 .

Excluding the impact of income taxes, our cash used in operating activities during the third quarter of fiscal 2021 was impacted by the cash losses incurred by the majority of our continuing operations and the payment of a $3.6 million settlement (refer to Note 6).

Our net cash provided by operating activities during the third quarter of fiscal 2020 includes the contribution from our Korean operations for January and February 2020 of $4.4 million (refer to Note 21).

Our cash used in operating activities during the third quarter of fiscal 2020 was also impacted by the pandemic because we were unable to originate loans towards the end of March 2020 due to the temporary COVID-19 restrictions imposed on our lending activities in late March 2020.

This had a positive result on net cash used in operating activities during the third quarter of fiscal 2020.

Our operating cash flows for the third quarter of fiscal 2020 were also adversely impacted by the purchase of additional Cell C prepaid airtime that was subject to sale restrictions.

During the third quarter of fiscal 2021, we paid our first provisional South African tax payments of $0.2 million (ZAR 2.6 million) related to our 2021 tax year.

During the third quarter of fiscal 2020, we paid our first provisional South African tax payments of $0.1 million (ZAR 0.9 million) related to our 2020 tax year.

We also paid taxes totaling $1.9 million in other tax jurisdictions, primarily South Korea.

Taxes paid during the second quarter of fiscal 2021 and 2020 were as follows:

Three months ended December 31,

Taxes paid during the third quarter of fiscal 2021 and 2020 were as follows:

Three months ended March 31,

First provisional payments

Total South African taxes paid

Second provisional payments

Tax refund received

Total South African taxes paid (received)

Foreign taxes paid

Total tax paid

We expect to pay additional provisional payments in South Africa of approximately $0.2 million (ZAR 2.4 million translated at exchange rates applicable as of December 31, 2020) related to our 2021 tax year in the third quarter of fiscal 2021.

Net cash used in operating activities during the first half of fiscal 2021 was $41.9 million (ZAR 689.3 million) compared to $13.9 million (ZAR 200.5 million) during the first half of fiscal 2020 .

Excluding the impact of income taxes, our cash used in operating activities during the first half of fiscal 2021 was impacted by the cash losses incurred by the majority of our continuing operations, which was partially offset by the unwind in our lending book during the quarter.

Our net cash used in operating activities during the first half of fiscal 2020 includes the contribution from our Korean operations.

During the first half of fiscal 2021, we paid our first provisional South African tax payments of $0.7 million (ZAR 10.1 million) related to our 2021 tax year.

During the first half of fiscal 2021, we paid South African tax of $0.2 million (ZAR 3.4 million) related to our 2020 tax year.

Net cash used in operating activities during the year to date of fiscal 2021 was $50.1 million (ZAR 807.7 million) compared to $18.1 million (ZAR 289.1 million) during the year to date of fiscal 2020 .

Excluding the impact of income taxes, our cash used in operating activities during the year to date of fiscal 2021 was impacted by the cash losses incurred by the majority of our continuing operations and the payment of a $3.6 million settlement (refer to Note 6).

Our net cash used in operating activities during the year to date of fiscal 2020 includes the contribution from our Korean operations for eight months of $14.6 million (refer to Note 21).

During the year to date of fiscal 2021, we paid our first provisional South African tax payments of $0.9 million (ZAR 12.7 million) related to our 2021 tax year.

During the year to date of fiscal 2021, we paid South African tax of $0.2 million (ZAR 3.4 million) related to our 2020 tax year.

We also paid taxes totaling $15.3 million in other tax jurisdictions, primarily in the U.S.

During the first half of fiscal 2020, we paid our first provisional South African tax payments of $0.7 million (ZAR 10.7 million) related to our 2020 tax year.

During the first half of fiscal 2020 , we paid South African tax of $0.8 million (ZAR 11.6 million) related to our 2019 tax year.

During the year to date of fiscal 2020, we paid our first provisional South African tax payments of $0.8 million (ZAR 11.5 million) related to our 2020 tax year.

During the year to date of fiscal 2020 , we paid South African tax of $0.8 million (ZAR 11.6 million) related to our 2019 tax year.

We also paid taxes totaling $4.3 million in other tax jurisdictions, primarily South Korea.

Taxes paid during the first half of fiscal 2021 and 2020 were as follows:

Six months ended December 31,

Taxes paid during the year to date of fiscal 2021 and 2020 were as follows:

Nine months ended March 31,

First provisional payments

Second provisional payments

Taxation paid related to prior years

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Cash flows from investing activities

Second quarter

Cash used in investing activities for the second quarter of fiscal 2021 included capital expenditures of $3.0 million (ZAR 46.8 million), primarily due to the acquisition of motor vehicles, which largely comprises a fleet of customized mobile ATMs used to deliver a service to rural communities .

During the second quarter of fiscal 2021 we received the outstanding amounts due on the deferred sale proceeds related to the April 2020 sale of DNI, which has now been paid in full.

We also extended loan funding of $1.0 million to V2 and $0.2 million to Revix.

Cash used in investing activities for the second quarter of fiscal 2020 included capital expenditures of $0.8 million (ZAR 12.1 million), primarily due to the acquisition of processing equipment in South Korea to maintain operations.

During the second quarter of fiscal 2020, we received $10.9 million from the sale of FIHRST.

We also extended loan funding of $0.6 million to Revix.

Cash used in investing activities for the first half of fiscal 2021 included capital expenditures of $3.0 million (ZAR 46.8 million), primarily due to the acquisition of motor vehicles, which largely comprises a fleet of customized mobile ATMs used to deliver a service to rural communities , computer equipment and leasehold improvements in South Africa.

We received $20.1 million related to the sale of our Korean business in March 2020 following the successful refund application of the amounts withheld and paid to the South Korean tax authorities pursuant to that transaction.

We received the amount due on the deferred sale proceeds related to the April 2020 sale of DNI, which has now been paid in full.

Third quarter

Cash used in investing activities for the third quarter of fiscal 2021 included capital expenditures of $0.6 million (ZAR 9.7 million), primarily due to the acquisition of computer equipment.

During the third quarter of fiscal 2021 we disposed of our investment in Bank Frick and received $18.6 million of the $30.0 million sales proceeds, the remainder of which will be received in fiscal 2022 and 2023.

Cash used in investing activities for the third quarter of fiscal 2020 included capital expenditures of $1.0 million (ZAR 16.0 million), primarily due to the acquisition of computer equipment in South Korea to maintain operations and leasehold improvements in Malta.

During the third quarter of fiscal 2020, we received a net $192.6 million from the sale of Net1 Korea and paid transaction costs of $7.5 million related to this disposal.

We also invested a further $1.3 million in V2 Limited.

Cash used in investing activities for the year to date of fiscal 2021 included capital expenditures of $3.9 million (ZAR 63.6 million), primarily due to the acquisition of motor vehicles, which largely comprises a fleet of customized mobile ATMs used to deliver a service to rural communities , computer equipment and leasehold improvements in South Africa.

We received $20.1 million related to the sale of our Korean business following the successful refund application of the amounts withheld and paid to the South Korean tax authorities pursuant to that transaction.

We received $18.6 million related to the disposal of Bank Frick and the amount due on the deferred sale proceeds related to the April 2020 sale of DNI, which has now been paid in full.

We also extended loan funding of $1.0 million to V2 and $0.2 million to Revix.

Cash used in investing activities for the first half of fiscal 2020 included capital expenditures of $0.8 million (ZAR 12.1 million), primarily due to the acquisition of ATMs in South Africa and processing equipment in South Korea to maintain operations.

During the first half of fiscal 2020, we received $10.9 million from the sale of FIHRST.

We also made a further equity contribution of $1.3 million to V2, extended loan funding of $0.6 million to Revix, and received $4.3 million from DNI related to the settlement of a ZAR 60.0 million loan outstanding.

Cash used in investing activities for the year to date of fiscal 2020 included capital expenditures of $4.5 million (ZAR 71.7 million), primarily due to the acquisition of ATMs and computer equipment in South Africa, leasehold improvements in Malta and processing equipment in South Korea to maintain operations.

During the year to date fiscal 2020, we received a net $192.6 million from the sale of Net1 Korea, paid transaction costs of $7.5 million related to this disposal, received $10.9 million from the sale of FIHRST and received $4.3 million from DNI related to the settlement of a ZAR 60.0 million loan outstanding.

We also made a further equity contribution of $2.5 million to V2 and extended loan funding of $0.7 million to Revix.

Cash flows from financing activities

Second quarter

During the second quarter of fiscal 2021 , we utilized approximately $137.3 million from our South African overdraft facilities to fund our ATMs and repaid $88.3 million of these facilities.

During the second quarter of fiscal 2020, we utilized approximately $200.7 million from our South African overdraft facilities, primarily to fund our ATMs, and repaid $193.8 million of these facilities.

We prepaid approximately $11.3 million of borrowings (Facility F) utilizing the proceeds received from the disposal of FIHRST.

We also utilized $7.2 million of our Bank Frick overdraft to fund our operations.

During the first half of fiscal 2021 , we utilized approximately $206.5 million from our South African overdraft facilities to fund our ATMs and repaid $165.1 million of these facilities.

During the first half of fiscal 2020, we utilized approximately $383.2 million from our South African overdraft facilities, primarily to fund our ATMs, and repaid $374.6 million of these facilities.

We utilized approximately $14.8 million of our borrowings to fund the purchase of Cell C prepaid airtime that was subject to sale restrictions.

Third quarter

During the third quarter of fiscal 2021 , we utilized approximately $55.3 million from our South African overdraft facilities to fund our ATMs and repaid $103.2 million of these facilities.

During the third quarter of fiscal 2020, we utilized approximately $184.7 million from our South African overdraft facilities, primarily to fund our ATMs, and repaid $203.8 million of these facilities.

We also utilized $9.0 million of our Bank Frick overdraft to fund our operations and repaid $22.9 million towards this facility, including the final payment to settle the facility in full.

During the year to date of fiscal 2021 , we utilized approximately $261.8 million from our South African overdraft facilities to fund our ATMs and repaid $268.3 million of these facilities.

During the year to date fiscal 2020, we utilized approximately $567.9 million from our South African overdraft facilities, primarily to fund our ATMs, and repaid $578.3 million of these facilities.

We utilized approximately $14.8 million of our borrowings to fund the purchase of Cell C prepaid airtime that is subject to sale restrictions.

We prepaid approximately $11.3 million of these borrowings (Facility F) utilizing the proceeds received from the disposal of FIHRST.

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Capital Expenditures

We expect capital spending for the third quarter of fiscal 2021 to primarily include limited investments into our ATM infrastructure and branch network in South Africa.

Our capital expenditures for the second quarter of fiscal 2021 and 2020 are discussed under “—Liquidity and Capital Resources—Cash flows from investing activities.” All of our capital expenditures for the past three fiscal years were funded through internally generated funds.

We had outstanding capital commitments as of December 31, 2020, of $0.6 million.

We expect capital spending for the fourth quarter of fiscal 2021 to primarily include limited investments into our vehicle fleet, our ATM infrastructure and branch network in South Africa.

Our capital expenditures for the third quarter of fiscal 2021 and 2020 are discussed under “—Liquidity and Capital Resources—Cash flows from investing activities.” All of our capital expenditures for the past three fiscal years were funded through internally generated funds.

We had outstanding capital commitments as of March 31, 2021, of $0.1 million.

We expect to fund these expenditures through internally generated funds and available facilities.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis