What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-10 compared with 2022-02-09 · 249 added, 176 removed, 302 unchanged (58% of the section changed)

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Recent Developments

Update on the Consumer business

We remain focused on returning our Consumer business to breakeven by June 2022, followed by profitability in the following half year.

Positive momentum was achieved, through continued execution on the three levers that were communicated in the previous quarter’s results:

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 South Africa, was built in the center of the community.

A kraal is seen as the social and economic heart of a village and only the most reliable people are entrusted with its care and protection.

The word Lesaka means Kraal in Setswana and Sesotho, two of South Africa’s official languages, and it was agreed by our shareholders that the existing company name Net1, should change to Lesaka, which aptly represents our new group and its vision.

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;

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 April 14, 2022, we announced the closing of the Connect Group acquisition for a consideration of ZAR 3.8 billion ($264.0 million).

This transformational acquisition positions the Group as a leading fintech company, offering a broad range of financial services and products to consumers (“B2C”) and merchants (“B2B”) across both the formal and informal sectors.

There are approximately 1.4 million informal and approximately 700,000 formal micro, small and medium enterprises (“MSME”) in South Africa.

With market leading affordable products and technologies, the Connect Group is well positioned to continue its growth in the MSME sector.

The Connect Group’s MSME offering, combined with our EasyPay platform targeting the larger merchants, and our point-of-sale business, provides a suite of products and services to address the needs of the entire spectrum of merchants in South Africa.

Steve Heilbron, CEO of the Connect Group, joined our board on April 14, 2022, and will be responsible for heading up our Merchant business.

Integrating the Connect Group will be a focus area for us for the remainder of the fiscal year, to ensure we capitalize on the growth opportunity delivered by this acquisition.

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 $6.9 million (which includes reorganization costs of $5.9 million), or $1.0 million after adjusting for the $5.9 million of reorganization costs related to Project Spring.

However, transforming the business and culture, from one which was focused on the logistics of efficiently distributing grant to over ten million grant recipients each month, to a sales focused organization remains a challenge we are focused on.

We have commenced the work on training and building our sales force, but this will take time.

We continue to work towards achieving a monthly Segment Adjusted EBITDA break-even position for our consumer business by the end of the fourth quarter, however certain elements may take longer than originally anticipated.

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;

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Progress on driving customer acquisition

The quarter ended with just under 1.1 million active EPE accounts.

Focused investment into our sales capability delivered over 126,000 new gross enrollments.

Activation rates on new accounts are in line with previous trends of 45% to 50% after three months from account opening.

A new product EPE lite was piloted, enrolling approximately 20,000 new accounts during the quarter, outperforming initial projections.

EPE lite is competitively placed with a ZAR 5.00 ($0.33) membership fee and attractive features for the entry level low-cost transactional account market.

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 March 2022, which had a positive impact on new account openings and activations, and we expect this momentum to continue into the fourth quarter of fiscal 2022.

Progress on cross selling

With a focus on upskilling and refocusing our employees on customer acquisition and cross-selling, 90% of all sales employees have been retrained to enable them to sell all our financial services products.

Penetration into the lending book averaged 38%, with approximately 221,000 new loans originated in the quarter, of which 52% were originated in the month of December.

The insurance book provides an ongoing opportunity to execute on our cross-selling strategy, with low penetration levels averaging 19% of the active account base, well below the target rate of 45%.

In November 2021, the rebranded core insurance product Smart1 was launched, with an insurable value of up to ZAR 30,000.

Over 6,000 new standalone polices were enrolled during the quarter.

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 ZAR 359 million ($24.7 million) as of March 31, 2022, up 6% in ZAR compared with March 2021.

Despite the average loan size growing to R1,417, up 10% year on year, the portfolio loss ratio, calculated as the loans written off during the period as a percentage of the total loan book, remains encouragingly low at around 1.0% for the quarter, as a result of our ongoing application of prudent credit scoring and a culture of responsible lending.

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 March 2021.

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.

Progress on cost optimization

Our cost optimization program, delivered cost savings of ZAR 53.5 million ($3.5 million) during the quarter, as a result of the closure of the mobile paypoint infrastructure and various other cost reduction initiatives.

In order to optimize the overall cost base and to move the business towards a more sales-focused and client solution driven financial services organization, we launched Project Spring.

Project Spring will focus on the restructuring of the financial services business and the rationalization of the distribution network.

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.

The section 189A retrenchment process with employees, as a result of Project Spring initiatives, commenced in January 2022.

Together with the cost initiatives already being implemented, combined, our total cost optimization program is targeted to deliver in excess of ZAR 300.0 million ($19.5 million) in annual cost savings.

Update on Merchant business

The merchant business was negatively impacted by delayed hardware sales in the NUETS terminal supply business, due to the global chip shortage.

However, the demand for product remains strong, with continued support from key customers for payment devices ordered.

The balance of orders are expected to be fulfilled in the remaining two quarters, with a resultant rebound in revenue.

If the Connect Group acquisition closes, it will form part of the Merchant business and the combined group will be best placed to deliver growth into our business to business (“B2B”) strategy, through the servicing of small and micro enterprises.

Enhancements to the management team

The group welcomes the enhancements to our management team, who offer a wealth of experience in their respective fields:

Basie Kok joined us effective February 2, 2022, as the new Chief Technology Officer.

Basie has over 15 years of technology experience and is a seasoned entrepreneur who co-founded the wiGroup.

Karabo Mothibi joined us effective February 1, 2022 as the new head of Human Capital.

He has over 18 years extensive experience in Human Resources, with proven success in partnering with business leaders to support, achieve and further corporate goals.

Simphiwe Pakathi joined us effective December 1, 2021 as the new head of Sales and Distribution in our Consumer division.

Simphiwe has over 18 years of experience in the Financial Services industry across the African continent.

The new head of Risk and Compliance is Denzel Landie, who will be joining the group on February 14, 2022.

Denzel has over 17 years’ experience in risk and compliance across multiple banking institutions.

On December 8, 2021, our board approved the appointment of Naeem Kola as our Group CFO, effective March 1, 2022.

Alex Smith will step down as CFO on this date and will take up his role of Group Chief Accounting Officer, a new role in the company.

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 January 10, 2022, and completed the process during March 2022, recording a total charge during the third quarter of fiscal 2022 of $5.9 million.

Please refer to Note 1 to our unaudited condensed consolidated financial statements for additional information.

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 ZAR 300.0 million.

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 March 1, 2022, Mr.

Naeem Kola joined our board and became our Group CFO.

On the same date, Mr.

Alex Smith stepped down as CFO, resigned from our board and took up his new role as Chief Accounting Officer.

During this quarter, we also successfully recruited a head of Legal and Company Secretarial, Verna Douman.

Verna is a qualified seasoned attorney, with over 25 years experience in corporate, banking and finance sectors.

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 South African Competition Tribunal’s approval of the Connect Group acquisition, their approval was subject to the company implementing an employee share transaction (“ESOP”) of at least 3% of the issued shares of the company, to increase the spread of ownership by historically disadvantaged people and workers.

If within 24 months of the implementation date of the Connect Group transaction, the company generates a positive net profit for 3 consecutive quarters, the ESOP shall increase to 5% of the issued shares.

The final structure of the ESOP is contingent on shareholder approval and relevant regulatory and governance approvals.

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.

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 July 2021, with the original intention of completing its initial public offering in November 2021.

MobiKwik decided to delay its initial public offering given prevailing market conditions and is anticipating concluding the listing during calendar year 2022.

MobiKwik has been focusing on its BNPL offering and has seen significant growth in that area in the last year.

The investment in Cell C is held at a carrying value of $0 (zero) as of December 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 we understand that they are making steady progress towards its recapitalization.

Blue Label Telecoms, the largest Cell C shareholder, announced in August that it has signed term sheets with various lenders to facilitate the recapitalization.

MobiKwik decided to delay its initial public offering given prevailing market conditions and will reassess their options as market conditions change.

MobiKwik has been focusing on its buy now pay later (BNPL) offering and has seen significant growth in that area in the last year.

On March 15, 2022, Blue Label Telecoms Limited, the largest shareholder in Cell C, announced that it has concluded a non-binding term sheet (“Umbrella Restructure Term Sheet”) with Cell C and various Cell C financial stakeholders.

In terms of the Umbrella Restructure Term Sheet, Cell C will be restructured and refinanced with the purpose of deleveraging its balance sheet, providing it with liquidity with which to operate and grow its businesses and to position itself to achieve long term success for the benefit of its customers, employees, creditors, shareholders, and other stakeholders.

The long form agreements, which will be binding, are currently in process of preparation and will incorporate the terms and conditions contained in the Umbrella Restructure Term Sheet.

Our investment in Cell C is held at a carrying value of $0 (zero) as of March 31, 2022.

Impact of COVID-19

We do not believe the COVID-19 pandemic has had a significant impact on our South African operations since the initial lockdown period which occurred between March 2020 and June 2020.

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 and is currently in adjusted Level 1.

The South African 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 2021.

As of February 8, 2022, 41.8% of the adult population had been fully vaccinated.

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.

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We will continue to evaluate the nature and extent of the impact to our business, consolidated results of operations, and financial condition.

Reallocation of certain activities among operating segments

Refer to Note 17 of the unaudited condensed consolidated financial statements for information regarding changes to the Company’s reportable segments during the three and six months ended December 31, 2021.

Critical Accounting Policies

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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 December 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 December 31, 2021, including the expected dates of adoption and effects on our financial condition, results of operations and cash flows.

Recent accounting pronouncements not yet adopted as of March 31, 2022

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, 2022, 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, 2022 and 2021, vary slightly from the averages shown in the table above.

Thus, the average rates used to translate this data for the three and nine months ended March 31, 2022 and 2021, 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 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 reflects lease charge excluded from the calculation of Segment Adjusted EBITDA and are therefore reported as a reconciling item to reconcile the reportable segments Segment Adjusted EBITDA to the Company’s loss before income tax expense.

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.

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

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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.

Second quarter of fiscal 2022 compared to second quarter of fiscal 2021

The following factors had a significant impact on our results of operations during the second quarter of fiscal 2022 as compared with the same period in the prior year:

Lower revenue:

Our revenues decreased 4% in ZAR primarily due to lower hardware sales as a result of the global chip shortage and fewer prepaid airtime sales.

The benefit of the increase in active accounts was offset by lower ATM transactions as the number of active ATMs decreased as we go through a relocation process;

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 38% in ZAR compared with the prior period primarily due to the closure of loss-making IPG and the implementation of various cost reduction initiatives in our Consumer business;

Significant transaction costs:

We expensed $1.5 million of transaction costs related to the Connect Group acquisition;

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 in January 2022;

Foreign exchange movements:

dollar was 1% stronger against the ZAR during the second quarter of fiscal 2022, which impacted our reported results.

dollar was 4% stronger against the ZAR during the third quarter of fiscal 2022, 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,

Cost of goods sold, IT processing, servicing and support

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Depreciation and amortization

Reorganization costs

Transaction costs related to Connect Group acquisition

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Change in fair value of equity securities

Unrealized loss related to fair value adjustment to currency options

Gain related to fair value adjustment to currency options

Loss on disposal of equity-accounted investment

Gain on disposal of equity securities

Loss on disposal of equity-accounted investment - Bank Frick

Interest income

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Income tax expense

Net loss before loss from equity-accounted investments

Loss from equity-accounted investments

Net loss before earnings from equity-accounted investments

Earnings from equity-accounted investments

Net loss attributable to us

In South African Rand

Three months ended December 31,

Three months ended March 31,

Cost of goods sold, IT processing, servicing and support

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Depreciation and amortization

Reorganization costs

Transaction costs related to Connect Group acquisition

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Change in fair value of equity securities

Unrealized loss related to fair value adjustment to currency options

Gain related to fair value adjustment to currency options

Loss on disposal of equity-accounted investment

Gain on disposal of equity securities

Loss on disposal of equity-accounted investment - Bank Frick

Interest income

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Income tax expense

Net loss before loss from equity-accounted investments

Loss from equity-accounted investments

Net loss before earnings from equity-accounted investments

Earnings from equity-accounted investments

Net loss attributable to us

The decrease in revenue was primarily due to fewer hardware sales, reduced prepaid airtime sales and lower lending revenue, which was partially offset by higher processing fees, insurance revenue and higher account holder fees.

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 hardware sales and prepaid airtime, which was partially offset by an increase in insurance-related claims experience.

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 an increase in our allowance for doubtful finance loans receivable recorded during the second quarter of fiscal 2022 following strong loan originations in December 2021, 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.

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.

Transaction costs related to Connect Group acquisition includes fees paid to external service providers associated with the contract drafting and negotiations;

legal, financial and tax due diligence activities performed;

warranty and indemnity insurance related to the transaction;

and other advisory services procured;

as well as our portion of the fees paid to competition authorities related to the regulatory filings made in various jurisdictions.

Our operating loss margin for the second quarter of fiscal 2022 and 2021 was (25.3%) and (40.5%), respectively.

We embarked on a retrenchment process on January 10, 2022, and incurred reorganization expenses of $5.9 million during the third quarter of fiscal 2022.

Transaction costs related to the Connect Group acquisition include fees paid to external service providers for various advisory services procured.

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 second quarter of fiscal 2021, represents a non-cash fair value adjustment gain related to MobiKwik.

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 $0 (zero).

Refer to Note 5 to our unaudited condensed consolidated financial statements for the methodology and inputs used in the fair value calculation for MobiKwik and Note 4 for the methodology and inputs used in the fair value calculation for Cell C.

Unrealized loss related to fair value adjustment to currency options represents non-cash mark-to-market adjustments to foreign exchange option contracts entered into in November 2021 in order to manage the risk of currency volatility and to fix the USD amount to be utilized for part of the purchase consideration settlement.

The option contracts mature in February 2022.

Gain related to fair value adjustment to currency options represents the net mark-to-market adjustments to foreign exchange option contracts entered into in November 2021 in order to manage the risk of currency volatility and to fix the USD amount to be utilized for part of the Connect Group purchase consideration settlement.

The foreign exchange option contract matured on February 24, 2022.

Refer to Note 4 to our unaudited condensed consolidated financial statements for additional information related to these currency options.

Interest on surplus cash decreased to $0.3 million (ZAR 4.8 million) from $0.7 million (ZAR 11.1 million), primarily due to lower average daily cash balances during the second quarter of fiscal 2022.

Interest expense increased to $0.8 million (ZAR 11.8 million) from $0.7 million (ZAR 10.5 million), primarily as a result of a higher utilization of our ATM facilities to fund our ATMs.

We recorded a gain of $0.7 million related to the disposal of our entire interest in an equity security during the third quarter of fiscal 2022.

Refer to Note 5 to our unaudited condensed consolidated financial statements for additional information regarding this gain.

We recorded a loss of $0.3 million related to the disposal of a minor portion of our investment in Finbond during the third quarter of fiscal 2022.

Refer to Note 5 to our unaudited condensed consolidated financial statements for additional information regarding this disposal.

We recorded a loss of $0.5 million related to the disposal of Bank Frick during the third quarter of fiscal 2021.

Interest on surplus cash increased to $0.8 million (ZAR 11.9 million) from $0.6 million (ZAR 9.1 million), primarily due to higher average ZAR denominated cash balances and higher interest rates during the third quarter of fiscal 2022.

The higher ZAR denominated cash balances arose as we converted dollar funds into ZAR in anticipation of the Connect Group acquisition closing.

Interest expense decreased to $0.7 million (ZAR 10.8 million) from $0.7 million (ZAR 11.1 million), primarily as a result of a lower utilization of our ATM facilities to fund our ATMs, which decrease was partially offset by higher rates during the third quarter of fiscal 2022.

Fiscal 2022 tax expense was $0.5 million (ZAR 7.3 million) compared to $2.2 million (ZAR 32.5 million) in fiscal 2021.

Our effective tax rate for fiscal 2022 was impacted by the tax effect of the change in the fair value of our equity securities, the tax expense recorded by 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 (including the unrealized loss on the foreign currency options).

Our effective tax rate for fiscal 2022 was impacted by the tax expense recorded by 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 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.

Bank Frick was sold in the third quarter of fiscal 2021 and was accounted for using the equity method during the second quarter of fiscal 2021.

Bank Frick was sold in the third quarter of fiscal 2021 and was accounted for using the equity method up until disposal.

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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In United States Dollars

Three months ended December 31,

Three months ended March 31,

Operating Segment

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Segment Adjusted EBITDA:

Total Segment Adjusted EBITDA

Corporate/eliminations

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In South African Rand

Three months ended December 31,

Three months ended March 31,

Operating Segment

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Segment Adjusted EBITDA:

Total Segment Adjusted EBITDA

Corporate/eliminations

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Total consolidated operating loss

Segment revenue increased primarily due to higher insurance revenue and moderately higher account holder fees, which was partially offset by moderately lower lending revenue and lower ATM transaction volumes.

Segment EBITDA loss has decreased primarily due to the implementation of various cost reduction initiatives, which was partially offset by an increase in insurance-related claims experience and an increase in our allowance for doubtful finance loans receivable recorded during the second quarter of fiscal 2022 following strong loan originations in December 2021.

Our EBITDA loss margin (calculated as EBITDA loss divided by revenue) for the second quarter of fiscal 2022 and 2021 was (27.4%) and (32.1%), respectively.

Segment revenue decreased due to fewer hardware sales as a result of the global chip shortage and fewer prepaid airtime sales, which was partially offset by higher processing fees.

The decrease in segment EBITDA is primarily due to the lower revenue.

Our EBITDA margin for the second quarter of fiscal 2022 and 2021 was 5.6% and 8.1%, respectively.

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 $5.9 million which is included in the Segment EBITDA loss, refer to Note 1 to our unaudited condensed consolidated financial statements for additional information regarding this process.

Segment EBITDA loss has decreased primarily due to the implementation of various cost reduction initiatives.

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:

In South African Rand

Three months ended March 31,

Operating Segment

Reorganization costs

Consumer excluding reorganization costs

EBITDA margin:

Consumer excluding reorganization costs

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.

Other includes the activities of IPG in fiscal 2021 and our other business outside South Africa, principally Botswana.

Segment revenue decreased due to lower revenue following the closure of IPG in fiscal 2021.

We recorded an EBITDA contribution during the second quarter of fiscal 2022 following the closure of our loss-making activities performed through IPG.

Our EBITDA (loss) margin for the Other segment was 31.1% and (494.2%) during the second quarter of fiscal 2022 and 2021, respectively.

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

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and from fiscal 2022 our group CEO’s compensation.

Our corporate expenses for fiscal 2022 decreased compared with fiscal 2021 due to the inclusion of an allowance on doubtful loans receivable from equity-accounted investments of $0.7 million created during the second quarter of fiscal 2021.

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 $0.6 million which also impacts comparability.

Our corporate expenses for fiscal 2022 includes transaction related expenses of $0.1 million (ZAR 1.8 million) related to the Connect Group acquisition.

We expect to incur additional expenses related to the Connect Group transaction in the third quarter of fiscal 2022.

First half of fiscal 2022 compared to first half of fiscal 2021

The following factors had a significant impact on our results of operations during the first half of fiscal 2022 as compared with the same period in the prior year:

We expect to incur additional expenses related to the Connect Group transaction in the fourth quarter of fiscal 2022.

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 4% in ZAR, primarily due to lower hardware sales as a result of the global chip shortage and fewer prepaid airtime sales, which was partially offset by higher processing fees.

The benefit of the increase in active accounts was offset by lower ATM transactions as the number of active ATMs decreased as we go through a relocation process;

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 28% in ZAR compared with the prior period primarily due to the closure of IPG and the implementation of various cost reduction initiatives in our Consumer business;

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 in January 2022;

Significant transaction costs:

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Foreign exchange movements:

dollar was 1% weaker against the ZAR during the first half of fiscal 2022, which impacted our reported results.

dollar was 4% weaker against the ZAR during the year to date fiscal 2022, which impacted our reported results.

Consolidated overall results of operations

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In United States Dollars

Six months ended December 31,

Nine months ended March 31,

Cost of goods sold, IT processing, servicing and support

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Depreciation and amortization

Reorganization costs

Transaction costs related to Connect Group acquisition

1 unchanged sentence

Change in fair value of equity securities

Unrealized loss related to fair value adjustment to currency options

Gain related to fair value adjustment to currency options

Loss on disposal of equity-accounted investment

Gain on disposal of equity securities

Loss on disposal of equity-accounted investment - Bank Frick

Interest income

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In South African Rand

Six months ended December 31,

Nine months ended March 31,

Cost of goods sold, IT processing, servicing and support

1 unchanged sentence

Depreciation and amortization

Reorganization costs

Transaction costs related to Connect Group acquisition

1 unchanged sentence

Change in fair value of equity securities

Unrealized loss related to fair value adjustment to currency options

Gain related to fair value adjustment to currency options

Loss on disposal of equity-accounted investment

Gain on disposal of equity securities

Loss on disposal of equity-accounted investment - Bank Frick

Interest income

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Net loss attributable to us

The decrease in revenue was primarily due to fewer hardware sales and prepaid airtime sales, which was partially offset by higher processing fees, insurance revenue and modestly higher transaction fees and lending revenue.

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 hardware sales and prepaid airtime, which was partially offset by 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, which was 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.

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.

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as well as our portion of the fees paid to competition authorities related to the regulatory filings made in various jurisdictions.

Our operating loss margin for the first half of fiscal 2022 and 2021 was (26.3%) and (32.8%), respectively.

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 first half of fiscal 2021, represents a non-cash fair value adjustment gain related to MobiKwik.

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 $0 (zero).

Gain related to fair value adjustment to currency options represents the realized gain related to foreign exchange option contracts entered into in November 2021 in order to manage the risk of currency volatility and to fix the USD amount to be utilized for part of the Connect Group purchase consideration settlement.

The foreign exchange option contract matured on February 24, 2022.

Refer to Note 4 to our unaudited condensed consolidated financial statements for additional information related to these currency options.

Interest on surplus cash decreased to $0.7 million (ZAR 10.5 million) from $1.3 million (ZAR 21.9 million), primarily due to lower average daily cash balances and lower average interest rates applied to daily cash balances during the first half of fiscal 2022.

We recorded a gain of $0.7 million related to the disposal of our entire interest in an equity security during the third quarter of fiscal 2022.

Refer to Note 5 to our unaudited condensed consolidated financial statements for additional information regarding this gain.

We recorded a loss of $0.3 million related to the disposal of a minor portion of our investment in Finbond during the third quarter of fiscal 2022.

Refer to Note 5 to our unaudited condensed consolidated financial statements for additional information regarding this disposal.

We recorded a loss of $0.5 million related to the disposal of Bank Frick during the year to date fiscal 2021.

Interest on surplus cash decreased to $1.5 million (ZAR 21.9 million) from $1.9 million (ZAR 31.2 million), primarily due to lower average daily cash balances.

Interest expense increased to $2.3 million (ZAR 34.1 million) from $2.2 million (ZAR 34.9 million), primarily as a result of a higher utilization of our ATM facilities to fund our ATMs.

Fiscal 2022 tax expense was $0.8 million (ZAR 11.3 million) compared to $4.5 million (ZAR 73.3 million) in fiscal 2022.

Bank Frick was sold in the third quarter of fiscal 2021 and was accounted for using the equity method during the first half of fiscal 2021.

Bank Frick was sold in the third quarter of fiscal 2021 and was accounted for using the equity method during the year to date fiscal 2021 up until it was disposed.

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,

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

Nine months ended March 31,

Share of net loss

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Share of net loss

Refer to Note 5 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

Six months ended December 31,

Nine months ended March 31,

Operating Segment

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Segment Adjusted EBITDA:

Total Segment Adjusted EBITDA

Corporate/eliminations

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In South African Rand

Six months ended December 31,

Nine months ended March 31,

Operating Segment

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Segment Adjusted EBITDA:

Total Segment Adjusted EBITDA

Corporate/eliminations

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Total consolidated operating loss

The underlying decrease in revenue was primarily due to lower processing fees, partially offset by higher insurance revenue and account holder fees, and moderately higher lending revenues.

Segment EBITDA loss has increased primarily due to an increase in insurance-related claims experience, which was partially offset by the implementation of various cost reduction initiatives.

Our EBITDA loss margin for the first half of fiscal 2022 and 2021 was (41.4%) and (37.3%), respectively.

Segment revenue decreased due to fewer hardware sales as a result of the global chip shortage and reduced prepaid airtime sales, which was partially offset by higher processing fees.

The decrease in segment EBITDA is primarily due to the lower revenue.

Our EBITDA margin for the first half of fiscal 2022 and 2021 was 8.6% and 12.5%, respectively.

The underlying decrease in revenue was primarily due to lower processing fees, partially offset by higher insurance and lending revenue and account holder fees.

Segment EBITDA loss, excluding the reorganization charge, has decreased primarily due to the implementation of various cost reduction initiatives, which was partially offset by an increase in insurance-related claims experience and an increase in our allowance for doubtful finance loans receivable recorded.

Our EBITDA loss margin for the year to date fiscal 2022 and 2021 was (41.5%) and (40.5%), respectively.

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.

Segment revenue decreased due to lower revenue following the closure of IPG in fiscal 2021.

We recorded an EBITDA contribution during the second quarter of fiscal 2022 following the closure of our loss-making activities performed through IPG.

Our EBITDA margin for the Other segment was 32.3% and (286.4%) during the first half of fiscal 2022 and 2021, respectively.

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 $0.7 million.

Our corporate expenses for fiscal 2022 includes transaction related expenses of $1.8 million (ZAR 26.8 million) related to the Connect Group acquisition.

Presentation of quarterly revenue and EBITDA by segment for fiscal 2021 and 2020

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 U.S.

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Segment Adjusted EBITDA:

Total Segment Adjusted EBITDA

Corporate/eliminations

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Segment Adjusted EBITDA:

Total Segment Adjusted EBITDA

Corporate/eliminations

4 unchanged sentences

Liquidity and Capital Resources

At December 31, 2021, our cash and cash equivalents were $182.4 million and comprised of U.S.

dollar-denominated balances of $159.4 million, ZAR-denominated balances of ZAR 0.3 billion ($21.0 million), and other currency deposits, primarily Botswana pula, of $2.0 million, all amounts translated at exchange rates applicable as of December 31, 2021.

The decrease in our unrestricted cash balances from June 30, 2021, was primarily due to growth in our financial loans receivable book in December 2021, and utilization of cash reserves to fund our operations, partially offset by the receipt of $7.5 million related to the sale of Bank Frick in fiscal 2021.

At March 31, 2022, our cash and cash equivalents were $183.7 million and comprised of U.S.

dollar-denominated balances of $11.3 million, ZAR-denominated balances of ZAR 2.5 billion ($169.9 million), and other currency deposits, primarily Botswana pula, of $2.4 million, all amounts translated at exchange rates applicable as of March 31, 2022.

The decrease in our unrestricted cash balances from June 30, 2021 was primarily due to utilization of cash reserves to fund our operations and payment of reorganization costs, which was partially offset by the receipt of $7.5 million related to the sale of Bank Frick in fiscal 2021 and a $3.7 million gain on the foreign currency options.

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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When considering whether to borrow under our financing facilities, we consider the cost of capital, cost of financing, opportunity cost of utilizing surplus cash and availability of tax efficient structures to moderate financing costs.

We have entered into a definite agreement to acquire the entities (the Connect Group) described in Note 20 to our unaudited condensed consolidated financial statements for ZAR 3.7 billion which will be funded through a combination of our existing cash reserves, issue of our common stock, and bank financing of ZAR 1.1 billion.

We closed the acquisition of Connect in April 2022 as described in Note 20 to our unaudited condensed consolidated financial statements .

The total purchase consideration was ZAR 3.8 billion ($262.0 million), comprising ZAR 3.5 billion ($238.2 million) in cash and ZAR 0.4 billion ($23.9 million) in 3,185,079 shares of our common stock.

The cash component was funded through ZAR 2.1 billion of our cash, the utilization of new Net1 banking facilities of ZAR 1.1 billion, and an increase in Connect’s debt of ZAR 0.3 billion in April 2022.

Available short-term borrowings

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

Summarized below are our short-term facilities available and utilized as of March 31, 2022:

Total short-term facilities available, comprising:

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(2) Indirect and derivative facilities may only be used for guarantees, letters of credit and forward exchange contracts to support guarantees issued by Nedbank to various third parties on our behalf.

(3) Increased to 7.50% on January 28, 2022, following an increase in the South African repo rate.

(4) Increased to 6.35%, on January 28, 2022, following an increase in the South African repo rate

Long-term borrowings

We obtained long-term borrowings of ZAR 1.1 billion to partially fund the acquisition of Connect.

In contemplation of the Connect transaction, Connect obtained total facilities of ZAR 1.3 billion which were utilized to repay its existing borrowings and to settle obligations under the Sales Agreement.

Our total long-term borrowings following the acquisition of Connect are ZAR 2.2 billion, comprising the ZAR 1.1 billion and ZAR 1.1 billion of Connect’s total facilities of ZAR 1.3 billion.

Refer to Note 20 to our unaudited condensed consolidated financial statements for additional information related to these borrowings.

Restricted cash

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, 2021, includes restricted cash of approximately $48.0 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, 2022, includes restricted cash of approximately $45.7 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.

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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 2022 was $13.8 million (ZAR 212.0 million) compared to $12.0 million (ZAR 185.3 million) during the second quarter of fiscal 2021 .

Excluding the impact of income taxes, our cash used in operating activities during the second quarter of fiscal 2022 was impacted by the utilization of cash to grow our financial loans receivable book in December 2021, but partially offset by lower cash losses incurred by the majority of our continuing operations.

During the second quarter of fiscal 2022, we paid our first provisional South African tax payments of $0.4 million (ZAR 6.9 million) related to our 2022 tax year and received tax refunds of $0.2 million (ZAR 2.9 million).

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.

Taxes paid during the second quarter of fiscal 2022 and 2021 were as follows:

Three months ended December 31,

Third quarter

Net cash used in operating activities during the third quarter of fiscal 2022 was $8.8 million (ZAR 137.0 million) compared to $8.3 million (ZAR 123.5 million) during the third quarter of fiscal 2021 .

Excluding the impact of income taxes, our cash used in operating activities during the third quarter of fiscal 2022 was impacted by the utilization of cash reserves to fund certain of our operations and payment of the reorganization costs, which was partially offset by the $3.7 million gain on the foreign currency options and profits realized by certain of our operations.

During the third quarter of fiscal 2022, we paid our first provisional South African tax payments of $0.1 million (ZAR 2.2 million) related to our 2022 tax year and received tax refunds of $0.0 million (ZAR 0.0 million).

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.

Taxes paid during the third quarter of fiscal 2022 and 2021 were as follows:

Three months ended March 31,

First provisional payments

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Total tax paid

We expect to pay additional provisional payments in South Africa of approximately $0.1 million (ZAR 2.2 million translated at exchange rates applicable as of December 31, 2021) related to our 2022 tax year in the third quarter of fiscal 2022.

Net cash used in operating activities during the first half of fiscal 2022 was $21.7 million (ZAR 325.4 million) compared to $41.9 million (ZAR 689.3 million) during the first half of fiscal 2021 .

Excluding the impact of income taxes, our cash used in operating activities during the first half of fiscal 2022 was impacted by the cash losses incurred by the majority of our continuing operations, which in aggregate was lower than in fiscal 2021.

During the first half of fiscal 2022, we paid our first provisional South African tax payments of $0.4 million (ZAR 6.9 million) related to our 2022 tax year and received tax refunds of $0.2 million (ZAR (3.2) million) .

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 fiscal 2022 was $30.5 million (ZAR 457.2 million) compared to $50.1 million (ZAR 807.7 million) during the year to date fiscal 2021 .

During the year to date fiscal 2022, we paid our first provisional South African tax payments of $0.6 million (ZAR 9.1 million) related to our 2022 tax year and received tax refunds of $0.2 million (ZAR (3.2) million) .

During the year to date 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 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.

Taxes paid during the first half of fiscal 2022 and 2021 were as follows:

Six months ended December 31,

Taxes paid during the year to date fiscal 2022 and 2021 were as follows:

Nine months ended March 31,

First provisional payments

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Cash flows from investing activities

Second quarter

Cash used in investing activities for the second quarter of fiscal 2022 included capital expenditures of $0.2 million (ZAR 2.9 million), primarily due to the acquisition of computer equipment.

During the second quarter of fiscal 2022, we received a scheduled payment of $7.5 million related to the sale of Bank Frick in fiscal 2021.

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 comprised 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 first half of fiscal 2022 included capital expenditures of $0.9 million (ZAR 13.3 million), primarily due to the roll out of our new express branches and the acquisition of computer equipment.

During the first half of fiscal 2022 we received a scheduled payment of $7.5 million related to the sale of Bank Frick in fiscal 2021

Cash used in investing activities for the first half of fiscal 2021 included capital expenditures of $3.3 million (ZAR 54.3 million), primarily due to the acquisition of motor vehicles, which largely comprised 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 total amount due on the deferred sale proceeds related to the April 2020 sale of DNI.

Third quarter

Cash used in investing activities for the third quarter of fiscal 2022 included capital expenditures of $0.8 million (ZAR 13.0 million), primarily due to the acquisition of ATMs.

During the third quarter of fiscal 2022, we received proceeds of $1.5 million from sale of property, plant and equipment, and $0.8 million and $0.7 million, respectively, related to the sale of minor positions in Finbond and from the disposal of our entire interest in Revix.

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.

Cash used in investing activities for the year to date fiscal 2022 included capital expenditures of $1.7 million (ZAR 25.8 million), primarily due to the roll out of our new express branches, acquisitions of ATMs and the acquisition of computer equipment.

During the year to date fiscal 2022, we received a scheduled payment of $7.5 million related to the sale of Bank Frick in fiscal 2021, proceeds from sale of property, plant and equipment of $3.5 million, and proceeds of $0.8 million and $0.7 million, respectively, related to the sale of minor positions in Finbond and from the disposal of our entire interest in Revix.

Cash used in investing activities for the year to date fiscal 2021 included capital expenditures of $3.9 million (ZAR 63.6 million), primarily due to the acquisition of motor vehicles, which largely comprised 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.

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

Cash flows from financing activities

Second quarter

During the second quarter of fiscal 2022 , we received $0.7 million from the exercise of stock options, and utilized approximately $172.4 million from our South African overdraft facilities to fund our ATMs and repaid $172.8 million of these facilities.

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 first half of fiscal 2022 , we received $0.7 million from the exercise of stock options, and utilized approximately $311.4 million from our South African overdraft facilities to fund our ATMs and repaid $271.7 million of these facilities.

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.

Third quarter

During the third quarter of fiscal 2022 , we utilized approximately $95.0 million from our South African overdraft facilities to fund our ATMs and repaid $100.8 million of these facilities.

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 year to date fiscal 2022 , we received $0.8 million from the exercise of stock options, and utilized approximately $406.4 million from our South African overdraft facilities to fund our ATMs and repaid $372.5 million of these facilities.

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.

Off-Balance Sheet Arrangements

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Capital Expenditures

We expect capital spending for the third quarter of fiscal 2022 to primarily include limited investments into our ATM infrastructure and branch network in South Africa.

Our capital expenditures for the second quarter of fiscal 2022 and 2021 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, 2021, of $1.0 million.

We expect capital spending for the fourth quarter of fiscal 2022 to primarily include limited investments into our ATM infrastructure and branch network in South Africa as well as IT equipment, and through Connect, spending for POS devices, vehicles, computer and office equipment.

Our capital expenditures for the third quarter of fiscal 2022 and 2021 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, 2022, 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