2019 Annual ReportHistory Informs the Future Euronet empowers
financial inclusion
across the globe.
1
Bridging the Gap
Between Cash and Digital
! Ria
Ria's powerful app allows customers to stage a transaction
on their smartphones and pay for it later at a Ria agent or
store location. The technology empowers them to send money
directly to their family or friends who can collect the payout in
the most convenient manner for them including at an ATM,
a Ria agent location or direct deposit into a bank account.
3
Connecting Consumers, Retailers
and Brands with Innovative
Payments Solutions
! Digital Wallet
Consumers have shown shifting behavioral patterns to
mobile and smartphone-powered payments. Euronet and
its epay business segment are pioneering innovations
in digital spaces and retail checkout lanes that bring
convenience to consumers and more efficient customer
experiences to retailers and brands through payments
based on PINs, QR codes, barcodes, graphics, biometrics
and other mobile-based alternative payments.
5
6 Providing Currency
Information and Payments.
Anywhere. Anytime.
! XE
The XE app has been downloaded more than
80 million times. Consumers trust it for accurate and
reliable exchange rates and quick, easy and secure
international money transfers all in one place.
7
8 Embracing Technology to Secure
Withdrawals at Any ATM
! BLIK
Euronet's network of ATMs allows customers to withdraw their
funds anytime from thousands of locations worldwide. By
integrating with banking wallet technologies such as BLIK
in Poland, Euronet provides an added layer of security and
convenience to each transaction for mobile-savvy customers.
9
10 Euronet: A Force in Driving
the Payments Landscape
and Industry Forward
With physical and digital assets established and technology built for now
and the future, the best is yet to come for Euronet. With a rich history of
innovation, Euronet is well positioned to continue driving payments inclusion
worldwide and the rapid growth the company has experienced since 1994.
11
11
A Leader in Secure
Financial Transactions
for 25 Years
Euronet Worldwide is an industry leader in processing
Euronet's global payment network is extensive -
secure electronic financial transactions. The Company
including 50,457 ATMs, approximately 330,000 EFT POS
offers payment and transaction processing solutions
terminals and a growing portfolio of outsourced debit
to financial institutions, retailers, service providers
and credit card services which are under management
and individual consumers. These services include
in 61 countries; card software solutions; a prepaid
comprehensive ATM, POS and card outsourcing
processing network of approximately 728,000 POS
services, card issuing and merchant acquiring services,
terminals at approximately 339,000 retailer locations in
software solutions, cash-based and online-initiated
53 countries; and a global money transfer network of
consumer-to-consumer and business-to-business
approximately 397,000 locations serving 160 countries.
money transfer services, and electronic distribution of
With corporate headquarters in Leawood, Kansas,
digital media and prepaid mobile phone time.
USA, and 66 worldwide offices, Euronet serves clients in
approximately 170 countries.
12
2 0 1 9 A T - A - G L A N C E
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N
:
For 25 years we have lived by that mission. I am proud that we have built a company that is nimble, flexible and has never backed away from a challenge. These attributes have served us well as we have faced a number of challenges ranging from getting the rights to install our first ATM, to managing through the last US recession and financial crisis that started in 2008 to the 2017 demonetization of cash in India. The resilience of our business, our employees, our products, our balance sheet and our technology have all played a key role in managing through difficult times. And as we all know, we and the world now faces another significant challenge – the COVID-19 pandemic. Not only is it the medical challenges we all face, the virus will have a significant adverse impact on the global economy. We entered the year with low-double digit growth expectations and each of our businesses started the year delivering strong results. Our business, like all those around the world have been impacted by this global pandemic, but I am confident that these events are transitory, that our business fundamentals are intact, that our balance sheet is strong and we will come through this challenge stronger.And I think for you to fully appreciate my confidence, it is important to understand how we have consistently worked over the past 25 years to be diverse in product and geography, develop the best technology and build a strong balance sheet. It is important to understand where we have come from, what we have built and where we are going. We have grown from a single ATM in Budapest to a global network which includes more than 50,000 ATMs, 1.1 million POS terminals, and the second largest money transfer network with 397,000 locations worldwide. We have also developed leading-edge payments technology that powers our entire network. And while we have accomplished many things, I am very proud to say we have done it all while delivering earnings growth in each of our 25 years. I founded Euronet with a mission to bring financial payment inclusion to those who have not had it before.INTRODUCTION14We launched the first ATM in Budapest and quickly expanded to Poland and Germany. That's when we realized that our ATMs could be used to sell other ancillary products in addition to the traditional cash withdrawals. Mobile phone top-ups were the first service we added to our ATMs and the experience we accumulated with that led to the strategic acquisition of U.K.-based epay in 2003. This acquisition broadened our capabilities as we expanded our presence into retail by introducing us to tokenized transactions and transactions completed with a bar code rather than a 16-digit credit card number. After expanding epay across Europe and the U.S., we realized there were more customers out there we could help in our mission of making payments accessible, convenient and affordable. In 2007, we fulfilled that vision through the strategic acquisition of Ria, a global money remittance business.Moving through the global recession in 2008-2009, we continued to grow each of our three businesses and one thing became apparent – smartphones were emerging as a driving force in changing the way people communicated, including the way the customer may choose to make payments, interact with their financial institution and manage their financial transactions. Armed with a skilled team of veteran payment industry experts and the knowledge that payment acceptance would become more digital and less reliant on standard 16-digit credit card numbers, our team began to develop an industry-leading cloud-based payment platform that would transform payment acceptance.With the continued growth of each of our three segments and a focus on developing a new payments system, what has emerged is our REN Ecosystem™ which is an industry leading solution that encompasses Euronet’s vast global network and innovative payments platforms. Collectively, it empowers businesses and financial institutions to meet the challenges of a changing payments landscape and provides people with convenient access to financial services worldwide. It is important to understand where we have come from, what we have built and where we are going.""CHAIRMAN, CEO AND PRESIDENTMichael J. Brown15 R E N E C O S Y S T E M
Euronet Platforms
REN Microservices
The REN Ecosystem is a view of Euronet
from a technology perspective.
It covers all our critical payment platforms as well as our digital content from leading brands,
ATMs, POS terminals, money transfer locations, and other physical financial touch points.
We rely on these technologies for our day-to-day business and for processing the billions of
transactions we manage each year. The REN Ecosystem also provides payments technologies
and development tools to our software customers through two key offerings with the REN
Foundation and the REV Payments Cloud.
16
R E N E C O S Y S T E M
As its name suggests, the REN Foundation is at the center
Euronet also has software that builds solutions in cloud-based
of the REN Ecosystem and contains the company’s key
environments. These businesses include FinTechs such as
payments platforms.
challenger and digital banks, digital wallet providers, peer-to-
Many businesses such as banks, national switches, and other
financial services companies operate in antiquated data centers
that are expensive to maintain and, in many cases, not capable
of processing modern and mobile-based transactions that rely
on QR codes, biometrics such as fingerprints, or other non-
traditional payment methods. These systems are also based on
peer payments companies, and others that provide a variety
of virtual financial services. Rather than building their solutions
in traditional data centers, developers in these businesses
typically build their solutions through remote access to
technologies via an application programming interface or
what is better known as an API.
decades-old software that is expensive to maintain from
For software customers in these environments, Euronet
licensing and hardware standpoints and written in older
provides the REV Payments Cloud. REV provides an API layer
programming languages that most software development
around the REN Foundation, enabling these developers to
professionals no longer learn.
access Euronet’s payments platforms with a single network
Businesses in these situations license the REN Foundation and
install it in their data centers or private cloud environments
where it is used in parallel with their legacy systems to provide
intelligent payments switching and other functionalities as part of
modernization and digital transformation strategies.
The REN Foundation also provides immediate solutions through
connection (Platform as a Service) and use them in their
custom apps or web applications. In addition, REV enables
these customers to access Euronet’s global network of digital
content from leading brands and use Euronet’s tremendous
physical network of assets including the company’s ATMs,
POS terminals and money transfer locations worldwide for
cash payments or payouts and other physical and digital
an architecture that is built to be compatible with common
financial transactions.
third-party tools, linearly scalable on any hardware, and
maintained with modern programming languages. In addition,
the REN Foundation’s microservices capabilities enable
development teams to quickly build new business logic without
interrupting the system’s core transaction processing, enabling
them to pursue new business opportunities with minimal risk while
also providing a future-proof environment.
Many retailers also leverage REV to access custom-built
Euronet solutions on a SaaS (Software as a Service) basis.
It is these technologies that power
our segments – all of which continue
to boast impressive results.
S E G M E N T S
Our Business Segments:
Services and Solutions
That Power Today's
Economy
Electronic Funds Transfer (EFT)
That single ATM we installed in Budapest in 1995 has grown
funds. We will continue to expand our ATM networks to
into a global ATM network of more than 50,000 ATMs and
new and existing markets, offer banks cost savings through
a suite of ancillary products and services unmatched in the
outsourcing deals and deliver innovative products that give
payments space.
customers the perfect intersection of physical cash in an
Our EFT team remains focused on adding new ATMs in
existing and new markets. During 2019, we deployed more
than 4,200 of our Euronet-branded ATMs across Europe
and into new markets in Asia. And, the recent interest in
outsourcing from financial service providers resulted in an
increase to our outsourcing portfolio of almost 1,800 ATMs.
We also acquired about 1,800 outsourcing ATMs in the U.S.
increasingly digital world. These innovative products include
10 million cardless ATM withdrawal transactions per year in
a market with a population of 38 million people, $4 billion
cash deposits processed, issuing technology that enables
new and traditional banks to issue open loop cards, channel
agnostic acquiring capabilities to support ATM, POS and
online initiatives, real time payments, and many more.
towards the end of the year. These three factors, combined
The diverse network and product offering in the EFT
with new payment products, expansion of dynamic currency
segment will allow us to continue to expand to new markets,
conversion (DCC) services to all bank and credit cards
add new products to our ATMs and offer banks a unique
worldwide, more software launches and other ancillary
value proposition as they continue to close branches across
services on our ATMs drove a 53% year-over-year increase in
the world. This strong set of assets will allow us to continue
adjusted operating income in 2019 – the eighth consecutive
to drive long-term double-digit growth.
year EFT has achieved double-digit growth.
As banks continue to close their branches around the world
we believe that with our vast network of ATMs and leading-
edge technology, the EFT segment is well positioned to
ensure consumers around the world have access to their
18
S E G M E N T S
epay
epay was founded to transform mobile phone top-up into
epay has now achieved two consecutive years of double-
a digital experience by providing the service through a bar
digit growth and has provided leading-edge technology
code or swipe card rather than a scratch card with a PIN.
to some of the world’s biggest brands and retail partners.
As smartphones were introduced and the fee structures
epay continues to develop technology that will help our
of mobile top-ups were reduced, epay found itself at a
partners advance their digital strategies, bring content to
crossroads. Leveraging the strength of the international retail
consumers in their preferred form, and provide payments
network that epay had established, the epay team went to
inclusion for all customers through various mobile wallet
leading content providers such as Apple and Google and
and retail integrations.
helped them establish an international gift card presence
quickly and efficiently. What ensued was a complete
transformation of the epay business into a leading global
digital media content and SaaS solutions provider.
19
S E G M E N T S
Money Transfer
In the 12 years since we acquired Ria, our network has
While more than 90% of remittances are still paid in cash,
grown almost 10x, from 42,000 locations to what has
we recognize the importance of digital and have invested
become the second leading global network with nearly
heavily on our digital network. More than 20% of our
400,000 locations across 160 countries. Our dedication
international send volume is deposited into an account,
to growing this network, the powerful technology running
and our money transfer service now reaches more than 3.2
our money transfer service, and our competitive consumer
billion bank accounts globally. In addition, we can deliver
pricing positioned Ria at the crux of the money transfer
funds to more than 30 mobile wallets. In fact, including the XE
industry. Walmart recognized Ria's value proposition and
payments business we acquired in 2015, cross border volumes
through the launch of Walmart2Walmart money transfer,
initiated or terminated on a digital device or into an account
we have saved customers $400 million.
represented 50% of our total Money Transfer Segment’s
Digital-only players also recognize the need for a physical
volume in 2019.
payout network for beneficiaries in cash-based economies.
While our money transfer growth was constrained by
These digital-only players now utilize Ria’s payments rails to
transitory challenges in our domestic money transfer business
provide their consumers with leading cash payouts to 160
and limited growth in XE from Brexit uncertainties, our
countries around the world.
underlying international remittance business continues to
grow at strong double-digit rates. While 2020 growth may
be limited by the coronavirus pandemic, we expect that as
we see the economy return to growth people will naturally
think of their family first and begin sending money home,
which combined with mid-single digit industry growth rates
expected from World Bank and ample room to continue to
grow our network give us confidence in our long-term money
transfer growth expectations.
20
F I N A N C I A L P E R F O R M A N C E
Revenue Mix
2 0 1 9 R E V E N U E * | $ 2 , 7 5 4 . 2 M
40%
Money Transfer
28%
epay
32%
EFT
Adjusted EBITDA Mix
2 0 1 9 A D J U S T E D E B I T D A * | $ 6 3 0 . 6 M
Financial Performance
During 2019, we processed more than 4.7 billion
transactions, which delivered $2.8 billion in revenue and
adjusted earnings per share of $7.01, a 27% year-over-year
increase and the seventh consecutive year of double-digit
adjusted EPS growth.
We also continued to strengthen our balance sheet,
ending the year with total cash of $1.5 billion and total
debt of $1.1 billion. We delivered more than $350 million in
cash flows generated from operations, while also funding
additional capital expenditures including ATM expansion.
We successfully replaced the $401.5 million of convertible
bonds outstanding with new $525.0 million of 0.75%
convertible bonds. We also successfully issued €600 million
in 7-year senior notes with a 1 3/8% coupon rate. These
bonds secured cash to fund our operations and combined
with the $1.0 billion of availability on our revolver, provide
significant financial flexibility to operate the business.
With a strong pipeline of earnings growth drivers, a strong
balance sheet and significant financial flexibility, we are
well positioned to navigate the challenges COVID-19 has
brought on our business and capitalize on competitive
opportunities presented to us. We are confident in our
ability to generate double digit growth over the long term.
*Revenues, Adjusted EBITDA and Percent EBITDA Margin by segment
excludes eliminations and expenses incurred by corporate services
27%
15%
58%
1 5 % M A R G I N
Money Transfer
1 1 % M A R G I N
epay
3 3 % M A R G I N
EFT
21
C O N C L U S I O N
As you can see, we have accomplished a lot in 2019 and over the last 25 years, and where we are right
now is perhaps the most exciting place we’ve been as we introduce technology that is revolutionizing
payments for consumers, businesses, and even entire countries.
It is these investments in technology that have aided our ability to work through this pandemic. All of our
servers are cloud-based so there was no interruption to our business. Our security platforms are strong
so we were easily able to transition our workforce to remote work arrangements. Various governments
have initiated stimulus and support bills which will see us through. And, our balance sheet is strong and
we have plenty of availability on our credit agreement. So, while our 2020 expectations remain uncertain
as we work through this global pandemic, we are confident that our business is still capable of producing
double-digit growth results in the long term.
To our employees: Thank you for your commitment and dedication. Together, like many times over the
past 25 years, we will overcome the challenges brought about by the Covid-19 virus and, together, we will
continue to add more products to more countries on more devices with leading edge, creative technology.
And, thank you to our partners, our customers and our shareholders for your trust and support.
We will continue to deliver exciting new products and strong financial results. Here’s to the next 25!
Sincerely,
22
E X E C U T I V E S U M M A R Y
Executive Officers and Management
Directors
! M I CH A E L J. B ROW N
Chairman, Chief Executive Officer and President
! R I CK L . W E L L E R
Executive Vice President and Chief Financial Officer
! J E F F R E Y B. N E W M A N
Executive Vice President and General Counsel
(Retired effective March 16, 2020)
! K E V I N J. C A P O N E CCH I
Executive Vice President and Chief Executive Officer,
epay, Software and EFT Asia Pacific Segment
! J UA N C. B I A N CH I
Executive Vice President and Chief Executive Officer,
Money Transfer Segment
! N I KOS F O U N TAS
Executive Vice President and Chief Executive Officer,
EFT Americas, Europe, Middle East and Africa Division
! D R . M A RT I N L . B R Ü CK N E R
Senior Vice President and Chief Technology Officer
! TO N Y WA R R E N
Managing Director, Payments Software
! M I CH A E L J. B ROW N
Chairman, Chief Executive Officer and President
Euronet Worldwide, Inc.
! PAU L S. A LT H AS E N
Co-founder
epay
! M A R K CA L L E GA R I
Founder and Chief Executive Officer
Callegenix LLC
! T H O M AS A . M CD O N N E L L
Retired President and Chief Executive Officer
DST Systems, Inc.
! D R . A N D R Z EJ O L E CH OWS K I
Professor
Vistula University, Warsaw, Poland
! A N D R E W B. S C H M I T T
Retired Chairman and Chief Executive Officer
Layne Christensen Company
! E R I B E RTO R . S CO CI M A R A
Retired Chairman and Chief Executive Officer
Scocimara & Company, Inc.
! M . J E A N N I N E ST R A N DJ O R D
Retired Senior Vice President
Sprint Corporation
Contact the Board
of Directors
To report complaints about Euronet’s
financial reporting, internal control
procedures, auditing matters or other
concerns to the Board of Directors or
the Audit Committee, write to:
Euronet Board of Directors,
c/o The General Counsel,
Euronet Worldwide, Inc.
3500 College Boulevard
Leawood, KS 66211
Or, email directors@eeft.com
Investor Information
Transfer Agent
Copies of Euronet Worldwide, Inc.’s
Annual Report on Form 10-K, quarterly
reports on Form 10-Q and current
reports on Form 8-K, are filed with the
Securities and Exchange Commission
(SEC), and are available without
charge from:
Euronet Investor Relations
3500 College Boulevard
Leawood, KS 66211
In addition, the Company’s Form 10-K
and other filings with the SEC are
available at sec.gov or through our
website at euronetworldwide.com.
Computershare Investor Services
P.O. Box 43078
Providence, RI 02940-3078
computershare.com
Corporate Headquarters
Euronet Worldwide, Inc.
3500 College Boulevard
Leawood, KS 66211 USA
+1 (913) 327-4200
Stock Listing
U.S. NASDAQ: EEFT
23
10K Report
24
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 10-K
_________________________
(Mark One)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2019
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from
to
OR
Commission File Number 001-31648
EURONET WORLDWIDE, INC.
(Exact name of Registrant as specified in its charter)
________________________
Delaware
(State or other jurisdiction of incorporation or organization)
74-2806888
(I.R.S. Employer Identification No.)
3500 College Boulevard
Leawood,
Kansas
(Address of principal executive offices)
66211
(Zip Code)
(913) 327-4200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock
1.375% Senior Notes due 2026
Trading Symbol(s)
Name of Each Exchange on Which Registered
EEFT
EEFT26
Nasdaq Global Select Market
Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
_________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No ¨
25
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated
filer þ
Accelerated filer o Non-accelerated filer o
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
As of June 28, 2019, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was
approximately $8.8 billion. The aggregate market value was determined based on the closing price of the Common Stock on June 28, 2019.
As of February 28, 2020, the registrant had 53,519,855 shares of Common Stock outstanding.
Documents Incorporated By Reference
Portions of the registrant's Proxy Statement for its 2020 Annual Meeting of Stockholders, which will be filed with the Securities and
Exchange Commission no later than 120 days after December 31, 2019, are incorporated by reference into Part III of this Annual Report on
Form 10-K.
26
TABLE OF CONTENTS
ITEM NUMBER
ITEM DESCRIPTION
PAGE
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV
ITEM 15.
BUSINESS………………………………………………………………………………………….
RISK FACTORS……………………………………………………………………………………
UNRESOLVED STAFF COMMENTS…………………………………………………………….
PROPERTIES……………………………………………………………………………………….
LEGAL PROCEEDINGS…………………………………………………………………………..
MINE SAFETY DISCLOSURES…………………………………………………………………..
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES…………………………
SELECTED FINANCIAL DATA…………………………………………………………………..
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS………………………………………………………………….
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK……………
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA………………………………….
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE……………………………………………………………………….
CONTROLS AND PROCEDURES………………………………………………………………..
OTHER INFORMATION…………………………………………………………………………..
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE………………...
EXECUTIVE COMPENSATION…………………………………………………………………..
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS………………………………………………...
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE………………………………………………………………………………….
PRINCIPAL ACCOUNTING FEES AND SERVICES…………………………………………….
28
47
66
66
66
66
67
70
71
92
95
141
141
142
142
142
142
142
142
143
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES……………………………………..
144
SIGNATURES……………………………………………………………………………………...
…...
148
27
ITEM 1. BUSINESS
PART I
References in this report to “we,” “our,” “us,” the “Company” and “Euronet” refer to Euronet Worldwide, Inc. and its
subsidiaries unless the context indicates otherwise.
GENERAL OVERVIEW
BUSINESS OVERVIEW
Euronet is a leading electronic payments provider. We offer payment and transaction processing and distribution solutions to
financial institutions, retailers, service providers and individual consumers. Our primary product offerings include
comprehensive automated teller machine (“ATM”), point-of-sale (“POS”), card outsourcing, card issuing and merchant
acquiring services; software solutions and cloud based payment solutions; electronic distribution of prepaid mobile airtime and
other electronic payment products; foreign exchange services and global money transfer services.
CORE BUSINESS SEGMENTS
We operate in the following three segments as of December 31, 2019:
The Electronic Fund Transfer ("EFT") Processing Segment processes transactions for a network of 46,070 ATMs and
approximately 330,000 POS terminals across Europe, the Middle East and Asia Pacific. We provide comprehensive
electronic payment solutions consisting of ATM cash withdrawal and deposit services, ATM network participation,
outsourced ATM and POS management solutions, credit and debit card outsourcing, and card issuing and merchant acquiring
services. In addition to our core business, we offer a variety of value added services, including ATM and POS dynamic
currency conversion, domestic and international ATM surcharge, advertising, customer relationship management (“CRM”),
mobile top-up, bill payment, fraud management, foreign remittance payout, cardless payout, banknote recycling solutions
and tax-refund services. Through this segment, we also offer a suite of integrated electronic financial transaction software
solutions for electronic payment and transaction delivery systems. In 2019, the EFT Processing Segment accounted for
approximately 32% of Euronet's consolidated revenues.
The epay Segment provides distribution and processing of prepaid mobile airtime and other electronic content and payment
processing services for various prepaid products, cards and services throughout our worldwide distribution network. We
operate a network that includes approximately 728,000 POS terminals that enable electronic processing of prepaid mobile
airtime “top-up” services and other digital media content in Europe, the Middle East, Asia Pacific, the United States and
South America. We also provide vouchers and physical gift fulfillment services in Europe, gift card distribution and
processing services in most of our markets and digital code distribution in a growing number of markets. In 2019, the epay
Segment accounted for approximately 28% of Euronet's consolidated revenues.
The Money Transfer Segment provides global consumer-to-consumer money transfer services, primarily under the brand
names Ria, AFEX, and IME, and global account-to-account money transfer services under the brand name xe. We offer
services under the brand names Ria and IME through a network of sending agents, Company-owned stores (primarily in
North America, Europe and Malaysia) and our websites (riamoneytransfer.com and online.imeremit.com), disbursing money
transfers through a worldwide correspondent network that includes approximately 397,000 locations. xe is a provider of
foreign currency exchange information on its currency data websites (www.xe.com and www.x-rates.com). We offer global
account-to-account money transfer services through our websites (www.xe.com and https://transferxe.com) and xe customer
service representatives. In addition to money transfers, we offer customers bill payment services (primarily in the U.S.),
payment alternatives such as money orders, comprehensive check cashing services for a wide variety of issued checks, along
28
with competitive foreign currency exchange services and mobile top-up. Through xe, we offer cash management solutions
and foreign currency risk management services to small-and-medium sized businesses. We are one of the largest global
money transfer companies measured by revenues and transaction volumes. In 2019, the Money Transfer Segment accounted
for approximately 40% of Euronet's consolidated revenues.
Euronet conducts business globally, serving customers in approximately 170 countries. We have 13 transaction processing
centers, six in Europe, five in Asia Pacific and two in North America. We also maintain 66 business offices that are located in
41 countries. Our corporate offices are located in Leawood, Kansas, USA.
HISTORICAL PERSPECTIVE
Euronet was established in 1994 as Euronet Bank Access Kft., a Hungarian limited liability company. Operations began in 1995
when we established a processing center in Budapest, Hungary and installed our first ATMs in Hungary, followed by Poland
and Germany in 1996. Euronet was reorganized in March 1997 in connection with its initial public offering, and at that time,
our operating entities became wholly owned subsidiaries of Euronet Services, Inc., a Delaware corporation. We changed our
name from Euronet Services, Inc. to Euronet Worldwide, Inc. in August 2001.
Initially, most of Euronet's resources were devoted to establishing and expanding the ATM network and ATM management
services business in Europe. In December 1998, we acquired Arkansas Systems, Inc. (now known as "Euronet USA"), a U.S.-
based company that produces electronic payment and transaction delivery systems software for retail banks internationally,
which resulted in significant ongoing savings in third-party licensing, services and maintenance costs. By the end of 1998, we
were doing business in Hungary, Poland, Germany, the Czech Republic and Croatia. From 1998 until 2005, we developed
networks in India, Slovakia, Serbia and Bulgaria.
In 2005, we expanded our product offerings of the EFT Processing Segment through the acquisition of Instreamline S.A., a
Greek company that provides credit card and POS outsourcing services in addition to debit card and transaction gateway
switching services in Greece and the Balkan region. In 2007, we combined our EFT and Software segments as both businesses
are strategically aligned due to the fact that our software segment primarily supports our EFT service offerings and processing
centers. In 2009 Euronet, through one of its group companies, was granted authorization as an e-money institution in the
United Kingdom ("U.K.") under the E-Money Directive of the European Union ("E.U."). In 2011, the Second E-Money
Directive ("2EMD") came into effect. 2EMD enables authorized e-money institutions to provide payment services and issue e-
money throughout the European Economic Area ("EEA") under a single regulatory framework. As a result of 2EMD, Euronet,
through one of its group companies, obtained relevant memberships of Visa and Mastercard during 2011. By obtaining the
status as an authorized e-money institution together with its principal memberships of Visa and Mastercard, Euronet has been
able to expand its Independent ATM Deployment ("IAD") networks across Europe. In 2018, Euronet, through one of its group
companies, was reauthorized by the U.K. Financial Conduct Authority to provide payment services under the Second Payment
Services Directive (“PSD2”) as well as continue to provide e-money serves under the 2EMD. By the end of 2019, Euronet's
IAD network of ATMs had expanded to include 29 countries. Our product portfolio for the EFT Processing Segment operates in
86 countries.
In 2003, Euronet added a complementary business line through the acquisition of epay Limited (“epay”), which had offices in
the U.K. and Australia. Through subsequent acquisitions between 2003 and 2011, the epay Segment continued to expand in
Europe (Germany, Romania, Spain and the U.K.), the U.S., the Middle East, Asia and Brazil, and established new offices in
New Zealand, Poland, India and Italy. We believe the epay Segment is the world's leading international network for distribution
and processing of prepaid mobile airtime ("top-up") as well as other electronic payment products and services.
In 2007, we established the Money Transfer Segment after completing the acquisition of Los Angeles-based Ria, one of the
largest global money transfer companies measured by revenues and transaction volumes. Established in 1987, Ria originates
and terminates transactions through a network of sending agents and Company-owned stores located around the world. In
November 2009, Ria obtained a payment services license under the E.U.'s Payment Services Directive ("PSD") from the U.K.
Financial Services Authority, (now the Financial Conduct Authority), which allowed Ria to operate under one license and one
29
regulator for all EEA Member States ("Member States"). Ria also obtained payment services licenses in Spain and France. The
licenses also facilitated expansion into new markets through the sales of money transfers through agents in countries where the
use of agents was not previously permitted. Ria became reauthorized under PSD2 in 2018. In 2014, Euronet added a
complementary product to the money transfer portfolio through the acquisition of HiFX, which offered account-to-account
international payment services to high-income individuals and small-and-medium sized businesses. In 2015, we completed the
acquisition of IME (M) Sdn Bhd ("IME") which provided Euronet with immediate entry into the Asian and Middle East money
transfer send markets. In 2015, we also added a complementary business line through the acquisition of xe Corporation ("xe"),
which provides currency-related data and international payment services. In addition to expanding its money transfer network,
the segment expanded its product portfolio to offer complementary non-money transfer products such as bill payment and
check cashing, and prepaid services in conjunction with the epay Segment.
In October 2016, the Company completed the acquisition of YourCash Europe Limited and its subsidiaries (“YourCash”).
YourCash is a company incorporated in England that owns and operates primarily merchant filled ATMs in the United
Kingdom, the Netherlands, and Ireland.
In March 2018, the Company completed the acquisition of Innova Tax Free Group S.L. and its subsidiaries (“Innova”). Innova
is a company incorporated in Spain and offers tax refunds services to consumers in Spain, Portugal, United Kingdom, France,
Italy and Germany. In May 2018, the Company acquired Easycash Ireland Limited (“Easycash”). Easycash owns and operates
a network of ATMs in the Republic of Ireland.
In November 2019, the company completed the acquisition of a small ATM outsourcing network.
BUSINESS SEGMENT OVERVIEW
For a discussion of operating results by segment, please see Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, and Note 16, Business Segment Information, to the Consolidated Financial Statements.
EFT PROCESSING SEGMENT
OVERVIEW
Our EFT Processing Segment provides comprehensive electronic payment solutions consisting of ATM cash withdrawal and
deposit services, ATM network participation, outsourced ATM and POS management solutions, credit and debit card
outsourcing; card issuing and merchant acquiring services. In addition to our core business, we offer a variety of value added
services, including ATM and POS dynamic currency conversion, domestic and international surcharge, advertising, CRM,
prepaid mobile top-up, bill payment, money transfer, fraud management, foreign remittance payout, cardless payout, banknote
recycling solutions and tax-refund services. We provide these services either through our Euronet-owned ATMs and POS
terminals, through contracts under which we operate ATMs and POS terminals on behalf of our customers or, for certain
services, as stand-alone products. Through this segment, we also offer a suite of integrated electronic financial transaction
software solutions for electronic payment and transaction delivery systems.
The primary sources of revenues generated by our ATM network are recurring monthly management fees, transaction-based
fees, surcharges and margins earned on dynamic currency conversion transactions. We receive fixed monthly fees under many
of our outsourced management contracts. The EFT Processing Segment also generates revenues from POS operations and
merchant management, card network management for credit, debit, prepaid and loyalty cards, prepaid mobile airtime recharge
and other electronic content on ATMs and ATM advertising. We primarily service financial institutions in the developing
markets of Central, Eastern and Southern Europe (Hungary, Poland, the Czech Republic, Croatia, Romania, Serbia, Greece and
Ukraine), the Middle East and Asia Pacific (India, China, Malaysia, Pakistan and the Philippines), as well as several developed
countries in Western Europe. As of December 31, 2019, we operated 46,070 ATMs compared to 40,354 at December 31, 2018.
The increase was largely due to the expansion of our ATM networks in Asia Pacific and Europe.
30
We monitor the number of transactions made by cardholders on our network. These include cash withdrawals, balance
inquiries, deposits, prepaid mobile airtime recharge purchases, dynamic currency conversion transactions and certain denied
(unauthorized) transactions. We do not bill certain transactions on our network to financial institutions, and we have excluded
these transactions for reporting purposes. The number of transactions processed over our networks has increased over the last
five years at a compound annual growth rate (“CAGR”) of approximately 19.1% as indicated in the following table:
(in millions)
EFT Processing Segment transactions per year
2015
1,523
2016
1,885
2017
2,352
2018
2,721
2019
3,052
Our processing centers for the EFT Processing Segment are located in Martinsreid, Germany; Budapest, Hungary; Mumbai,
India; Beijing, China; and Karachi, Pakistan. Our processing centers run two types of proprietary transaction switching
software: our legacy ITM software, which we have used and sold to banks since 1998 through our Software Solutions unit, and
a new, innovative switching software package named “REN” which is hosted in Germany and India. The processing centers
operates 24 hours a day, seven days a week. We have been progressively transitioning all of our networks to REN.
EFT PROCESSING PRODUCTS AND SERVICES
Outsourced Management Solutions
Euronet offers outsourced management solutions to financial institutions, merchants, mobile phone operators and other
organizations using our processing centers' electronic financial transaction processing software. Our outsourced management
solutions include management of existing ATM networks, development of new ATM networks, management of POS networks,
management of automated deposit terminals, management of credit and debit card databases and other financial processing
services. These solutions include 24-hour monitoring of each ATM's status and cash condition, managing the cash levels in
each ATM, coordinating the cash delivery and providing automatic dispatches for necessary service calls. We also provide real-
time transaction authorization, advanced monitoring, network gateway access, network switching, 24-hour customer service,
maintenance, cash settlement and reconciliation, forecasting and reporting. Since our infrastructure can support a significant
increase in transactions, any new outsourced management solutions agreements should provide additional revenue with lower
incremental cost.
Our outsourced management solutions agreements generally provide for fixed monthly management fees and, in most cases,
fees payable for each transaction. The transaction fees under these agreements are generally lower than those under card
acceptance agreements.
Euronet-Branded ATM Transaction Processing
Our Euronet-branded ATM networks, also known as IAD networks, are primarily managed by a processing center that uses our
internally developed software solutions. The ATMs in our IAD networks are able to process transactions for holders of credit
and debit cards issued by or bearing the logos of financial institutions and international card organizations such as American
Express®, Visa®, Mastercard®, Diners Club International®, Discover® and UnionPay International©, as well as international
ATM networks such as PULSE®. This is accomplished through our agreements and relationships with these institutions,
international credit and debit card issuers and international card associations.
When a bank cardholder conducts a transaction on a Euronet-owned ATM or automated deposit terminal, we receive a fee from
the cardholder's bank for that transaction. The bank pays us this fee either directly or indirectly through a central switching and
settlement network. When paid indirectly, this fee is referred to as the “interchange fee.” All of the banks in a shared ATM and
POS switching system establish the amount of the interchange fee by agreement. We receive transaction processing fees for
successful transactions and, in certain circumstances, for transactions that are not completed because they fail to receive
authorization. The fees paid to us by the card issuers are independent of any fees charged by the card issuers to cardholders in
31
connection with the ATM transactions. In some cases, we may also charge a direct access fee or surcharge to cardholders at the
ATM. The direct access fee is added to the amount of the cash withdrawal and debited from the cardholder's account.
We generally receive fees or earn margin from our customers for six types of ATM transactions:
• Cash withdrawals;
• Cash deposits;
• Balance inquiries;
• Transactions not completed because the relevant card issuer does not give authorization;
• Dynamic currency conversion; and
• Prepaid telecommunication recharges and other electronic content.
Card Acceptance or Sponsorship Agreements
Our agreements with financial institutions and international card organizations generally provide that all credit and debit cards
issued by the financial institution or organization may be used at all ATMs that we operate in a given market. In most markets,
we operate under sponsorship by our own e-money licensed entity, Euronet 360 Finance Limited ("E360"). In some markets,
we have agreements with a financial institution under which we are designated as a service provider (which we refer to as
“sponsorship agreements”) for the acceptance of domestic cards and/or cards bearing international logos, such as Visa and
Mastercard. These card acceptance or sponsorship agreements allow us to receive transaction authorization directly from the
card issuing institution or international card organizations on a stand-in basis. Our agreements generally provide for a term of
three to seven years and renew automatically unless either party provides notice of non-renewal prior to the termination date. In
some cases, the agreements are terminable by either party upon six months' notice. We are generally able to connect a financial
institution to our network within 30 to 90 days of signing a card acceptance agreement. The financial institution provides the
cash needed to complete transactions on the ATM, but we do provide a significant portion of the cash to our IAD network to
fund ATM transactions ourselves. Euronet is generally liable for the cash in the ATM networks.
Under our card acceptance agreements, the ATM transaction fees we charge vary depending on the type of transaction and the
number of transactions attributable to a particular card issuer. Our agreements generally provide for payment in local currency,
though transaction fees are sometimes denominated in euros or U.S. dollars. Transaction fees are billed to financial institutions
and card organizations with payment terms typically no longer than one month.
Dynamic Currency Conversion
We offer dynamic currency conversion (“DCC”) over our IAD networks, ATM networks that we operate on an outsourced basis
for banks, and over banks' ATM networks or POS devices as a stand-alone service. DCC is a feature of the underlying ATM or
POS transaction that is offered to customers completing transactions using a foreign debit or credit card issued in a country
with a currency other than the currency where the ATM or POS is located. The customer is offered a choice between
completing the transaction in the local currency or in the customer's home currency via a DCC transaction. If a cardholder
chooses to perform a DCC transaction, the acquirer or processor performs the foreign exchange conversion at the time that the
funds are delivered at an ATM or transactions completed through the POS terminal, which results in a pre-defined amount of
the customer's home currency being charged to their card. Alternatively, the customer may have the transaction converted by
the card issuing bank, in which the amount of local currency is communicated to the card issuing bank and the card issuing
bank makes the conversion to the customer's home currency.
32
When a customer chooses DCC at an ATM or POS device and Euronet acts as the acquirer or processor, we receive all or a
portion of the foreign exchange margin on the conversion of the transaction. On our IAD ATMs, Euronet receives the entire
foreign exchange margin. If Euronet is not the acquirer or processor of the transaction, we share the DCC revenue with the
sponsor bank. On ATMs or POS devices that are operated for banks, or where we offer DCC as a stand-alone service to banks
or merchants, we share the foreign exchange margin. The foreign exchange margin on a DCC transaction increases the amount
Euronet earns from the underlying ATM or POS transaction and supports deployment of additional ATMs in new locations.
Other Products and Services
Our network of owned or operated ATMs allows for the sale of financial and other products or services at a low incremental
cost. We have developed value added services in addition to basic cash withdrawal and balance inquiry transactions. These
value-added services include mobile top-up, fraud management, bill payment, domestic and international surcharge, CRM,
foreign remittance payout, cardless payout, banknote recycling, electronic content, ticket and voucher, and advertising. We are
committed to the ongoing development of innovative new products and services to offer our EFT processing customers.
Euronet offers multinational merchants a Single European Payments Area (“SEPA”)-compliant cross-border transaction
processing solution. SEPA is an area in which all electronic payments can be made and received in euros, whether between or
within national boundaries, under the same basic conditions, rights and obligations, regardless of the location. This single,
centralized acquiring platform enables merchants to benefit from cost savings and faster, more efficient payments transfer.
Although many European countries are not members of the eurozone, our platform can serve merchants in these countries as
well, through our multi-currency functionality.
Software Solutions
We also offer a suite of integrated software solutions for electronic payments and transaction delivery systems. We generate
revenues for our software products from licensing, professional services and maintenance fees for software and sales of related
hardware, primarily to financial institutions around the world.
Our software products are an integral part of the EFT Processing Segment product lines, and our investment in research,
development, delivery and customer support reflects our ongoing commitment to an expanded customer base both internally
and externally. Our proprietary software is used by our processing centers in the EFT Processing Segment, resulting in cost
savings and added value compared to third-party license and maintenance options. Our proprietary software consists of our
legacy ITM software, which we have used and sold to banks since 1998 through our Software Solutions unit, and an innovative
switching software package named REN that we released in 2017.
We currently operate REN in our processing center to process payments for our own networks in Europe and we are
progressively transitioning all our networks globally to REN. The private cloud architecture of REN allows us to
simultaneously deploy REN across multiple physical locations. While we currently only operate REN for our internal
resources, REN is scalable and will allow us to offer payment and digital solutions to third parties. In addition to payments
processing, REN also supports other digital elements, including card issuing for physical and virtual cards, loyalty services,
Know Your Customer compliance, real time settlement, inventory management, risk and fraud management and other services.
REN will be used as a platform to connect Euronet assets to offer digital payment solutions.
EFT PROCESSING SEGMENT STRATEGY
The EFT Processing Segment maintains a strategy to expand the network of ATMs and POS terminals into developed and
developing markets that have the greatest potential for growth. In addition, we follow a supporting strategy to increase the
penetration of value added (or complementary) services across our existing customer base, including DCC, surcharge, cardless
payment, banknote recycling solutions, tax refund services, advertising, fraud management, bill payment, mobile top-up, CRM
and foreign remittance payout.
33
We continually strive to make our own ATM networks more efficient by eliminating underperforming ATMs and installing
ATMs in more desirable locations. We make selective additions to our own ATM network if we see market demand and profit
opportunities. In tourist locations, we also shut down ATMs during the winter season when tourist activity is low.
In recent years, the need for “all-in” services has increased. Banks, particularly smaller banks, are increasingly looking for
integrated ATM, POS and card issuing processing and management services. Euronet is well positioned for this opportunity as
it can offer a full end-to-end solution to the potential partners.
Additional growth opportunities are driven through financial institutions that are receptive to outsourcing the operation of their
ATM, POS and card networks. The operation of these devices requires expensive hardware and software and specialized
personnel. These resources are available to us, and we offer them to our customers under outsourcing contracts. The expansion
and enhancement of our outsourced management solutions in new and existing markets will remain an important business
opportunity for Euronet. Increasing the number of non-owned ATMs and POS terminals that we operate under management
services agreements and continued development of our credit and debit card outsourcing business could provide continued
growth while minimizing our capital investment.
Complementary services offered by our epay Segment, where we provide prepaid mobile top-up services through POS
terminals, strengthens the EFT Processing Segment's line of services. We plan to continue to expand our technology and
business methods into other markets where we operate and further leverage our relationships with mobile phone operators and
financial institutions to facilitate that expansion.
SEASONALITY
Our EFT Processing business experiences its heaviest demand for cash withdrawals and DCC during the third quarter of the
fiscal year, coinciding with the tourism season. It is also impacted by seasonality during the fourth quarter and first quarter of
each year due to higher transaction levels during the holiday season and lower levels after the holiday season. This seasonality
is increased due to our practice of "winterizing" ATMs in tourist locations that experience significantly higher traffic during the
summer. Winterizing involves shutting down the ATMs during the slower winter months and results in lower overall transaction
volumes in the EFT Processing Segment during those months. As we have expanded our IAD network in tourist locations, the
financial impact of winterization has increased, because we continue to bear the expense of winterized ATMs even though they
do not generate transactions during the winter months.
SIGNIFICANT CUSTOMERS AND GOVERNMENT CONTRACTS
No individual customer of the EFT Processing Segment makes up greater than 10% of total consolidated revenues. In India, we
have contracts with government-owned banks to provide certain ATM driving and transaction switching services and mobile
airtime recharge services. Additionally, certain government-owned banks are members of our shared ATM network in India. In
Croatia, we lease land and other property for certain ATM sites from companies that are majority-owned by the government. In
Pakistan, we have a contract with a government-owned bank to provide software support services.
COMPETITION
Our principal EFT Processing Segment competitors include ATM networks owned by financial institutions and national
switches consisting of consortiums of local banks that provide outsourcing and transaction services to financial institutions and
independent ATM deployers in a particular country. Additionally, large, well-financed companies that operate ATMs offer ATM
network and outsourcing services, and those that provide card outsourcing, POS processing and merchant acquiring services
also compete with us in various markets. Small local operators have also recently begun offering their services, particularly in
the IAD market. None of these competitors has a dominant market share in any of our markets. Competitive advantages in our
EFT Processing Segment include breadth of service offering, network availability and response time, price to both the financial
institution and to its customers, ATM location and access to other networks.
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epay SEGMENT
OVERVIEW
We currently offer prepaid mobile airtime top-up services and other electronic content and payment processing services for
various prepaid products, cards and services on a network of approximately 728,000 POS terminals across approximately
339,000 retailer locations in Europe, the Middle East, Asia Pacific, the United States and South America. Our processing
centers for the epay Segment are located in Billericay, U.K.; Martinsried, Germany; Hamburg, Germany; Milan, Italy; Buena
Park, California, USA; and Kansas City, Missouri, USA.
Since 2003, we have expanded our prepaid business in new and existing markets by drawing upon our depth of experience to
build and expand relationships with content providers, mobile phone operators and retailers. We offer a wide range of products
across our retail networks, including prepaid mobile airtime, prepaid debit cards, prepaid gift cards, prepaid electronic content
such as music, games and software, prepaid vouchers, transport payments, lottery payments, prepaid long distance and bill
payment processing assistance through partnerships with various licensed money transmitters.
SOURCES OF REVENUES
The epay Segment generates commissions and processing fees from the distribution of electronic content and from
telecommunications service providers for the sale and distribution of prepaid mobile airtime. In 2019, of the total revenues and
gross profit for the epay Segment, approximately 63% of total revenues and approximately 72% of gross profit was from
electronic content other than prepaid mobile airtime (digital media products).
Customers purchase digital media prepaid content as a gift or for self-use. Content is generally purchased in two ways:
• Directly online from the content provider using an online payment method; or
• Through physical retail stores, online retailers or other electronic channels, including payment wallets, online banking,
mobile applications and other sources.
Customers using mobile phones generally pay for usage in one of two ways:
• Through “postpaid” accounts, where usage is billed at the end of each billing period; or
• Through “prepaid” accounts, where customers pay in advance by crediting their accounts prior to usage.
Although mobile phone operators in the U.S. and certain European countries have provided service principally through
postpaid accounts, the norm in many other countries in Europe and the rest of the world is to offer wireless service on a prepaid
basis.
Prepaid mobile phone credits are generally distributed using personal identification numbers ("PINs"). We distribute PINs in
two ways. First, we establish an electronic connection to the mobile operator and the retailer. When the sale to a customer is
initiated, the terminal requests the PIN from the mobile operator via our transaction processing platform. These transactions
obtain the PIN directly from the mobile operator. The customer pays the retailer and the retailer becomes obligated to make
settlement to us of the principal amount of the mobile airtime sold. We maintain systems that know the amount of mobile top-
up sold by the retailer which allows us in turn to bill that retailer for the mobile top-up sold.
Second, we purchase PINs from the mobile operator which are electronically sent to our processing platform. We establish an
electronic connection with the POS terminals in retailer locations and our processing platform provides the terminal with a PIN
when the mobile top-up is purchased. We maintain systems that monitor transaction levels at each terminal. As sales of
prepaid mobile airtime to customers are completed, the inventory on the platform is reduced by the PIN purchased. The
customer payment and settlement with the retailer are the same as described above.
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We expand our distribution networks by signing new contracts with retailers, and in some markets, by acquiring existing
networks. We continue to focus on growing our distribution network through independent sales organizations that contract
directly with retailers in their network to distribute prepaid mobile airtime or other digital media content from the retailers' POS
terminals. We continue to increase our focus on direct relationships with chains of supermarkets, convenience stores, gas
stations, and other larger scale retailers, where we can negotiate agreements with the retailers on multi-year bases.
In addition to the sale of traditional mobile top-up volume described above, we have expanded distribution into digital media
products and other value-added services. We have leveraged our existing technology infrastructure to sell digital media
products, which have been sold through our traditional retailer network and new retailer networks such as electronic channels.
In the U.S., most prepaid digital media content is purchased for gifting; in markets outside the U.S., consumers generally
purchase prepaid digital media content for self-use.
epay PRODUCTS AND SERVICES
Prepaid Mobile Airtime Transaction Processing
We process prepaid mobile airtime top-up transactions on our POS network across Europe, the Middle East, Asia Pacific, North
America and South America for two types of clients: distributors and retailers. Both types of client transactions start with a
consumer in a retail store. The retailer uses a specially programmed POS terminal in the store, the retailer's electronic cash
register (ECR) system, or web-based POS device that is connected to our network to buy prepaid mobile airtime. The consumer
will select a predefined amount of mobile airtime from the carrier of choice, and the retailer enters the selection into the POS
terminal. The consumer will pay that amount to the retailer (in cash or other payment methods accepted by the retailer). The
POS device then transmits the selected transaction to our processing center. Using the electronic connection we maintain with
the mobile phone operator or drawing from our inventory of PINs, the purchased amount of mobile airtime will be either
credited to the consumer's account or delivered via a PIN printed by the terminal and given to the consumer. In the case of PINs
printed by the terminal, the consumer must then call the mobile phone operator's toll-free number to activate the purchased
airtime to the consumer's mobile account.
One difference in our relationships with various retailers and distributors is the way in which we charge for our services. For
distributors and certain very large retailers, we charge a processing fee. However, the majority of our transactions occur with
smaller retailers. With these clients, we receive a commission or discount on each transaction that is withheld from the
payments made to the mobile phone operator, and we share that commission/discount with the retailers.
Closed Loop Gift Cards
Closed loop (private-branded) gift cards are generally described as merchant-specific prepaid cards, used for purchases
exclusively at a particular merchant's locations. We distribute closed loop gift cards in various categories, including dining,
retail, and digital media, such as music, games and software. Generally, the gift card is activated when a consumer loads funds
(with cash, debit or credit card payment) or purchases a preloaded value gift card at a retail store location or online.
Open Loop Gift Cards
Open loop (network-branded) gift cards are prepaid gift cards associated with an electronic payment network (such as Visa or
Mastercard) and are honored at multiple, unaffiliated locations (wherever cards from these networks are generally accepted).
They are not merchant-specific. We distribute and issue single-use, non-reloadable open loop gift cards carrying the Visa brand
in our retail channels. After the consumer purchases the preloaded value gift card at a retail store location or online, the
consumer must call the toll-free number on the back of the card to activate it.
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Open Loop Reloadable
We distribute Visa and Mastercard issued debit cards provided by Green Dot, NetSpend and other card issuers. We also manage
and distribute a proprietary debit card that allows a retailer to issue its own reloadable store-branded card. Open loop reloadable
cards have features similar to a bank checking account, including direct deposit, purchasing capability wherever a credit card is
accepted, bill payment and ATM access. Fees are charged to consumers for the initial load and reload transactions, monthly
account maintenance and other transactions.
Other Products and Services
Our POS network is used for the distribution of other products and services, including games and software, bill payment,
lottery tickets and transportation products. Through our Cadooz subsidiary, we also distribute vouchers and physical gifts into
the business-to-business ("B2B") channel principally for the purposes of employee and customer incentives and rewards. In
certain locations, the terminals used for prepaid services can also be used for electronic funds transfer to process credit and
debit card payments for retail merchandise. We provide promotion and advertising for content providers of their prepaid
content throughout our retail distribution network. We also provide card production and processing services to some of our
prepaid gift card partners and telecom content providers.
Retailer and Distributor Contracts
We provide our prepaid services through POS terminals or web-based POS devices installed in retail outlets or, in the case of
major retailers, through direct connections between their ECR systems and our processing centers. In markets where we operate
proprietary technology (the U.K., Germany, Australia, Poland, Ireland, New Zealand, Spain, Greece, India, Italy, Brazil and the
U.S.), we generally own and maintain the POS terminals. In certain countries in Europe, the terminals are sold to the retailers
or to distributors who service the retailer. Our agreements with major retailers for the POS services typically have one to three-
year terms. These agreements include terms regarding the connection of our networks to the respective retailer's registers or
payment terminals or the maintenance of POS terminals, and obligations concerning settlement and liability for transactions
processed. Generally, our agreements with individual or small retailers have shorter terms and provide that either party can
terminate the agreement upon three to six months' notice.
In Germany, distributors are key intermediaries in the sale of mobile top-up. As a result, our business in Germany is
substantially concentrated in, and dependent upon, relationships with our major distributors. The termination of any of our
agreements with major distributors could materially and adversely affect our prepaid business in Germany. However, we have
been establishing agreements with independent German retailers in order to diversify our exposure to such distributors.
The number of transactions processed on our POS network over the last five years are indicated in the table below:
(in millions)
epay processing transactions per year
2015
1,335
2016
1,294
2017
1,186
2018
1,149
2019
1,542
The loss of a high-volume, low-margin customer in the Middle East in 2017 contributed to a decline in processing transactions
in 2017 and 2018. The addition of a high-volume, low-margin market in India contributed to an overall increase in processing
transactions in 2019.
epay SEGMENT STRATEGY
Mobile top-up transactions are declining in many developed markets and transaction fees for mobile transactions are being
compressed by the mobile operators. epay's strategy is to defend margins in developing markets by providing value added
services to mobile operators and to decrease our reliance on mobile top-up by increasing distribution of other electronic
content. New product initiatives focus on products such as gift card malls, prepaid debit cards, transport and electronic content,
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including music, software and games. Strategic execution behind new products includes the development of relationships with
global consumer product brands. This strategy leverages the global scale of the epay business allowing global brands to be sold
in many or all of the countries in which we have a presence. Examples of global brands we distribute include iTunes, Google
Play, Sony, and Microsoft.
Telecommunications companies and other content providers have a substantial opportunity to increase revenues by diversifying
the products and services currently offered to their retailers. epay is deploying additional content through its POS network to
retailers and distributors all over the world. The reach, capabilities and quality of the epay network are appealing as a global
distribution channel. We are one of the largest worldwide multi-country operators, and believe we have a distinct competitive
advantage from the existing relationships that we maintain with prepaid content providers and retailers.
SEASONALITY
As the product mix continues to change, the epay business is impacted by seasonality during the fourth quarter and first quarter
of each year due to the higher transaction levels during the holiday season and lower levels following the holiday season.
SIGNIFICANT CUSTOMERS AND GOVERNMENT CONTRACTS
No individual customer of our epay Segment makes up greater than 10% of total consolidated revenues. epay has a contract for
the technology and distribution infrastructure for six state-owned lotteries in Germany. In addition, epay has contracts with the
state of Florida's (USA) Turnpike partners and Transurban Limited, the largest manager of toll road networks in Australia,
Cubic supporting New South Wales Transport ticketing in Australia and with New Zealand Transport Authority, which operates
all toll roads in New Zealand. In Germany, Cadooz has a contract with Deutsche Bahn, which is majority owned by the German
state. We also have a contract for the distribution of mobile airtime with a Saudi company, which is majority owned by the
Saudi government. There are no other government contracts in the epay Segment.
COMPETITION
We face competition in the prepaid business in all of our markets. We compete with a few multinational companies that operate
in several of our markets. In other markets, our competition is from smaller, local companies. The mobile operators in all of our
markets have retail distribution networks, and in some markets, on-line distribution of their own through which they offer top-
up services for their own products.
We believe our size and market share are competitive advantages in many markets. In addition, we believe our processing
platforms are a competitive advantage. We have extremely flexible technical platforms that enable us to tailor POS solutions to
individual retailers and mobile operator and digital media content provider requirements where appropriate. Our platforms are
also able to provide value added services other than processing which makes us a more valuable partner to the content
providers and retailers. We have introduced new digital products into the marketplace such as digital payment for online media
subscriptions. Many of these products are not offered by our competitors and in many countries, these are new products. We are
capitalizing on being the first to market for these products.
The principal competitive factors in the epay Segment include price (that is, the level of commission paid to retailers for each
transaction), breadth of products and up-time offered on the system. Major retailers with high volumes are able to demand a
larger share of the commission, which increases the amount of competition among service providers. We are seeing signs that
some mobile operators are expanding their distribution networks to provide top-up services on-line or via mobile devices,
which provides other alternatives for consumers to use.
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MONEY TRANSFER SEGMENT
OVERVIEW
We provide global money transfer services primarily under the brand names Ria, IME, and xe. Ria and IME provide
consumer-to-consumer money transfer services through a global network of more than 397,000 locations and our website
riamoneytransfer.com and online.imeremit.com. Most of our money transfers are originated through sending agents in
approximately 34 countries, with money transfer delivery completed in 160 countries. The initiation of a consumer money
transfer occurs through retail agents, Company-owned stores or online, while the delivery of money transfers can occur with
bank correspondents, retailer agents or from certain ATMs. Our websites allow consumers to send funds online, using a bank
account or credit or debit card, for pay-out directly to a bank account or for cash pickup.
In addition, we provide global account-to-account money transfer services under the brand name xe. We offer money transfer
services via our websites (www.xe.com and https://transferxe.com) and through customer service representatives. xe also
provides foreign currency exchange information on its currency data websites (www.xe.com and www.x-rates.com). Through
xe, we offer cash management solutions and foreign currency risk management services to small-and-medium sized businesses.
We monitor the number of transactions made through our money transfer networks. The number of transactions processed on
our network has increased over the last five years at a CAGR of approximately 13.7% as indicated in the following table:
(in millions)
Money transfer transactions per year
2015
68.7
2016
82.3
2017
92.2
2018
107.6
2019
114.5
Our sending agent network includes a variety of agents, including Walmart, large/medium size regional retailers, convenience
stores, bodegas, multi-service shops and phone centers, which are predominantly found in areas with a large immigrant
population. Each Ria money transfer transaction is processed using Euronet's proprietary software system and checked for
security, completeness and compliance with federal and state regulations at every step of the process. Senders can track the
progress of their transfers through Ria's customer service representatives, and funds are delivered quickly to their beneficiaries
via our extensive payout network, which includes large banks and non-bank financial institutions, post offices and large
retailers. Our processing centers for the Money Transfer Segment are located in Buena Park, California, USA; Bracknell, U.K.;
Auckland, New Zealand; Kansas City, Missouri, USA; and Kuala Lumpur, Malaysia. We mainly operate Ria call centers in
Buena Park, California; Antiguo Cuscatlán, El Salvador; Kuala Lumpur, Malaysia; Dakar, Senegal; Mumbai, India and Madrid,
Spain and provide multi-lingual customer service for both our agents and consumers. Additionally, we operate a call center for
xe in Sydney, Australia.
We are one of the largest global money transfer companies measured by revenues and transaction volumes. Our Money
Transfer Segment processed approximately $54 billion in money transfers in 2019.
MONEY TRANSFER PRODUCTS AND SERVICES
Money transfer products and services are sold primarily through three channels at agent locations, Company-owned stores and
on internet enabled devices at riamoneytransfer.com, online.imeremit.com, xe.com, and https://transferxe.com (online
transactions).
In an online transaction, customers send funds, using a bank account or credit or debit card, for pay-out at most of our agent
locations around the world or directly to a bank account.
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Through our TeleRia service, customers connect to our call center from a telephone available at an agent location and a
representative collects the information over the telephone and enters it directly into our secure proprietary system. As soon as
the data capture is complete, our central system automatically faxes a confirmation receipt to the agent location for the
customer to review and sign and the customer pays the agent the money to be transferred, together with a fee. The agent then
faxes the signed receipt back to Ria to complete the transaction.
Through our Walmart-2-Walmart Money Transfer Service, which allows customers to transfer money to and from Walmart
stores in the U.S., our Ria business executes the transfers with Walmart serving as both the sending agent and payout
correspondent. Ria earns a significantly lower margin from these transactions than its traditional money transfers; however, the
arrangement adds a significant number of transactions to Ria’s business. The agreement with Walmart establishes Ria as the
only party through which Walmart will sell U.S. domestic money transfers branded with Walmart marks. The agreement had an
initial term expiring in April 2017 and was renewed for an additional three-year period until April 2020. Thereafter, it will
automatically renew for one-year terms unless either party provides notice to the contrary. The agreement imposes certain
obligations on each party, the most significant being service level requirements by Ria and money transfer compliance
requirements by Walmart. Any violation of these requirements by Ria could result in an obligation to indemnify Walmart or
termination of the contract by Walmart. However, the agreement allows the parties to resolve disputes by mutual agreement
without termination of the agreement.
In addition to money transfers, Ria also offers customers bill payment services, payment alternatives such as money orders,
comprehensive check cashing services for a wide variety of issued checks, along with competitive foreign currency exchange
services and mobile top-up. These services are all offered through our Company-owned stores while select services are offered
through our agents in certain markets.
Ria money orders are widely recognized and exchanged throughout the United States. Our check cashing services cover payroll
and personal checks, cashier checks, tax refund checks, government checks, insurance drafts and money orders. Our bill
payment services offer timely posting of customer bills for over 8,000 companies, including electric and gas utilities and
telephone/wireless companies. Bill payment services are offered primarily in the U.S.
xe offers account-to-account international payment service to high-income individuals and small-and-medium sized businesses,
complementing our existing consumer-to-consumer money transfer business. xe has a multi-channel platform which allows
customers to make transfers, track payments and manage their international payment activity online or through a customer
service representative. xe offers cash management solutions and foreign currency risk management services to small-and-
medium sized businesses. xe also offers foreign currency exchange subscriptions and advertising on its websites.
SOURCES OF REVENUES
Revenues in the Money Transfer Segment are derived through the charging of a transaction fee, as well as a margin earned
from purchasing foreign currency at wholesale exchange rates and selling the foreign currency to customers at retail exchange
rates. Sending agents and receiving agents for consumer-to-consumer products each earn fees for cash collection and
distribution services. Euronet recognizes these fees as direct operating costs at the time of sale.
MONEY TRANSFER SEGMENT STRATEGY
The Money Transfer Segment's strategy is to increase the volume of money transfers processed by leveraging our existing
banking and merchant/retailer relationships to expand our agent and correspondent networks in existing corridors. In addition,
we pursue expansion into high-potential money transfer corridors from the U.S. and internationally beyond the traditional U.S.
to Mexico corridor. Further, we expect to continue to take advantage of cross-selling opportunities with our epay and EFT
Processing Segments by providing prepaid services through our stores and agents and offering our money transfer services at
select prepaid retail locations and ATMs we operate in key markets. We will continue to make investments in our systems to
support this growth. Additionally, we are expanding our xe business into new markets.
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SEASONALITY
Our money transfer business is significantly impacted by seasonality that varies by region. In most of our markets, we
experience increased money transfer transaction levels during the month of May and in the fourth quarter of each year,
coinciding with various holidays. Additionally, in the U.S. to Mexico corridor, we usually experience our heaviest volume
during the May through October time frame, coinciding with the increase in worker migration patterns and various holidays,
and our lowest volumes during the first quarter.
SIGNIFICANT CUSTOMERS AND GOVERNMENT CONTRACTS
No individual customer of our Money Transfer Segment makes up greater than 10% of total consolidated revenues. The Money
Transfer Segment maintains correspondent relationships with a number of financial institutions whose ownership includes
governments of the correspondents' countries of origin. Those countries include Armenia, Bangladesh, Benin, Bhutan, Bosnia-
Herzegovina, Burundi, China, Costa Rica, Cote d'Ivoire, Cuba, Djibouti, Dominican Republic, Ecuador, Egypt, Eritrea,
Ethiopia, Fiji, Gabon, Ghana, Guatemala, Mali, Mauritania, Mexico, Pakistan, Philippines, Poland, Romania, Saudi Arabia,
Senegal, Tunisia, Uganda, Ukraine, Vietnam, Burkina Faso, El Salvador, Gambia, Georgia, Guinea, Guinea Bissau, Honduras,
India, Kenya, Kyrgyzstan, Liberia, Mauritius, Moldova, Morocco, Myanmar, Niger, Nigeria, Rwanda, Sri Lanka, Suriname,
Tanzania, Thailand, Turkey, Yemen and Zambia.
COMPETITION
Our primary competitors in the money transfer and bill payment business include other large money transfer companies and
electronic money transmitters, together with hundreds of smaller registered and unregistered money transmitters, as well as
certain major national and regional banks, financial institutions and independent sales organizations. Our competition includes
The Western Union Company, the leading competitor with revenue approximately two times greater than our revenue. The
Western Union Company has a significant competitive advantage due to its greater resources and access to capital for
expansion. This may allow them to offer better pricing terms to customers, agents or correspondents, which may result in a loss
of our current or potential customers or could force us to lower our prices. In addition to traditional money payment services,
new technologies are emerging that compete with traditional money payment services, such as stored-value cards, debit
networks and web-based services and digital currencies. Our continued growth also depends upon our ability to compete
effectively with these alternative technologies.
EMPLOYEES
We had approximately 7,700, 7,100 and 6,600 employees as of December 31, 2019, 2018, and 2017, respectively. We believe
our future success will depend in part on our ability to continue to recruit, retain and motivate qualified management, technical
and administrative employees. Currently, no union represents any of our employees, except in one of our Spanish subsidiaries.
We experienced no work stoppages or strikes by our workforce in 2019 and we consider relations with our employees to be
good.
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GOVERNMENT REGULATION
As discussed below, many of our business activities are subject to regulation in our current markets. In the Money Transfer
Segment, we are subject to a wide variety of laws and regulations of the U.S., individual U.S. states and foreign governments.
These include international, federal and state anti-money laundering laws and regulations, money transfer and payment
instrument licensing laws, escheat laws, laws covering consumer privacy, data protection and information security and
consumer disclosure and consumer protection laws. Our operations have also been subject to increasingly strict requirements
intended to help prevent and detect a variety of illegal financial activity, including money laundering, terrorist financing,
unauthorized access to personal customer data and other illegal activities. The more significant of these laws and regulations
are discussed below. Noncompliance with these laws and requirements could result in the loss or suspension of licenses or
registrations required to provide money transfer services through retail agents, Company owned stores or online. For more
discussion, see Item 1A - Risk Factors.
Any further expansion of our activity into areas that are qualified as “financial activity” under local legislation may subject us
to licensing and we may be required to comply with various conditions to obtain such licenses. Moreover, the interpretations of
bank regulatory authorities as to the activity we currently conduct might change in the future. We monitor our business for
compliance with applicable laws or regulations regarding financial activities.
Certain of our European product offerings, including in particular, our money transfer services, merchant acquiring and bill
payment products, are regulated services requiring a license under the PSD2, which replaced PSD effective January 13, 2018.
Key changes made by PSD2 to PSD include: extension of PSD rules on transparency to additional transactions not previously
covered by PSD; enhanced cooperation and information exchange between authorities in the context of authorization and
supervision of payment institutions and electronic money institutions; and increased obligations around the management of
operational and security risk, increased obligations relating to complaints handling and additional requirements regarding
payment security.
PSD2 requires a license to perform certain defined "payment services" in a European country, which may be extended
throughout the Member States through passporting. Conditions for obtaining the license include minimum capital requirements,
establishment of procedures for safeguarding of funds, and certain governance and reporting requirements. In addition, certain
obligations relating to internal controls and the conduct of business, in particular, consumer disclosure requirements and certain
rules regarding the timing and settlement of payments, must be met. We have payment institution licenses in the U.K., France,
Germany, and Spain and are complying with these requirements. To date, we have passported our U.K., German and Spanish
payment services authorizations to several Member States and our Spanish authorization to several host Member States.
Additionally, in the U.K., we have obtained an e-money license under the 2EMD. The e-money license allows Euronet to issue
e-money and provide the same payment services as a PSD2 licensee. The e-money license imposes certain requirements
similar to those of the payment services license, including minimum capital requirements, consumer disclosure and internal
controls and can be passported to Member States. Our e-money license holder is currently operating in over twenty-one
Member States.
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MONEY TRANSFER AND PAYMENT INSTRUMENT LICENSING
Licensing requirements in the U.S. are generally driven by the various state banking departments regulating the businesses of
money transfers and issuances of payment instruments. Typical requirements include the meeting of minimum net worth
requirements, maintaining permissible investments (e.g., cash, agent receivables, and government-backed securities) at levels
commensurate with outstanding payment obligations and the filing of a security instrument (typically in the form of a surety
bond) to offset the risk of default of trustee obligations by the license holder. We are required by many state regulators to
submit ongoing reports of licensed activity, most often on a quarterly or monthly basis, that address changes to agent and
branch locations, operating and financial performance, permissible investments and outstanding transmission liabilities. These
periodic reports are utilized by the regulator to monitor ongoing compliance with state licensing laws. A number of major state
regulators also conduct periodic examinations of license holders and their authorized delegates, generally with a frequency of
every one to two years. Examinations are most often comprehensive in nature, addressing both the safety and soundness and
overall compliance by the license holder with regard to state and federal regulations. Such examinations are typically
performed on-site at the license holder's headquarters or operations center; however, certain states may choose to perform
examinations off-site as well.
Money transmitters, issuers of payment instruments and their agents are required to comply with U.S. federal, state and/or
foreign anti-money laundering laws and regulations. In summary, our Money Transfer Segment, as well as our agent network,
is subject to regulations issued by the different state and foreign national regulators who license us, the Office of Foreign Assets
Control (“OFAC”), the Bank Secrecy Act as amended by the USA PATRIOT (“BSA”), the Financial Crimes Enforcement
Network (“FINCEN”), as well as any existing or future regulations that impact any aspect of our money transfer business.
A similar set of regulations applies to our money transfer businesses in most of the foreign countries in which we originate
transactions. These laws and regulations include monetary limits for money transfers into or out of a country, rules regarding
the foreign currency exchange rates offered, as well as other limitations or rules for which we must maintain compliance.
Regulatory bodies in the U.S. and abroad may impose additional rules on the conduct of our Money Transfer Segment that
could have a significant impact on our operations and our agent network. In this regard, the U.S. federal government has
implemented U.S. federal regulations for electronic money transfers, including the Electronic Fund Transfer Act, which
provides consumer protections for international remittance transfers. The Consumer Financial Protection Bureau ("CFPB"),
adopted a rule that provides additional protections for consumers who transmit money internationally, including disclosure
requirements, cancellation rights and error resolution procedures for consumer complaints. Under U.S. federal law, it is
unlawful for any provider of consumer financial products or services to engage in unfair, deceptive or abusive acts or practices
(collectively, "UDAAPs"). The CFPB has rule making and enforcement authority to prevent UDAAPs in connection with
transactions for consumer financial products or services. The CFPB audits our compliance with these rules, and we may be
subject to fines or penalties for violations of any of such rules.
ESCHEAT REGULATIONS
Our Money Transfer Segment is subject to the unclaimed or abandoned property (i.e., “escheat”) regulations of the United
States and certain foreign countries in which we operate. These laws require us to turn over property held by Euronet on behalf
of others remaining unclaimed after specified periods of time (i.e., “dormancy” or “escheat” periods). Such abandoned property
is generally attributable to the failure of beneficiary parties to claim money transfers or the failure to negotiate money orders, a
form of payment instrument. We have policies and programs in place to help us monitor the required information relating to
each money transfer or payment instrument for possible eventual reporting to the jurisdiction from which the order was
originally received. In the U.S., reporting of unclaimed property by money service companies is performed annually, generally
with a due date of on or before November 1. State banking department regulators will typically include a review of Euronet
escheat procedures and related filings as part of their examination protocol.
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PRIVACY AND INFORMATION SECURITY REGULATIONS
Our Money Transfer Segment operations involve the collection and storage of certain types of personal customer data that are
subject to privacy and security laws in the U.S. and abroad. In the United States, we are subject to the Gramm-Leach-Bliley Act
(“GLBA”) and various state laws including California Consumer Privacy Act ("CCPA"), which requires that financial
institutions have in place policies regarding the collection, processing, storage and disclosure of information considered
nonpublic personal information. Laws in other countries include the E.U.'s General Data Protection Regulation (2016/679)
("GDPR"), which became effective from May 25, 2018, as well as the laws of other countries.
The GDPR establishes stringent requirements for the collection and processing of personal information of individuals within
the E.U. The GDPR establishes certain rights of individuals regarding personal information processed by companies as well as
requirements for information security and imposes significant fines that may be revenue-based for violation of its requirements.
Any failure on our part to meet the requirements of the GDPR could result in the imposition of fines and penalties that could
affect our financial results.
We comply with the GLBA and state privacy provisions. In October 2015, the European Court of Justice invalidated the
European Commission’s decision of 2000 regarding the transfer of personal data from the E.U. to the United States (known as
the "Safe Harbor Decision"). Despite the October 2015 ruling of the European Court of Justice, we believe we remain in
compliance with E.U. regulations regarding the transfer of personal data to the United States and other jurisdictions.
Recently, as identity theft has been on the rise, there has been increased public attention to concerns about information security
and consumer privacy, accompanied by laws and regulations addressing the issue. We believe we are compliant with these laws
and regulations; however, this is a rapidly evolving area and there can be no assurance that we will continue to meet the
existing and new regulations, which could have a material, adverse impact on our Money Transfer Segment business.
ANTI-CORRUPTION AND BRIBERY
We are subject to the Foreign Corrupt Practices Act ("FCPA"), which prohibits U.S. and other business entities from making
improper payments to foreign government officials, political parties or political party officials. We are also subject to the
applicable anti-corruption laws in the jurisdictions in which we operate, such as the U.K. Bribery Act, thus potentially exposing
us to liability and potential penalties in multiple jurisdictions. The anti-corruption provisions of the FCPA are enforced by the
United States Department of Justice. In addition, the Securities and Exchange Commission ("SEC") requires strict compliance
with certain accounting and internal control standards set forth under the FCPA. Because our services are offered in many
countries throughout the world, we face a higher risk associated with FCPA, the U.K. Bribery Act and other similar laws than
many other companies and we have policies and procedures in place to address compliance with the FCPA, the U.K. Bribery
Act and other similar laws. Any determination that we have violated these laws could have an adverse effect on our business,
financial position and results of operations. Failure to comply with our policies and procedures or the FCPA and other laws can
expose Euronet and/or individual employees to potentially severe criminal and civil penalties. Such penalties could have a
material adverse effect on our business, financial condition and results of operations.
MONEY TRANSFER COMPLIANCE POLICIES AND PROGRAMS
We have developed risk-based policies and programs to comply with existing and new laws, regulations and other requirements
outlined above, including having dedicated compliance personnel, training programs, automated monitoring systems and
support functions for our offices and agents. To assist in managing and monitoring our money laundering and terrorist financing
risks, we continue to have our compliance programs, in many countries, independently examined on an annual basis. In
addition, we continue to enhance our anti-money laundering, counter-terrorist financing compliance policy, procedures and
monitoring systems, as well as our consumer protection policies and procedures.
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INTELLECTUAL PROPERTY
Each of our three operating segments utilizes intellectual property which is protected in varying degrees by a combination of
trademark, patent and copyright laws, as well as trade secret protection, license and confidentiality agreements.
The brand names of “Ria,” “Ria Financial Services,” “Ria Envia,” “xe,” "AFEX," "IME," derivations of those brand names and
certain other brand names are material to our Money Transfer Segment and are registered trademarks and/or service marks in
most of the markets in which our Money Transfer Segment operates. Consumer perception of these brand names is important to
the growth prospects of our money transfer business. We also hold a U.S. patent on a card-based money transfer and bill
payment system that allows transactions to be initiated primarily through POS terminals and integrated cash register systems.
With respect to our EFT Processing Segment, we have registered or applied for registration of our trademarks, including the
names “Euronet” and “Bankomat” and/or our blue diamond logo, as well as other trade names in most markets in which these
trademarks are used. Certain trademark authorities have notified us that they consider these trademarks to be generic and,
therefore, not protected by trademark laws. This determination does not affect our ability to use the Euronet trademark in those
markets, but it would prevent us from stopping other parties from using it in competition with Euronet. We have registered the
“Euronet” trademark in the class of ATM machines in Germany, the U.K. and certain other Western European countries. We
have filed pending applications and/or obtained patents for a number of our new software products and our processing
technology, including certain top-up services.
With respect to our epay Segment, we have filed trademark applications for the “epay” brand in the U.S., U.K., the E.U.
through a Community Trademark application, Brazil, India, Australia and New Zealand. The epay trademark has issued to
registration in the U.S., U.K., the E.U., Australia, New Zealand and Brazil. The trademark application in India is still pending.
We cannot be certain that we are entitled to use the epay trademark in any markets other than those in which we have registered
the trademark. We have filed patent applications for some of our POS top-up and certain other products in support of epay
technology. Certain patents have been granted while others have been refused or are still pending. We also hold a patent license
covering certain of epay's operations in the U.S.
Technology in the areas in which we operate is developing very rapidly, and we are aware that many other companies have
filed patent applications for products, processes and services similar to those we provide. The procedures of the U.S. patent
office make it impossible for us to predict whether our patent applications will be approved or will be granted priority dates that
are earlier than other patents that have been filed for similar products or services. Moreover, many “process patents” have been
filed in the U.S. over recent years covering processes that are in wide use in the money transfer, EFT and prepaid processing
industries. If any of these patents are considered to cover technology that has been incorporated into our systems, we may be
required to obtain additional licenses and pay royalties to the holders of such patents to continue to use the affected technology
or be prohibited from continuing the offering of such services if licenses are not obtained. This could materially and adversely
affect our business.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The name, age, period of service and position held by each of our Executive Officers as of February 28, 2020 are as follows:
Name
Age
Served Since
Position Held
Michael J. Brown
Rick L. Weller
Jeffrey B. Newman
July 1994
Chairman, Chief Executive Officer and President
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62 November 2002 Executive Vice President - Chief Financial Officer
65 December 1996 Executive Vice President - General Counsel
Kevin J. Caponecchi
Juan C. Bianchi
53
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July 2007
April 2007
Nikos Fountas
56 September 2009
Executive Vice President - Chief Executive Officer, epay,
Software and EFT Asia Pacific Division
Executive Vice President - Chief Executive Officer, Money
Transfer Segment
Executive Vice President - Chief Executive Officer, EFT
Europe, Middle East and Africa Division
Martin L. Bruckner
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January 2014
Senior Vice President - Chief Technology Officer
MICHAEL J. BROWN, Chairman, Chief Executive Officer and President. Mr. Brown is one of the founders of Euronet and
has served as our Chairman of the Board and Chief Executive Officer since 1996 and has served as President since December
2014. He also co-founded our predecessor company in 1994. Mr. Brown has been a Director of Euronet since our incorporation
in December 1996 and previously served on the boards of Euronet's predecessor companies. In 1979, Mr. Brown founded
Innovative Software, Inc., a computer software company that was merged in 1988 with Informix. Mr. Brown served as
President and Chief Operating Officer of Informix from February 1988 to January 1989. He served as President of the
Workstation Products Division of Informix from January 1989 until April 1990. In 1993, Mr. Brown was a founding investor of
Visual Tools, Inc. Visual Tools, Inc. was acquired by Sybase Software in 1996. Mr. Brown received a B.S. in Electrical
Engineering from the University of Missouri - Columbia in 1979 and a M.S. in Molecular and Cellular Biology at the
University of Missouri - Kansas City in 1997.
RICK L. WELLER, Executive Vice President, Chief Financial Officer. Mr. Weller has been Executive Vice President and
Chief Financial Officer of Euronet since he joined Euronet in November 2002. From January 2002 to October 2002, he was the
sole proprietor of Pivotal Associates, a business development firm. From November 1999 to December 2001, Mr. Weller held
the position of Chief Operating Officer of ionex telecommunications, inc., a local exchange company. He is a certified public
accountant and received his B.S. in Accounting from the University of Central Missouri.
JEFFREY B. NEWMAN, Executive Vice President, General Counsel. Mr. Newman has been Executive Vice President and
General Counsel of Euronet since January 2000. He joined Euronet in December 1996 as Vice President and General Counsel.
Prior to this, he practiced law with the Washington, D.C. based law firm of Arent Fox Kintner Plotkin & Kahn and the Paris
based law firm of Salans Hertzfeld & Heilbronn. He is a member of the District of Columbia, California and Paris, France bars.
He received a B.A. in Political Science and French from Ohio University in 1976 and law degrees from Ohio State University
and the University of Paris.
KEVIN J. CAPONECCHI, Executive Vice President, Chief Executive Officer, epay, Software and EFT Asia Pacific Division.
Mr. Caponecchi joined Euronet in July 2007 and served as President until assuming his current role in December 2014. Prior to
joining Euronet, Mr. Caponecchi served in various capacities with subsidiaries of General Electric Company for 17 years. From
2003 until June 2007, Mr. Caponecchi served as President of GE Global Signaling, a provider of products and services to
freight, passenger and mass transit systems. From 1998 through 2002, Mr. Caponecchi served as General Manager -
Technology for GE Consumer & Industrial, a provider of consumer appliances, lighting products and electrical products. Mr.
Caponecchi holds degrees in physics from Franklin and Marshall College and industrial engineering from Columbia University.
JUAN C. BIANCHI, Executive Vice President - Chief Executive Officer, Money Transfer Segment. Mr. Bianchi joined
Euronet subsequent to the acquisition of Ria in 2007. Prior to the acquisition, Mr. Bianchi served as the Chief Executive Officer
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of Ria and has spent his entire career at either Ria or AFEX Money Express, a money transfer company purchased by Ria's
founders. Mr. Bianchi began his career at AFEX in Chile in 1992, joined AFEX USA's operations in 1996, and became chief
operating officer of AFEX-Ria in 2003. Mr. Bianchi studied business at the Universidad Andres Bello in Chile and completed
the Executive Program in Management at UCLA's John E. Anderson School of Business.
NIKOS FOUNTAS, Executive Vice President - Chief Executive Officer, EFT Europe, Middle East and Africa Division. Mr.
Fountas has been Executive Vice President of the Company's EFT Processing Segment in Europe since December 2012. Mr.
Fountas joined Euronet subsequent to the Company's 2005 acquisition of Instreamline S.A. (now Euronet Card Services) in
Greece. He served as managing director of the Company's Greece EFT subsidiary, responsible for Euronet's European card
processing and cross-border acquiring operations until September 2009. In September 2009, Mr. Fountas took over
responsibilities as managing director of Euronet's Europe EFT Processing Segment. Prior to joining Euronet, Mr. Fountas spent
over 20 years working in management and executive-level positions in the IT field for several companies, including IBM for 12
years. He has a degree in computer science (Honors) from York University in Canada and post graduate studies in business
administration from Henley Management School and IBM Business Professional Institute.
MARTIN L. BRUCKNER, Senior Vice President - Chief Technology Officer. Mr. Bruckner has been Senior Vice President
and Chief Technology Officer of Euronet since January 2014. Mr. Bruckner joined Euronet in 2007 as head of software
development and IT operations for Transact GmbH. In 2009, he was promoted to Chief Technology Officer of Euronet's epay
segment. Prior to joining Euronet, Mr. Bruckner established his own IT company called MLB Development GmbH, where he
developed software systems for various European companies. Mr. Bruckner has more than 20 years of software development
experience and published his first software product (BBS systems) at the age of 15. He received a Doctorate of Law from the
University of Rostock and a law degree from the University of Bielefeld.
AVAILABILITY OF REPORTS, CERTAIN COMMITTEE CHARTERS AND OTHER INFOROMATION
Our Website addresses are www.euronetworldwide.com and www.eeft.com. We make available all SEC public filings,
including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments
to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act") on our Websites free of charge as soon as reasonably practicable after these documents are electronically
filed with, or furnished to, the SEC. The information on our Websites is not, and shall not be deemed to be, a part of this report
or incorporated into any other filings we make with the SEC. In addition, our SEC filings are made available via the SEC's
EDGAR filing system accessible at www.sec.gov.
The charters for our Audit, Compensation, and Corporate Governance and Nominating Committees, as well as the Code of
Business Conduct & Ethics for our employees, including our Chief Executive Officer and Chief Financial Officer, are available
on our Website at www.euronetworldwide.com in the “For Investors” section under "Document and Charters".
ITEM 1A. RISK FACTORS
Our operations are subject to a number of risks and uncertainties, including those described below. You should carefully
consider the risks described below before making an investment decision. The risks and uncertainties described below are not
necessarily organized in order of priority or probability.
If any of the following risks actually occurs, our business, financial condition or results of operations could be materially
adversely affected. In that case, the trading price of our Common Stock could decline substantially.
This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could
differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks
described below and elsewhere in this Annual Report.
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Our business may suffer from risks related to acquisitions and potential future acquisitions.
A substantial portion of our growth has been due to acquisitions, and we continue to evaluate and engage in discussions
concerning potential acquisition opportunities, some of which could be material. We cannot assure you that we will be able to
successfully integrate, or otherwise realize anticipated benefits from, our recent acquisitions or any future acquisitions. Failure
to successfully integrate or otherwise realize the anticipated benefits of these acquisitions could adversely impact our long-term
competitiveness and profitability. The integration of any future acquisitions will involve a number of risks that could harm our
financial condition, results of operations and competitive position. In particular:
• The integration plans for our acquisitions are based on benefits that involve assumptions as to future events, including
our ability to successfully achieve anticipated synergies, leveraging our existing relationships, as well as general
business and industry conditions, many of which are beyond our control and may not materialize. Unforeseen factors
may offset components of our integration plans in whole or in part. As a result, our actual results may vary considerably,
or be considerably delayed, compared to our estimates;
• The integration process could disrupt the activities of the businesses that are being combined. The combination of
companies requires, among other things, coordination of administrative and other functions. In addition, the loss of key
employees, customers or vendors of acquired businesses could materially and adversely impact the integration of the
acquired businesses;
• The execution of our integration plans may divert the attention of our management from other key responsibilities;
• We may assume unanticipated liabilities and contingencies; or
• Our acquisition targets could fail to perform in accordance with our expectations at the time of purchase.
Future acquisitions may be affected through the issuance of our Common Stock or securities convertible into our Common
Stock, which could substantially dilute the ownership percentage of our current stockholders. In addition, shares issued in
connection with future acquisitions could be publicly tradable, which could result in a material decrease in the market price of
our Common Stock.
A lack of business opportunities or financial or other resources may impede our ability to continue to expand at desired
levels, and our failure to expand operations could have an adverse impact on our financial condition.
Certain factors on which our ability to expand each of our divisions is dependent are set forth at Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations - Opportunities and Challenges. If any of such
factors impede our ability to expand our businesses, our financial results and condition could be materially and adversely
affected.
We are subject to business cycles, seasonality and other outside factors that may negatively affect our business.
A recessionary economic environment in any of our markets or other outside factors could have a negative impact on banks,
mobile phone operators, content providers, retailers and our individual customers and could reduce the level of transactions in
all of our divisions, which would, in turn, negatively impact our financial results. If banks, mobile phone operators and content
providers experience decreased demand for their products and services, or if the locations where we provide services decrease
in number, we will process fewer transactions, resulting in lower revenues. In addition, a recessionary economic environment
could reduce the level of transactions taking place on our networks, which will have a negative impact on our business.
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Our experience is that the level of transactions on our networks is also subject to substantial seasonal variation. In the EFT
Processing Segment, mostly in Europe, we usually experience our heaviest demand for dynamic currency conversion during
the third quarter of the fiscal year, coinciding with the tourism season in Europe. As a result, our revenues earned in the third
quarter of the year will usually be greater than other quarters of the fiscal year. Additionally, transaction levels have
consistently been higher in the fourth quarter of the fiscal year due to increased use of ATMs, prepaid products and money
transfer services during the holiday season. Generally, the level of transactions drops in the first quarter, during which
transaction levels are generally the lowest we experience during the year, which reduces the level of revenues that we record.
In the Money Transfer Segment, we experience increased transaction levels during the May through October timeframe,
coinciding with certain holidays and the increase in worker migration patterns. As a result of these seasonal variations, our
quarterly operating results may fluctuate materially and could lead to volatility in the price of our shares.
Additionally, economic or political instability, wars, civil unrest, terrorism, epidemics (including but not limited to,
Coronavirus outbreak) and natural disasters may make money transfers to, from or within a particular country more difficult.
The inability to timely complete money transfers could adversely affect our business.
The current U.S. presidential administration has proposed certain actions that could have an adverse effect on our
money transfer business.
Our money transfer business relies on the free flow of funds along remittance corridors, and our largest corridor is the U.S. to
Mexico. Our business benefits from free trade agreements such as the North American Free Trade Agreement ("NAFTA"). On
September 30, 2018, the U.S. drafted a new free trade agreement with Canada and Mexico, which was signed on November 30,
2018. If the new USMCA Agreement is not approved by all three countries, then the U.S. administration may exercise its right
to withdraw from NAFTA after a six-month notice period. The U.S. and Mexico have approved the USMCA agreement. Any
withdrawal from NAFTA or the adoption of other proposals that tax, restrict or otherwise limit remittances or transfers of
money out of the U.S. could have a material adverse impact on our business.
A prolonged economic slowdown or lengthy or severe recession in the U.S. or elsewhere could harm our operations.
Concerns over slow economic growth, level of sovereign debt in many parts of the world, inflation levels, energy costs and
geopolitical issues have contributed to increased volatility and diminished expectations for the world economy and the markets
going forward. These factors, combined with volatile energy and commodity prices, reduced business and consumer confidence
and slow recovery from high unemployment rates, have negatively impacted the world economy. A prolonged economic
downturn or recession could materially impact our results from operations. A recessionary economic environment could have a
negative impact on mobile phone operators, content providers, retailers and our other customers and could reduce the level of
transactions processed on our networks, which would, in turn, negatively impact our financial results. If content providers and
financial institutions experience decreased demand for their products and services, or if the locations where we provide services
decrease in number, we will process fewer transactions, resulting in lower revenues.
Retaining the founder and key executives of our company, and of companies that we acquire, and finding and retaining
qualified personnel is important to our continued success, and any inability to attract and retain such personnel could
harm our operations.
The development and implementation of our strategy has depended in large part on the co-founder of our company, Michael J.
Brown. The retention of Mr. Brown is important to our continued success. In addition, the success of the expansion of
businesses that we acquire may depend in large part upon the retention of the founders or leaders of those businesses. Our
success also depends in part on our ability to hire and retain highly skilled and qualified management, operating, marketing,
financial and technical personnel. The competition for qualified personnel in the markets where we conduct our business is
intense and, accordingly, we cannot assure you that we will be able to continue to hire or retain the required personnel.
Our officers and some of our key personnel have entered into service or employment agreements containing non-competition,
non-disclosure and non-solicitation covenants, which grant incentive stock options and/or restricted stock with long-term
49
vesting requirements. However, most of these contracts do not guarantee that these individuals will continue their employment
with us. The loss of our key personnel could have a material adverse effect on our business, growth, financial condition or
results of operations.
We have a moderate amount of debt and other contractual commitments, and while the cost of servicing those
obligations is not expected to adversely affect our business, the risk could increase if we incur more debt. We may be
required to prepay our obligations under the credit facility.
As of December 31, 2019, total liabilities were $3,078 million, of which $1,091 million represents long-term debt obligations,
and total assets were $4,658 million. We may not have sufficient funds to satisfy all such obligations as a result of a variety of
factors, some of which may be beyond our control. If the opportunity of a strategic acquisition arises or if we enter into new
contracts that require the installation or servicing of infrastructure, such as processing centers, ATM machines or POS terminals
on a faster pace than anticipated, we may be required to incur additional debt for these purposes and to fund our working
capital needs, including ATM network cash, which we may not be able to obtain. The level of our indebtedness could have
important consequences to investors, including the following:
• our ability to obtain any necessary financing in the future for working capital, capital expenditures, debt service
requirements or other purposes may be limited, or financing may be unavailable;
•
a portion of our cash flows must be dedicated to the payment of principal and interest on our indebtedness and other
obligations and will not be available for use in our business;
• our level of indebtedness could limit our flexibility in planning for, or reacting to, changes in our business and the
markets in which we operate;
• our level of indebtedness will make us more vulnerable to changes in general economic conditions and/or a downturn in
our business, thereby making it more difficult for us to satisfy our obligations; and
• because a portion of our debt bears interest at a variable rate of interest, our actual debt service obligations could
increase as a result of adverse changes in interest rates.
If we fail to make required debt payments, or if we fail to comply with other covenants in our debt service agreements, we
would be in default under the terms of these agreements. This default would permit the holders of the indebtedness to
accelerate repayment of this debt and could cause defaults under other indebtedness that we have.
Restrictive covenants in our credit facilities may adversely affect us. Our credit facility contains two financial covenants that
we must meet as defined in the agreement: (1) Consolidated Total Leverage Ratio, and (2) Consolidated Interest Coverage
Ratio. To remain in compliance with our debt covenants, we may be required to increase Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA"), repay debt, or both. We cannot assure you that we will have sufficient assets,
liquidity or EBITDA to meet or avoid these obligations, which could have an adverse impact on our financial condition.
Our ability to secure additional financing for growth or to refinance any of our existing debt is also dependent upon the
availability of credit in the marketplace, which has experienced severe disruptions in the past. If we are unable to secure
additional financing or such financing is not available at acceptable terms, we may be unable to secure financing for growth or
refinance our debt obligations, if necessary.
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In the event that we need debt financing in the future, uncertainty in the credit markets could affect our ability to
obtain debt financing on reasonable terms.
In the event we were to require additional debt financing in the future, uncertainty in the credit markets could materially impact
our ability to obtain debt financing on reasonable terms. The inability to access debt financing on reasonable terms could
materially impact our ability to make acquisitions, refinance existing debt or materially expand our business in the future.
Increases in interest rates will adversely impact our results of operations.
A portion of our existing indebtedness has variable interest rates. Increases in variable interest rates will increase the amount of
interest expense that we pay for our borrowings and have a negative impact on our results of operations.
We may be required to recognize impairment charges related to long-lived assets and goodwill recorded in connection
with our acquisitions, which would adversely impact our results of operations.
Our total assets include approximately $885.7 million, or 19% of total assets, in goodwill and acquired intangible assets
recorded as a result of acquisitions. We assess our goodwill, intangible assets and other long-lived assets as and when required
by accounting principles generally accepted in the U.S. to determine whether they are impaired. If operating results in any of
our key markets, including Australia, Germany, Greece, Malaysia, India, New Zealand, the U.S., U.K., Poland and Romania,
deteriorate or our plans do not progress as expected when we acquired these entities, or if capital markets depress our value or
that of similar companies, we may be required to record additional impairment write-downs of goodwill, intangible assets or
other long-lived assets. This could have a material adverse effect on our results of operations and financial condition.
The processes and systems we employ may be subject to patent protection by other parties, and any claims could
adversely affect our business and results of operations.
In certain countries, including the U.S., patent protection legislation permits the protection of processes and systems. We
employ processes and systems in various markets that have been used in the industry by other parties for many years, and
which we or other companies that use the same or similar processes and systems consider to be in the public domain. However,
we are aware that certain parties believe they hold valid patents that cover some of the processes and systems employed in our
business lines in the U.S. and elsewhere. We believe the processes and systems we use have been in the public domain prior to
the patents we are aware of. The question of whether a process or system is in the public domain is a legal determination, and if
this issue is litigated, we cannot be certain of the outcome of any such litigation. If a person were to assert that it holds a patent
covering any of the processes or systems we use, we would be required to defend ourselves against such claim. If unsuccessful,
we may be required to pay damages for past infringement, which could be trebled if the infringement was found to be willful.
We may also be required to seek a license to continue to use the processes or systems. Such a license may require either a
single payment or an ongoing license fee. No assurance can be given that we will be able to obtain a license which is
reasonable in fee and scope. If a patent owner is unwilling to grant such a license, or we decide not to obtain such a license, we
may be required to modify our processes and systems to avoid future infringement. Any such occurrences could materially and
adversely affect one or more of our business lines in any affected markets and could result in our reconsidering the rate of
expansion of business in those markets.
We conduct a significant portion of our business in Central and Eastern European countries, and we have subsidiaries
in the Middle East, Asia Pacific and South America, where the risk of continued political, economic and regulatory
change that could impact our operating results is greater than in the U.S. or Western Europe.
We have subsidiaries in Central and Eastern Europe, the Middle East, Asia Pacific and South America. We expect to continue to
expand our operations to other countries in these regions. Some of these countries have undergone significant political,
economic and social change in recent years and the risk of new, unforeseen changes in these countries remains greater than in
the U.S. or Western Europe. In particular, changes in laws or regulations or in the interpretation of existing laws or regulations,
51
whether caused by a change in government or otherwise, could materially adversely affect our business, growth, financial
condition or results of operations.
For example, currently there are no limitations in any of the countries in which we have subsidiaries on the repatriation of
profits from these countries, but foreign currency exchange control restrictions, taxes or limitations may be imposed or
tightened in the future with regard to repatriation of earnings and investments from these countries. If exchange control
restrictions, taxes or limitations are imposed or tightened, our ability to receive dividends or other payments from affected
subsidiaries could be reduced, which may have a material adverse effect on us. As discussed under "Liquidity and Capital
Resources" in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, under existing
U.S. tax laws, repatriation of certain assets to the U.S. could have adverse tax consequences.
In addition, corporate, contract, property, insolvency, competition, securities and other laws and regulations in many of the
countries in which we operate have been, and continue to be, substantially revised. Therefore, the interpretation and procedural
safeguards of the new legal and regulatory systems are in the process of being developed and defined, and existing laws and
regulations may be applied inconsistently. Also, in some circumstances, it may not be possible to obtain the legal remedies
provided for under these laws and regulations in a reasonably timely manner, if at all.
We conduct business in many international markets with complex and evolving tax rules, including value added tax
rules, which subjects us to international tax compliance risks which could adversely affect our operating results.
While we obtain advice from legal and tax advisors as necessary to help assure compliance with tax and regulatory matters,
most tax jurisdictions that we operate in have complex and subjective rules regarding the valuation of intercompany services,
cross-border payments between affiliated companies and the related effects on income tax, value added tax (“VAT”), transfer
tax and share registration tax. Our foreign subsidiaries frequently undergo VAT reviews, and from time to time undergo
comprehensive tax reviews and may be required to make additional tax payments should the review result in different
interpretations, allocations or valuations of our services.
Uncertainties in the interpretation and application of the Tax Cuts and Jobs Act of 2017 could materially affect our tax
obligations and effective tax rate.
The Tax Cuts and Jobs Act of 2017 (the "Act") was enacted on December 22, 2017, and it significantly affected U.S. tax law
by, among other things, changing how the U.S. imposes income tax on multinational corporations. The Act contains several key
tax provisions that affect us, including a one-time mandatory transition tax on previously undistributed foreign earnings, a
reduction of the corporate income tax rate to 21% effective January 1, 2018, and new taxes on certain foreign sourced earnings,
among others.
We are required to recognize the effect of the tax law changes in the period of enactment, including determining the transition
tax, re-measuring our U.S. deferred tax assets and liabilities and reassessing the net realizability of our deferred tax assets and
liabilities. Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”)
allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As
of December 31, 2017, we recorded provisional estimates in our financial statements with respect to certain income tax effects
of the Act for which the accounting is incomplete, but a reasonable estimate was able to be determined. During 2018, we
continued to perform additional analysis on the application of the Act, taking into account any additional regulatory guidance
that was issued by the applicable taxing authorities, which resulted in adjustments to our previously reported provisional
estimates, some of which materially affected our tax obligations and our effective tax rate.
In addition, the Act requires complex computations not previously provided in U.S. tax law, and the application of accounting
guidance for such items is currently uncertain in some respects. Further, compliance with the Act and the accounting for such
provisions require accumulation of information not previously required or regularly produced. The U.S. Department of
Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how the law is
applied and thus impact our results of operations in the period issued.
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Increases in taxes could negatively impact our operating results.
As a result of economic downturns, tax receipts have decreased and/or government spending has increased in many of the
countries in which we operate. Consequently, governments may increase tax rates or implement new taxes in order to
compensate for gaps between tax revenues and expenditures. Additionally, governments may prohibit or restrict the use of
certain legal structures designed to minimize taxes. Any such tax increases, whether borne by us or our customers, could
negatively impact our operating results or the demand for our products.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act or other similar anti-corruption
laws.
Our operations in countries outside the United States are subject to anti-corruption laws and regulations, including restrictions
imposed by the FCPA. The FCPA and similar anti-corruption laws in other jurisdictions, such as the U.K. Bribery Act, generally
prohibit companies and their intermediaries from making improper payments to government officials or employees of commercial
enterprises for the purpose of obtaining or retaining business. We operate in many parts of the world that have experienced
corruption to some degree and, in certain circumstances, strict compliance with anti-corruption laws may conflict with local
customs and practices.
Our employees and agents interact with government officials on our behalf, including as necessary to obtain licenses and other
regulatory approvals necessary to operate our business, import or export equipment, employ expatriates and resolve tax disputes.
We also have a number of contracts with foreign governments or entities owned or controlled by foreign governments. These
interactions and contracts create a risk of violation of the FCPA or other similar laws.
Although we have implemented policies and procedures designed to ensure compliance with local laws and regulations as well
as U.S. laws and regulations, including the FCPA, there can be no assurance that all of our employees, consultants, contractors
and agents will abide by our policies. If we are found to be liable for violations of the FCPA or similar anti-corruption laws in
other jurisdictions, either due to our own or others' acts or inadvertence, we could suffer from criminal or civil penalties which
could have a material and adverse effect on our results of operations, financial condition and cash flows.
Because we are a multinational company conducting a complex business in many markets worldwide, we are subject to
legal and operational risks related to staffing and management, as well as a broad array of local legal and regulatory
requirements which could adversely affect our operations.
Operating outside of the U.S. creates difficulties associated with staffing and managing our international operations, as well as
complying with local legal and regulatory requirements. We operate financial transaction processing networks that offer new
products and services to customers, and the laws and regulations in the markets in which we operate evolve and are subject to
rapid change. Although we have knowledgeable local staff in countries in which we deem it appropriate, we cannot assure you
that we will continue to be found to be operating in compliance with all applicable customs, currency exchange control, data
protection, employment, transfer pricing and other laws or regulations to which we may be subject. We also cannot assure you
that these laws will not be modified in ways that may adversely affect our business.
Our business may be adversely affected if recent developments to applicable data protection regulations in the
European Union require us to cease the transfer of personal data from the European Union to the United States.
In October 2015, the European Court of Justice invalidated the European Commission’s decision regarding the transfer of
personal data from the E.U. to the United States (known as the "Safe Harbor Decision"). Prior to the ruling of the European
Court of Justice, the Safe Harbor Decision provided a mechanism that facilitated personal data transfers to the United States in
compliance with the E.U.’s Directive on Data Protection. Our money transfer business relies on the transfer of E.U. citizens’
personal information to the United States to enable payment of money remittance transactions to beneficiaries through our
correspondent network. Despite the October 2015 ruling of the European Court of Justice, we believe we remain in compliance
with E.U. regulations regarding the transfer of personal data to the United States and other jurisdictions. If we are unable to
53
transfer personal data from the E.U. to the United States or other countries where we operate, then it could affect the manner in
which we provide our services or adversely affect our financial results.
Because we derive our revenues from a multitude of countries with different currencies, our business may be adversely
affected by local inflation and foreign currency exchange rates and policies.
We report our results in U.S. dollars, although a majority of our income is realized in foreign currencies. As exchange rates
among the U.S. dollar, the euro, and other currencies fluctuate, the impact of these fluctuations may have a material adverse
effect on our results of operations or financial condition as reported in U.S. dollars.
A significant number of our ATMs are located in countries in the European Union that use the euro. From time to time, some of
these countries, have considered leaving the European Union and adopting another currency. If such an event were to occur, the
conversion of cash that we hold in banks and in our ATM network in that country from euros to another currency could have an
adverse effect on our financial condition or results of operations, either from initial conversion or from subsequent changes in
currency exchange rates. The magnitude of this risk increases when cash balances in our ATM network increase during the
tourism season. While such currency change does not appear to be an immediate risk under current circumstances, the
Company continues to monitor developments in this area and will attempt to mitigate any adverse effects where possible.
In November 2016, without advance warning, the Indian government announced that it would remove from circulation two of
the most often used Indian banknotes, the Rs 500 and Rs 1000 banknotes. The government expected that the notes would
rapidly be replaced with a new Rs 500 note and a new Rs 2000 note, retiring (or demonetizing) completely the Rs 1000
banknote. However, distribution of the new notes was delayed, and circulation of the new notes only commenced in February
2017. While the cash supply was restored during the first months of 2017, the shortage of cash in November and December
2016 adversely impacted Euronet's 2016 fourth quarter revenue earned from ATM cash withdrawals on the more than 12,000
ATMs Euronet owns or operates as well as revenue earned from money transfer remittance payout in India. The action by the
Indian government was motivated by a desire to penalize Indians holding large quantities of money earned from illicit business.
Any similar action by other governments in countries in which we do business could have an adverse effect on our business.
Our Money Transfer Segment is subject to foreign currency exchange risks because our customers deposit funds in one
currency at our retail and agent locations worldwide or in an online account and we typically deliver funds denominated in a
different, destination country currency. Although we use foreign currency derivative contracts to mitigate a portion of this risk,
we cannot eliminate all of the exposure to the impact of changes in foreign currency exchange rates for the period between
collection and disbursement of the money transfers.
We have various mechanisms in place to discourage takeover attempts, which may reduce or eliminate our
stockholders' ability to sell their shares for a premium in a change of control transaction.
Various provisions of our certificate of incorporation and bylaws and of Delaware corporate law may discourage, delay or
prevent a change in control or takeover attempt of our company by a third party which our management and board of directors
opposes. Public stockholders who might desire to participate in such a transaction may not have the opportunity to do so. These
anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change of control or
change in our management and board of directors. These provisions include:
54
• preferred stock that could be issued by our board of directors to make it more difficult for a third party to acquire, or to
discourage a third party from acquiring, a majority of our outstanding voting stock;
•
•
classification of our directors into three classes with respect to the time for which they hold office;
supermajority voting requirements to amend the provision in our certificate of incorporation providing for the
classification of our directors into three such classes;
• non-cumulative voting for directors;
•
•
•
control by our board of directors of the size of our board of directors;
limitations on the ability of stockholders to call special meetings of stockholders;
advance notice requirements for nominations of candidates for election to our board of directors or for proposing matters
that can be acted upon by our stockholders at stockholder meetings. and
•
an exclusive forum bylaw provision for all internal corporate claims.
We are authorized to issue up to a total of 90 million shares of Common Stock, potentially diluting equity ownership of
current holders and the share price of our Common Stock.
We believe that it is necessary to maintain a sufficient number of available authorized shares of our Common Stock in order to
provide us with the flexibility to issue Common Stock for business purposes that may arise as deemed advisable by our Board.
These purposes could include, among other things, (i) to declare future stock dividends or stock splits, which may increase the
liquidity of our shares; (ii) the sale of stock to obtain additional capital or to acquire other companies or businesses, which
could enhance our growth strategy or allow us to reduce debt if needed; (iii) use in additional stock incentive programs and (iv)
other bona fide purposes. Our Board of Directors may issue the available authorized shares of Common Stock without notice
to, or further action by, our stockholders, unless stockholder approval is required by law or the rules of the NASDAQ Global
Select Market. The issuance of additional shares of Common Stock may significantly dilute the equity ownership of the current
holders of our Common Stock. Further, over the course of time, all of the issued shares have the potential to be publicly traded,
perhaps in large blocks. This may result in dilution of the market price of the Common Stock.
An additional 8.7 million shares of Common Stock, representing approximately 16% of the shares outstanding as of
December 31, 2019, could be added to our total Common Stock outstanding through the exercise of options or the
issuance of additional shares of our Common Stock pursuant to existing convertible debt and other agreements. Once
issued, these shares of Common Stock could be traded into the market and result in a decrease in the market price of
our Common Stock.
As of December 31, 2019, we had 3.0 million and 0.5 million options and restricted stock awards outstanding, respectively,
held by our directors, officers and employees, which entitle these holders to acquire an equal number of shares of our Common
Stock. Of this amount, 1.7 million options are vested and exercisable as of December 31, 2019. Approximately 2.4 million
additional shares of our Common Stock may be issued in connection with our stock incentive and employee stock purchase
plans.
Accordingly, based on current trading prices of our Common Stock, approximately 2.1 million shares could potentially be
added to our total current Common Stock outstanding through the exercise of options and the vesting of restricted stock
awards, which could adversely impact the trading price for our stock.
Of the 3.5 million total options and restricted stock awards outstanding, an aggregate of 2.1 million options and restricted stock
awards are held by persons who may be deemed to be our affiliates and who would be subject to Rule 144. Thus, upon exercise
of their options or sale of shares for which restrictions have lapsed, these affiliates' shares would be subject to the trading
restrictions imposed by Rule 144. The remainder of the common shares issuable under option and restricted stock award
55
arrangements would be freely tradable in the public market. Over the course of time, all of the issued shares have the potential
to be publicly traded, perhaps in large blocks.
Upon the occurrence of certain events, another 2.8 million shares of Common Stock could be issued upon conversion of the
Company's convertible notes issued in March 2019; in certain situations, the number of shares issuable could be higher. While
we have stated that we intend to settle any conversion of these notes by issuing cash for the principal value of the
notes and issuing shares of Common Stock for the conversion value in excess of the principal, which would significantly
reduce the number of shares issued upon conversion, if our financial condition significantly and adversely changes, we may not
be able to settle as intended should the notes be converted.
Our competition in the EFT Processing Segment, epay Segment and Money Transfer Segment includes large, well-
financed companies and financial institutions larger than us with earlier entry into the market. As a result, we may lack
the financial resources and access to capital needed to capture increased market share.
EFT Processing Segment - Our principal EFT Processing competitors include ATM networks owned by banks and national
switches consisting of consortiums of local banks that provide outsourcing and transaction services only to banks and
independent ATM deployers in that country. Large, well-financed companies offer ATM network and outsourcing services that
compete with us in various markets. In some cases, these companies also sell a broader range of card and processing services
than we do, and are, in some cases, willing to discount ATM services to obtain large contracts covering a broad range of
services. Competitive factors in our EFT Processing Segment include network availability and response time, breadth of service
offering, price to both the bank and to its customers, ATM location and access to other networks.
epay Segment - We face competition in the epay business in all of our markets. A few multinational companies operate in
several of our markets, and we therefore compete with them in a number of countries. In other markets, our competition is from
smaller, local companies. Major retailers with high volumes are in a position to demand a larger share of commissions or to
negotiate directly with the mobile phone operators, which may compress our margins. Additionally, certain of our content
providers, including mobile phone operators have entered into direct contracts with retailers and/or have developed processing
technology that diminishes or eliminates the need for intermediate processors and distributors.
Money Transfer Segment - Our primary competitors in the money transfer and bill payment business include other large
money transfer companies and electronic money transmitters, as well as certain major national and regional banks, financial
institutions and independent sales organizations. Our competitors include The Western Union Company and MoneyGram
International Inc. The Western Union Company has a significant competitive advantage due to its greater resources and access
to capital for expansion. This may allow them to offer better pricing terms to customers, which may result in a loss of our
current or potential customers or could force us to lower our prices. Either of these actions could have an adverse impact on our
revenues. In addition, our competitors may have the ability to devote more financial and operational resources than we can to
the development of new technologies that provide improved functionality and features to their product and service offerings. If
successful, their development efforts could render our product and service offerings less desirable, resulting in the loss of
customers or a reduction in the price we could demand for our services. In addition to traditional money payment services, new
technologies are emerging that may effectively compete with traditional money payment services, such as stored-value cards,
debit networks, web-based services and digital currencies. Our continued growth depends upon our ability to compete
effectively with these alternative technologies.
If processing fees and commissions in our epay business continue to decline, our financial results may be adversely
affected.
Our epay Segment derives revenues based on processing fees and commissions from mobile phone operators and other content
providers. Growth in our prepaid mobile business in any given market is driven by a number of factors, including the overall
pace of growth in the prepaid mobile phone market which is impacted by competing postpaid services, our market share of the
retail distribution capacity, the level of commission that is paid to the various intermediaries in the prepaid mobile airtime
distribution chain, and the value provided to the retailers through the types of products offered and the level of integration with
56
their systems. Also, competition among prepaid mobile distributors results in retailer churn and the reduction of commissions
paid by prepaid content providers, although a portion of such reductions can be passed along to retailers. In recent years,
processing fees and commissions per transaction have declined in most markets, and we expect that trend to continue.
Additionally, the number of prepaid mobile top-up transactions we process has declined in certain markets. We have generally
been able to mitigate these trends due to growth in the number of higher margin digital media product transactions, driven by
acquisitions and organic growth. If we cannot continue to increase our transaction levels and per-transaction fees and
commissions continue to decline, the combined impact of these factors could adversely impact our financial results.
Our epay and money transfer businesses may be susceptible to fraud and/or credit risks occurring at the retailer,
correspondent and/or consumer level, which could adversely affect our results of operations.
In our epay Segment, we contract with retailers that accept payment on our behalf, which we then transfer to a trust or other
operating account for payment to content providers. In the event a retailer does not transfer to us payments that it receives for
prepaid content sales, whether as a result of fraud, insolvency, billing delays or otherwise, we are responsible to the content
provider for the cost of the product sold. We can provide no assurance that retailer fraud or insolvency will not increase in the
future or that any proceeds we receive under our credit enhancement or insurance policies will be adequate to cover losses
resulting from retailer fraud, which could have a material adverse effect on our business, financial condition and results of
operations.
With respect to our money transfer business, we conduct the majority of our business through our agent network, which
provides money transfer services directly to consumers at retail locations. Our agents collect funds directly from consumers and
in turn, we collect from the agents the proceeds due to us resulting from the money transfer transactions. In addition, we
advance funds to our correspondent banks to pay out money transfers and they may hold our funds for several days or more
pending payment to beneficiaries. Therefore, we have credit exposure to our agents and correspondents. Additionally, our
Company-owned stores transact a significant amount of business in cash. Although we have safeguards in place, cash
transactions have a higher exposure to fraud and theft than other types of transactions. The failure of agents owing us
significant amounts to remit funds to us or to repay such amounts, or the loss of cash in our stores could have a material
adverse effect on our business, financial condition and results of operations.
Because we typically enter into short-term contracts with content providers and retailers, our epay business is subject to
the risk of non-renewal of those contracts, or renewal under less favorable terms.
Our contracts with content providers to distribute and process content, including prepaid mobile airtime top-up services,
typically have terms of less than three years. Many of those contracts may be canceled by either party upon three months'
notice. Our contracts with content providers are not exclusive, so these providers may enter into contracts with other service
providers. In addition, our service contracts with major retailers typically have terms of one to three years, and our contracts
with smaller retailers typically may be canceled by either party upon three to six months' notice. The cancellation or non-
renewal of one or more of our significant content provider or retail contracts, or of a large enough group of our contracts with
smaller retailers, could have a material adverse effect on our business, financial condition and results of operations. The
renewal of contracts under less favorable payment terms, commission terms or other terms could have a material adverse
impact on our working capital requirements and/or results from operations. In addition, our contracts generally permit operators
to reduce our fees at any time. Commission revenue or fee reductions by any of the content providers could also have a material
adverse effect on our business, financial condition or results of operations.
The growth and profitability of our epay business may be adversely affected by changes in state, federal or foreign laws,
rules and regulations.
As we continue to expand our electronic payment product offerings, certain of those products may become regulated by state,
federal or foreign laws, rules and regulations, including the U.S. CFPB. New product offerings may be considered to be money
transfer related products which would require licensure for entities distributing or processing such products. If such products
become more highly regulated and ultimately require licensure, our epay business may be adversely affected. Further, if
57
regulations regarding the expiration of gift vouchers change in the countries where we offer them, the revenue epay recognizes
from unredeemed vouchers may be negatively affected.
The growth in our epay business may be adversely affected if we are unable to expand and differentiate our offering of
new electronic payment products.
The prepaid marketplace is currently experiencing high growth in the differentiation of product offerings. While our epay
business is focused on expanding and differentiating its suite of prepaid product offerings on a global basis, there can be no
assurance that we will be able to enter into relationships on favorable terms with additional content providers or renew or
expand current relationships and contracts on favorable terms. Inability to continue to grow our suite of electronic payment
product offerings could have a material adverse effect on our business, financial condition and results of operations.
The stability and growth of our EFT Processing Segment may be adversely affected if we are unable to maintain our
current card acceptance and ATM management agreements with banks and international card organizations, and to
secure new arrangements for card acceptance and ATM management.
The stability and future growth of our EFT Processing Segment depends in part on our ability to sign card acceptance and ATM
management agreements with banks and international card organizations. Card acceptance agreements allow our ATMs to
accept credit and debit cards issued by banks and international card organizations. ATM management agreements generate
service income from our management of ATMs for banks.
These agreements have expiration dates, and banks and international card organizations are generally not obligated to renew
them. Our existing contracts generally have terms of five to seven years and a number of them expire or are up for renewal
each year. In some cases, banks may terminate their contracts prior to the expiration of their terms. We cannot assure you that
we will be able to continue to sign or maintain these agreements on terms and conditions acceptable to us or that international
card organizations will continue to permit our ATMs to accept their credit and debit cards. The inability to continue to sign or
maintain these agreements, or to continue to accept the credit and debit cards of local banks and international card
organizations at our ATMs in the future, could have a material adverse effect on our business, growth, financial condition or
results of operations.
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Our operating results depend, in part, on the volume of transactions on ATMs in our network and the fees we can
collect from processing these transactions. We generally have little control over the ATM transaction fees established in
the markets where we operate, and therefore, cannot control any potential reductions in these fees which may adversely
affect our results of operations.
Transaction fees from banks, customers and international card organizations for transactions processed on our ATMs have
historically accounted for a substantial portion of our revenues. These fees are set by agreement among all banks in a particular
market. The future operating results of our ATM business depend on the following factors:
•
the acceptance of our ATM processing and management services in our target markets;
•
the maintenance of the level of transaction fees we receive;
•
the continued use of our ATMs by credit and debit cardholders; and
• our ability to generate revenues from interchange fees and from other value-added services, including dynamic currency
conversion.
The amount of fees we receive per transaction is set in various ways in the markets in which we do business. We have card
acceptance agreements or ATM management agreements with some banks under which fees are set. However, we derive a
significant portion of our revenues in many markets from interchange fees, surcharges or cash withdrawal related services that
are set by the central ATM processing switch or various card organizations. The banks that participate in these switches or the
card organizations that enable the services or transactions set the interchange fee and/or establish the rules regarding the
services allowed, and we are not in a position in any market to greatly influence these fees or rules, which may change over
time. A significant decrease in the interchange fee, or limitations placed on our ability to offer value added services via our
ATM network, in any market could adversely affect our results in that market.
Although we believe that the volume of transactions in developing countries may increase due to growth in the number of cards
being issued by banks in these markets, we anticipate that transaction levels on any given ATM in developing markets will not
increase significantly. We can attempt to improve the levels of transactions on our ATM network overall by acquiring good sites
for our ATMs, eliminating poor locations, entering new, less-developed markets and adding new transactions, including new
value added services, to the sets of transactions that are available on our ATMs. However, we may not be successful in
materially increasing transaction levels through these measures. Per-transaction fees paid by international card organizations
have declined in certain markets in the past and competitive factors have required us to reduce the transaction fees we charge
customers. If we cannot continue to increase our transaction levels and per-transaction fees generally decline, our results would
be adversely affected.
Tightening of regulations may adversely affect our results.
The evolving regulatory environment may change the competitive landscape across various jurisdictions and adversely affect
our financial results. If governments implement new laws or regulations, or organizations such as Visa and Mastercard issue
new rules, that effectively limit our ability to provide DCC or set fees and/or foreign currency exchange spreads, then our
business, financial condition and results of operations could be materially and adversely affected. In addition, changes in
regulatory interpretations or practices could increase the risk of regulatory enforcement actions, fines and penalties and such
changes may be replicated across multiple jurisdictions.
In March 2018, the E.U. proposed additional regulations on cross border transactions within the E.U., including specific
regulations on DCC. In December 2018, the European Commission, European Council and European Parliament agreed to
legislation that requires disclosure of foreign exchange margins applicable to DCC transactions and eventual comparability
between foreign exchange rates offered by DCC providers and bank card issuers. The new legislation comes into effect in April
2020. Such regulation could materially and adversely impact our financial results, by reducing the number of DCC
transactions performed over our networks and the level of profit we generate from such transactions.
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The E.U. has passed a regulation called the GDPR that establishes stringent requirements for the collection and processing of
personal information of individuals within the E.U. The GDPR came into effect across the E.U. on May 25, 2018. The GDPR
established stringent requirements for the collection and processing of personal information of individuals within the E.U.,
established certain rights of individuals regarding personal information processed by companies as well as requirements for
information security and imposed significant fines that may be revenue-based for violation of its requirements. The GDPR
applies to transfers of personal information from the E.U. to countries outside the E.U., including the U.S. Any failure on our
part to meet the requirements of the GDPR could result in the imposition of fines and penalties that could materially and
adversely affect our financial results.
Developments in payments could materially reduce our transaction levels and revenues.
Certain developments in the field of payments may reduce the need for ATMs, prepaid product POS terminals and money
transfer agents. An example of this type of development is the use of near field technology in retail transactions, which if
widely accepted in a market reduces the need for cash and can negatively impact the level of ATM transactions in that market.
Advances in biometric payment solutions could have similar adverse impacts. These developments may reduce the transaction
levels that we experience on our networks in the markets where they occur. Financial institutions, retailers and agents could
elect to increase fees to their customers for using our services, which may cause a decline in the use of our services and have an
adverse effect on our revenues. If transaction levels over our existing network of ATMs, POS terminals, agents and other
distribution methods do not increase, growth in our revenues will depend primarily on increased capital investment for new
sites and developing new markets, which reduces the margin we realize from our revenues.
The mobile phone industry is a rapidly evolving area, in which technological developments, in particular the development of
new billing models (such as "all you can eat" plans) and distribution methods or services, may affect the demand for other
services in a dramatic way. The development of any new models or technology that reduce the need or demand for prepaid
mobile airtime could materially and adversely affect our business.
In some cases, we are dependent upon international card organizations and national transaction processing switches to
provide assistance in obtaining settlement from card issuers of funds relating to transactions on our ATMs, and any
failure by them to provide the required cooperation could result in our inability to obtain settlement of funds relating to
transactions.
Our ATMs dispense cash relating to transactions on credit and debit cards issued by banks. We have in place arrangements for
the settlement to us of all of those transactions, but in some cases, we do not have a direct relationship with the card-issuing
bank and rely for settlement on the application of rules that are administered by international card associations (such as Visa or
Mastercard) or national transaction processing switching networks. If a bankcard association fails to settle transactions in
accordance with those rules, we are dependent upon cooperation from such organizations or switching networks to enforce our
right of settlement against such banks or card associations. Failure by such organizations or switches to provide the required
cooperation could result in our inability to obtain settlement of funds relating to transactions and adversely affect our business.
Moreover, international card associations and issuers of their cards (and, in the case of Visa, member banks) have the ability to
change or apply their rules in ways that could negatively impact our business. As an example, DCC is not permitted on certain
cards in certain geographic territories, and the scope of such restrictions could be extended. Any such change or application of
the rules of international card associations could materially and adversely affect our business.
Because our business is highly dependent on the proper operation of our computer networks and telecommunications
connections, significant technical disruptions to these systems would adversely affect our revenues and financial results.
Our business involves the operation and maintenance of sophisticated computer networks and telecommunications connections
with financial institutions, mobile phone operators, other content providers, retailers and agents. This, in turn, requires the
maintenance of computer equipment and infrastructure, including telecommunications and electrical systems, and the
integration and enhancement of complex software applications. There are operational risks inherent in this type of business that
can result in the temporary shutdown of part or all of our processing systems, such as failure of electrical supply, failure of
60
computer hardware, security breaches and software errors. Transactions in the EFT Processing Segment are processed through
our Budapest, Beijing, Mumbai and Karachi processing centers. Transactions in the epay Segment are processed through our
London, Martinsried, Hamburg, Milan, Buena Park, California and Kansas City, Missouri processing centers. Transactions in
our Money Transfer Segment are processed through our Buena Park, California, Kansas City, Missouri, Bracknell, Auckland,
and Kuala Lumpur processing centers. Any operational problem in these centers may have a significant adverse impact on the
operation of our networks. Even with disaster recovery procedures in place, these risks cannot be eliminated entirely, and any
technical failure that prevents operation of our systems for a significant period of time will prevent us from processing
transactions during that period of time and will directly and adversely affect our revenues and financial results.
We are subject to security breaches of our systems. Any such breach may cause us to incur financial losses, liability,
harm to our reputation, litigation, regulatory enforcement actions and limitations on our ability to conduct our
businesses.
We capture, transmit, handle and store sensitive information in conducting and managing electronic, financial and mobile
transactions, such as card information, PIN numbers and personal information of various types. These businesses involve
certain inherent security risks, in particular: the risk of electronic interception and theft of the information for use in fraudulent
or other card transactions by persons outside the Company, including third party vendors or by our own employees; and the use
of fraudulent cards on our network of owned or outsourced ATMs and POS devices. We incorporate industry-standard
encryption technology and processing methodology into our systems and software and maintain controls and procedures
regarding access to our computer systems by employees and others, to maintain high levels of security. Although this
technology and methodology decreases security risks, they cannot be eliminated entirely as criminal elements apply
increasingly sophisticated technology to attempt to obtain unauthorized access to the information handled by ATM, money
transfer and electronic financial transaction networks. In addition, the cost and timeframes required for implementation of new
technology may result in a time lag between availability of such technology and our adoption of it. Further, our controls,
procedures and technology may not be able to detect when there is a breach, causing a delay in our ability to mitigate it. As
previously disclosed in our SEC filings, we were the subject of computer security breaches, and we cannot exclude the
possibility of additional breaches in the future.
Any breach in our security systems could result in the perpetration of fraudulent financial transactions for which we may bear
the liability. We are insured against various risks, including theft and negligence, but such insurance coverage is subject to
deductibles, exclusions and limits that may leave us bearing some or all of any losses arising from security breaches.
We also collect, transfer and retain personal data as part of our money transfer business. These activities are subject to certain
privacy laws and regulations in the U.S. and in other jurisdictions where our money transfer services are offered. We maintain
technical and operational safeguards designed to comply with applicable legal requirements. Despite these safeguards, there
remains a risk that these safeguards could be breached resulting in improper access to, and disclosure of, sensitive customer
information. Breaches of our security policies or applicable legal requirements resulting in a compromise of customer data
could expose us to regulatory enforcement action, subject us to litigation, limit our ability to provide money transfer services
and/or cause harm to our reputation.
In addition to electronic fraud issues and breaches of our systems, the possible theft and vandalism of ATMs or cash in the
ATMs present risks for our ATM business. We install ATMs at high-traffic sites and consequently our ATMs are exposed to
theft and vandalism, and to a new form of attack whereby the security of the ATM is breached electronically by transmitting a
command to the ATM to dispense cash without a card being present. We constantly monitor ATM security and take measures
to protect our systems from such attacks and other breaches, but we cannot be certain that our measures will be effective
against new, rapidly developing methods used by criminal elements. Although we are insured against such risks, deductibles,
exclusions or limitations in such insurance may leave us bearing some or all of any losses arising from theft or vandalism of
ATMs or loss of cash due to security breaches of our ATM networks. In addition, we have experienced increases in claims
under our insurance, which has increased our insurance premiums.
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We could incur substantial losses if one of the third-party depository institutions we use in our operations were to fail.
As part of our business operations, we maintain cash balances at third party depository institutions. We could incur substantial
losses if a financial institution in which we have significant deposits fails.
We are required under certain national laws and the rules of financial transaction switching networks in many of our
markets to have ''sponsors'' to operate ATMs and switch ATM transactions. Our failure to secure ''sponsor''
arrangements in any of our markets that require bank sponsors could prevent us from doing business in that market.
Under the laws of some countries, only a licensed financial institution may operate ATMs. Because we are not a licensed
financial institution outside of the E.U. we are required to have a ''sponsor'' bank to conduct ATM operations in those countries.
In addition, in all of our non-E.U. markets, the rules governing national transaction switching networks owned or operated by
banks, and other international financial transaction switching networks operated by organizations such as Citibank, Visa and
Mastercard, require any company sending transactions through these switches to be a bank or a technical service processor that
is approved and monitored by a bank. As a result, the operation of our ATM network in many of our markets depends on our
ability to secure these ''sponsor'' arrangements with financial institutions.
To date, we have been successful in reaching contractual arrangements that have permitted us to operate in all of our target
markets. However, we cannot assure you that we will continue to be successful in reaching these arrangements, and it is
possible that our current arrangements will not continue to be renewed. If we are unable to secure “sponsor” arrangements in
any market, we could be prevented from doing business in that market.
We rely on third party financial institutions to provide us with a portion of the cash required to operate our ATM
networks in certain countries. If these institutions were unable or unwilling to provide us with the cash necessary to
operate our ATM networks, we would be required to locate additional alternative sources of cash to operate these
networks.
In our EFT Processing Segment, we primarily rely on third party financial institutions in certain countries in Europe and Asia
Pacific to provide us with the cash required to operate our ATM networks. Under our agreements with these providers, we pay
fees or interest, which is generally variable and could increase, based on the total amount of cash we are using from such
provider at a given time, as well as other costs such as bank fees and cash transportation costs. As of December 31, 2019, the
amount of cash used in our ATM networks under these supply agreements was approximately $489 million. Before the cash is
disbursed to ATM customers, beneficial ownership of the cash is generally retained by the cash providers, and we have no
access or proprietary rights to the cash.
Our existing agreements with cash providers are generally multi-year agreements that expire at various times. However, each
provider may have the right to demand the return of all or any portion of its cash at any time upon the occurrence of certain
events beyond our control, including certain bankruptcy events affecting us or our subsidiaries, or a breach of the terms of our
cash provider agreements.
If any of our cash supply providers were to demand return of their cash or terminate their agreements with us and remove their
cash from our ATM devices, or if they fail to provide us with the cash our operations require, our ability to operate the ATM
networks to which the provider supplies cash would be jeopardized, and we would need to locate additional alternative sources
of cash, including, potentially the increased use of our own cash. Under those circumstances, the terms and conditions of the
new or renewed agreements could potentially be less favorable to us, which would negatively impact our results of
operations. Furthermore, restrictions on our access to cash to supply our ATMs could severely restrict our ability to keep our
ATMs operating, which could subject us to performance penalties under our contracts with our customers.
We have encountered difficulty in obtaining cash supply arrangements in certain of our markets, including Greece, and directly
provide cash for our ATM transactions in those markets. While the amounts involved are currently well within our capabilities
given our cash flows and available financing, any failure to renew a major cash supply arrangement could require that we
62
commit significant financial resources to the supply of cash to our ATM networks, which could adversely impact our results of
operations.
Competition in our EFT Processing Segment has increased over the last several years, increasing the risk that certain of
our long-term bank outsourcing contracts may be terminated or not renewed upon expiration.
The developing markets in which we have done business have matured over the years, resulting in increasing competition. In
addition, as consolidation of financial institutions in Central and Eastern Europe continues, certain of our customers have
established or are establishing internal ATM management and processing capabilities. As a result of these developments,
negotiations regarding renewal of contracts have become increasingly challenging and in certain cases we have reduced fees to
extend contracts beyond their original terms. In certain other cases, contracts have been, and in the future may be, terminated
by financial institutions resulting in a substantial reduction in revenue. Contract termination payments, if any, may be
inadequate to replace revenues and operating income associated with these contracts. Although we have historically considered
the risk of non-renewal of major contracts to be relatively low because of complex interfaces and operational procedures
established for those contracts, the risk of non-renewal or early termination is increasing.
Our operating results in the money transfer business may be harmed if there are adverse changes in worker
immigration patterns, our ability to expand our share of the existing electronic market and to expand into new markets
and our ability to continue complying with regulations issued by the OFAC, BSA, FINCEN, USA PATRIOT Act
regulations, the Dodd-Frank Act or any other existing or future regulations that impact any aspect of our money
transfer business.
Our money transfer business primarily focuses on workers who migrate to foreign countries in search of employment and then
send a portion of their earnings to family members in their home countries. Changes in U.S. and foreign government policies or
enforcement, including changes that have been, or may be, implemented by the U.S. President or Congress, toward
immigration may have a negative effect on immigration in the U.S. and other countries, which could also have an adverse
impact on our money transfer revenues.
Both U.S. and foreign regulators have become increasingly aggressive in the enforcement of the various regulatory regimes
applicable to our businesses and the imposition of fines and penalties in the event of violations. Our ability to continue
complying with the requirements of OFAC, BSA, FINCEN, the USA PATRIOT Act, the Dodd-Frank Act and other regulations
(both U.S. and foreign) is important to our success in achieving growth and an inability to do this could have an adverse impact
on our revenues and earnings. Anti-money laundering and consumer protection regulations require us to be responsible for the
compliance by agents with such regulations. Although we have training and compliance programs in place, we cannot be
certain our agents will comply with such regulations and we may be held responsible for their failure to comply, resulting in
fines and penalties.
Future growth and profitability depend upon expansion within the markets in which we currently operate and the development
of new markets for our money transfer services. Our expansion into new markets is dependent upon our ability to successfully
apply our existing technology or to develop new applications to satisfy market demand. We may not have adequate financial
and technological resources to expand our distribution channels and product applications to satisfy these demands, which may
have an adverse impact on our ability to achieve expected growth in revenues and earnings.
Changes in state, federal or foreign laws, rules and regulations could impact the money transfer industry, making it
more difficult for our customers to initiate money transfers which would harm our money transfer business.
Our money transfer services are subject to regulation by the U.S. states in which we operate, by the U.S. federal government
and the governments of the other countries in which we operate. Changes in the laws, rules and regulations of these
governmental entities, and our ability to obtain or retain required licensure, could have a material adverse impact on our results
of operations, financial condition and cash flow.
63
Changes in banking industry regulation and practice could make it more difficult for us and our agents to maintain
depository accounts with banks, which would harm our business.
The banking industry, in light of increased regulatory oversight, is continually examining its business relationships with
companies that offer money transfer services and with retail agents that collect and remit cash collected from end consumers.
Certain major national and international banks have already withdrawn from providing service to money services businesses.
Should our own banks decide to not offer depository services to companies engaged in processing money transfer transactions,
or to retail agents that collect and remit cash from end customers, our ability to complete money transfers, and to administer
and collect fees from money transfer transactions, could be adversely impacted.
If we are unable to maintain our money transfer agent and correspondent networks, our business may be adversely
affected.
Our consumer-to-consumer money transfer-based revenues are primarily generated through the use of our agent and
correspondent networks. If agents or correspondents decide to leave our network or if we are unable to sign new agents or
correspondents, our revenue and profit growth rates may be adversely affected. Our agents and correspondents are also subject
to a wide variety of laws and regulations that vary significantly, depending on the legal jurisdiction. Changes in these laws and
regulations could adversely affect our ability to maintain the networks or the cost of providing money transfer services. In
addition, agents may generate fewer transactions or less revenue due to various factors, including increased competition.
Because our agents and correspondents are third parties that may sell products and provide services in addition to our money
transfer services, they may encounter business difficulties unrelated to the provision of our services, which may cause the
agents or correspondents to reduce their number of locations or hours of operation, or cease doing business altogether.
If consumer confidence in our money transfer business or brands declines, our business may be adversely affected.
Our money transfer business relies on customer confidence in our brands and our ability to provide efficient and reliable money
transfer services. A decline in customer confidence in our business or brands, or in traditional money transfer providers as a
means to transfer money, may adversely impact transaction volumes which would, in turn, be expected to adversely impact our
business and possibly result in recording charges for the impairment of goodwill and/or other long-lived assets.
Our money transfer service offerings are dependent on financial institutions to provide such offerings, and any adverse
change in such offerings would harm our money transfer business.
Our money transfer business involves transferring funds internationally and is dependent upon foreign and domestic financial
institutions, including our competitors, to execute funds transfers and foreign currency transactions. Changes to existing
regulations of financial institution operations, such as those designed to combat terrorism or money laundering, could require
us to alter our operating procedures in a manner that increases our cost of doing business or to terminate certain product
offerings. In addition, as a result of existing regulations and/or changes to those regulations, financial institutions could decide
to cease providing the services on which we depend, requiring us to terminate certain product offerings.
64
The Dodd-Frank Act could have an adverse effect on our ability to hedge risks associated with our business.
The Dodd-Frank Act established federal oversight and regulation of the over-the-counter derivatives market and entities that
participate in that market. The act requires the U.S. Commodity Futures Trade Commission ("CFTC") to institute broad new
position limits for futures and options traded on regulated exchanges. As the law favors exchange trading and clearing, the
Dodd-Frank Act also may require us to move certain derivatives transactions to exchanges where no trade credit is provided
and also comply with margin requirements in connection with our derivatives activities that are not exchange traded, although
the application of those provisions to us is uncertain at this time. The Dodd-Frank Act also requires many counterparties to our
derivatives instruments to spin off some of their derivatives activities to a separate entity, which may not be as creditworthy as
the current counterparty, or cause the entity to comply with the capital requirements, which could result in increased costs to
counterparties such as us. The Dodd-Frank Act and any new regulations could (i) significantly increase the cost of derivative
contracts (including requirements to post collateral, which could adversely affect our available liquidity); (ii) reduce the
availability of derivatives to protect against risks we encounter; and (iii) reduce the liquidity of foreign currency related
derivatives.
If we reduce our use of derivatives as a result of the legislation and regulations, our results of operations may become more
volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital
expenditures and working capital. Increased volatility may make us less attractive to certain types of investors. Any of these
consequences could have a material adverse effect on our financial condition and results of operations.
The United Kingdom's departure from the European Union could adversely affect us.
On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the E.U., commonly referred to as Brexit.
The Brexit withdrawal agreement (officially: Agreement on the withdrawal of the United Kingdom of Great Britain and
Northern Ireland from the European Union and the European Atomic Energy Community) is a treaty between the European
Union (EU), the European Atomic Energy Community ("Euratom"), and the United Kingdom (UK), signed on 24 January
2020, setting the terms of the withdrawal of the latter from the former two (Brexit). The withdrawal agreement provides for a
transition period until December 31, 2020, during which the U.K. remains in the single market, in order to ensure frictionless
trade until a long-term relationship is agreed. However, as of February 2020, the withdrawal of the U.K. and Northern Ireland
from the E.U. remains subject of negotiations yet to come. If no such agreement is reached by that date and the transition
period is not extended, a no-deal Brexit would remain the default outcome in 2021. Although it remains unknown what the
final terms will be, it is likely that there will be greater restrictions on the terms of trade and immigration between the U.K. and
E.U. countries and increased regulatory complexities.
xe adjusted operating income decreased compared to 2018 primarily due to lower revenues due to Brexit uncertainty.
Our EFT Processing Segment and our Money Transfer Segment operate subsidiaries that are licensed in the U.K. as payment
institutions and as an e-money institution and have passported their licenses under the PSD2 and 2EMD, respectively, across
the Member States. When the U.K. leaves the E.U. single market without an agreement or without an agreement to continue
passporting rights, then U.K. payment and/or e-money institutions may lose their rights to continue providing services in the
E.U. after December 31, 2020. These measures could potentially disrupt the markets we serve and cause us to use one of our
other E.U. licenses or obtain new licenses in another E.U. member state to continue operating in the markets throughout the
E.U.
If we are unable to shift business to one of our other E.U. licenses or obtain additional licenses by the date that the U.K. leaves
the E.U., then we may have a disruption to the services that we provide in the E.U. under our U.K. licenses. Any disruption of
our business following Brexit could have a material adverse effect on our business or financial results.
The COVID-19 pandemic could adversely affect us.
Our business is sensitive to the willingness of our customers to travel. A pandemic could cause disruptions in air and other
forms of travel. As of the date of this filing, the COVID-19 (coronavirus) outbreak has resulted in several countries issuing
65
travel warnings, although it has largely been concentrated in China, where the Company has a small presence. Our business is
diversified across our segments and management does not believe that the disruptions would have a material adverse effect on
our business, financial condition or results of operations. The extent to which our results are affected by the virus will largely
depend on future developments which cannot be accurately predicted and are uncertain. This includes new information which
may emerge concerning the severity of the virus and attempts to contain or treat the impact.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our executive offices are located in Leawood, Kansas. As of December 31, 2019, we also have 36 principal offices in Europe,
14 in Asia Pacific, 10 in North America, three in the Middle East, two in South America and one in Africa. Our office leases
generally provide for initial terms ranging from two to twelve years.
Our processing centers for the EFT Processing Segment are located in Martinsreid, Germany; Budapest, Hungary; Mumbai,
India; Beijing, China; and Karachi, Pakistan. Processing centers we operate for the epay Segment are located in Billericay,
U.K.; Martinsried, Germany; Hamburg, Germany; Milan, Italy; Buena Park, California, USA; and Kansas City, Missouri, USA.
Our processing centers for the Money Transfer Segment are located in Buena Park, California, USA; Bracknell, U.K.;
Auckland, New Zealand; Kansas City, Missouri, USA; and Kuala Lumpur, Malaysia.
All of our processing centers are leased and have off-site real time backup processing centers that are capable of providing full
or partial processing services in the event of failure of the primary processing centers.
ITEM 3. LEGAL PROCEEDINGS
The Company is, from time to time, a party to legal or regulatory proceedings arising in the ordinary course of its business.
The discussion regarding litigation in Part II, Item 8 - Financial Statements and Supplementary Data and Note 18, Litigation
and Contingencies, to the Consolidated Financial Statements included elsewhere in this report is incorporated herein by
reference.
Currently, there are no legal or regulatory proceedings that management believes, either individually or in the aggregate, would
have a material adverse effect upon the Consolidated Financial Statements of the Company. In accordance with U.S. Generally
Accepted Accounting Principles ("U.S. GAAP"), we record a liability when it is both probable that a liability has been incurred
and the amount of the loss can be reasonably estimated. These liabilities are reviewed at least quarterly and adjusted to reflect
the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a
particular case or proceeding.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
66
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Our Common Stock, $0.02 par value per share, is quoted on the NASDAQ Global Select Market under the symbol EEFT.
DIVIDENDS
Since our inception, no dividends have been paid on our Common Stock or Preferred Stock. We do not intend to distribute
dividends for the foreseeable future.
HOLDERS
At December 31, 2019, we had 44 stockholders of record of our Common Stock, and none of our Preferred Stock was
outstanding. This figure does not include an estimate of the indeterminate number of beneficial holders whose shares may be
held of record by brokerage firms and clearing agencies.
PRIVATE PLACEMENTS AND ISSUANCES OF EQUITY
During 2019, we did not issue any equity securities that were not registered under the Securities Act of 1933, which have not
been previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
67
STOCK PERFORMANCE GRAPH
Set forth below is a graph comparing the total cumulative return on our Common Stock from December 31, 2014 through
December 31, 2019 with the Total Returns Index for U.S. companies traded on the NASDAQ Global Select Market (the
“Market Group”) and an index group of peer companies, the Total Returns Index for U.S. NASDAQ Financial Stocks (the
“Peer Group”). Returns are based on monthly changes in price and assume reinvested dividends. These calculations assume
the value of an investment in the Common Stock, the Market Group and the Peer Group was $100 on December 31, 2014.
The following performance graph and related text are being furnished to and not filed with the SEC, and will not be deemed to
be “soliciting material” or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the
Exchange Act and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the
Exchange Act, except to the extent we specifically incorporate such information by reference into such filing.
NOTE: Index Data: Calculated (or Derived) based from CRSP NASDAQ Stock Market (U.S. Companies) and CRSP
NASDAQ Financial Index, Center for Research in Security Prices (CRSP®), Graduate School of Business, The University of
Chicago. Copyright 2019. Used with permission. All rights reserved.
68
EQUITY COMPENSATION PLAN INFORMATION
The table below sets forth information with respect to shares of Common Stock that may be issued under our equity
compensation plans as of December 31, 2019.
(a)
(b)
(c)
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options and Rights
Weighted Average
Exercise Price of
Outstanding Options
and Rights (1)
Number of
Securities
Remaining Available
for Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities Reflected
in Column (a))(2)
2,388,186
3,015,775 $
493,948
—
81.29
—
—
—
Plan category
Equity compensation plans approved by security holders:
Stock option awards
Restricted stock unit awards
Equity compensation plans not approved by security holders
Total
3,509,723
$
81.29
2,388,186
____________________________
(1) The weighted average exercise price in this column does not take into account the restricted stock unit awards.
(2)
Included in this column is 0.2 million shares remaining under our employee stock purchase plan. During 2019, Euronet
issued 16,713 shares to employees under the employee stock purchase plan.
STOCK REPURCHASES
During the quarter ended December 31, 2019, the Company repurchased 217,829 shares at an average share price of $142.89.
Period
October 1 - October 31, 2019
November 1 - November 30, 2019
December 1 - December 31, 2019
Total
Total Number of
Shares Purchased
Average Price Paid
per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Maximum Dollar
Value of Shares that
May Yet Be
Purchased Under the
Programs (in
thousands) (1)
217,829 $
—
—
217,829 $
142.89
—
—
—
217,829 $
—
—
217,829
249,124
249,124
249,124
(1) Amount remaining to be repurchased at the end of the period. The Board of Directors has authorized a stock repurchase
program ("Repurchase Program") allowing Euronet to repurchase up to $375 million in value or 10.0 million shares of stock
through March 31, 2020. Euronet has repurchased 245.9 million of stock under the Repurchase Program. On March 11, 2019,
in connection with the issuance of the Convertible Notes, the Board of Directors authorized an additional repurchase program
of $120 million in value of Euronet’s common stock through March 11, 2021. On February 26, 2020, the Company put a
repurchase program in place to repurchase up to $250 million in value, but not more than five million shares of common stock
through February 28, 2022. Repurchases under either program may take place in the open market or in privately negotiated
transactions, including derivative transactions, and may be made under a Rule 10b5-1 plan.
69
ITEM 6. SELECTED FINANCIAL DATA
The following information should be read in conjunction with Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations and our Consolidated Financial Statements and accompanying notes contained in Item 8 -
Financial Statements and Supplementary Data in this report. The historical results are not necessarily indicative of the results to
be expected in any future period.
(dollar amounts in thousands, except per share amounts)
2019
2018
2017
2016
2015
Year Ended December 31,
Income statement data:
Revenues
Operating expenses (1)
Depreciation and amortization
Operating income (1)
Other expenses, net
Income from continuing operations before
income taxes
Income tax expense
Income from continuing operations
$ 2,750,109 $ 2,536,629 $ 2,252,422 $ 1,958,615 $ 1,772,262
1,497,396
70,025
204,841
(63,747 )
2,072,694
106,021
357,914
(62,998 )
1,891,395
95,030
265,997
(9,662 )
1,628,313
80,529
249,773
(16,880 )
2,163,171
111,744
475,194
(41,387 )
433,807
294,916
256,335
232,893
141,094
(87,112 )
346,695 $
(62,785 )
232,131 $
(99,395 )
156,940 $
(58,795 )
174,098 $
(42,602 )
98,492
$
Earnings per share from continuing operations:
Basic
Diluted
$
$
6.49 $
6.31 $
4.52 $
4.26 $
2.99 $
2.85 $
3.34 $
3.23 $
1.89
1.83
Balance sheet data (at period end):
Assets
Debt obligations, long-term portion
Finance lease obligations, long-term portion
Summary network data
Number of operational ATMs at end of period
EFT processing transactions during the period
(millions)
Number of operational prepaid processing POS
terminals at end of period (rounded)
Prepaid processing transactions during the
period (millions)
Money transfer transactions during the period
(millions)
$ 4,657,666 $ 3,321,155 $ 3,140,029 $ 2,712,872 $ 2,192,714
405,472
4,147
1,090,939
8,054
589,782
8,199
404,012
9,753
561,663
6,969
46,070
40,354
37,133
33,973
21,360
3,052
2,721
2,352
1,885
1,523
728,000
719,000
683,000
661,000
674,000
1,542
114.5
1,149
107.6
1,186
1,294
1,335
92.2
82.3
68.7
___________________
(1) The results of 2018 and 2017 include non-cash charges related to impairment of goodwill and acquired intangible assets of
$7.0 million and $34.1 million, respectively.
70
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with the consolidated financial statements and
accompanying notes included elsewhere in this Annual Report on Form 10-K. This section of this Form 10-K generally
discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. Discussions of 2017 items and year-to-
year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2018.
COMPANY OVERVIEW, GEOGRAPHIC LOCATIONS AND PRINCIPAL PRODUCTS AND SERVICES
Euronet is a leading electronic payments provider. We offer payment and transaction processing and distribution solutions to
financial institutions, retailers, service providers and individual consumers. Our primary product offerings include
comprehensive ATM, POS, card outsourcing, card issuing and merchant acquiring services, software solutions, electronic
distribution of prepaid mobile airtime and other electronic payment products, foreign currency exchange services and global
money transfer services. We operate in the following three segments:
•
•
•
The EFT Processing Segment, which processes transactions for a network of 46,070 ATMs and approximately
330,000 POS terminals across Europe, the Middle East, Asia Pacific, and the United States. We provide
comprehensive electronic payment solutions consisting of ATM cash withdrawal and deposit services, ATM
network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing, DCC,
and other value-added services. Through this segment, we also offer a suite of integrated electronic financial
transaction software solutions for electronic payment and transaction delivery systems.
The epay Segment, which provides distribution, processing and collection services for prepaid mobile airtime and
other electronic content. We operate a network of approximately 728,000 POS terminals providing electronic
processing of prepaid mobile airtime top-up services and other electronic content in Europe, the Middle East, Asia
Pacific, the United States and South America. We also provide vouchers and physical gift fulfillment services in
Europe.
The Money Transfer Segment, which provides global consumer-to-consumer money transfer services, primarily
under the brand names Ria, IME and xe and global account-to-account money transfer services under the brand
name xe. We offer services under the brand names Ria and IME through a network of sending agents, Company-
owned stores (primarily in North America, Europe and Malaysia) and our websites (riamoneytransfer.com and
online.imeremit.com), disbursing money transfers through a worldwide correspondent network that includes
approximately 397,000 locations. xe is a provider of foreign currency exchange information and offers money
transfer services on its currency data websites (xe.com and x-rates.com). In addition to money transfers, we also
offer customers bill payment services (primarily in the U.S.), payment alternatives such as money orders and
prepaid debit cards, comprehensive check cashing services for a wide variety of issued checks, along with
competitive foreign currency exchange services and prepaid mobile top-up. Through our xe brand, we offer cash
management solutions and foreign currency risk management services to small-to-medium sized businesses.
We have six processing centers in Europe, five in Asia Pacific and two in North America. We have 36 principal offices in
Europe, 14 in Asia Pacific, 10 in North America, three in the Middle East, two in South America and one in Africa. Our
executive offices are located in Leawood, Kansas, USA. With approximately 74% of our revenues denominated in currencies
other than the U.S. dollar, any significant changes in foreign currency exchange rates will likely have a significant impact on
our results of operations (for a further discussion, see Item 1A - Risk Factors and Item 7A - Quantitative and Qualitative
Disclosures About Market Risk).
SOURCES OF REVENUE AND CASH FLOW
Euronet earns revenues and income primarily from ATM management fees, transaction fees, commissions and foreign currency
exchange margin. Each operating segment’s sources of revenues are described below.
71
EFT Processing Segment — Revenues in the EFT Processing Segment, which represented approximately 32% of total
consolidated revenues for the year ended December 31, 2019, are derived from fees charged for transactions made by
cardholders on our proprietary network of ATMs, fixed management fees and transaction fees we charge to customers for
operating ATMs and processing debit and credit cards under outsourcing and cross-border acquiring agreements, foreign
currency exchange margin on DCC transactions, domestic and international surcharge, foreign currency dispensing and other
value added services such as advertising, prepaid telecommunication recharges, bill payment, and money transfers provided
over ATMs. Revenues in this segment are also derived from cardless payment, banknote recycling, tax refund services, license
fees, professional services and maintenance fees for proprietary application software and sales of related hardware.
epay Segment — Revenues in the epay Segment, which represented approximately 28% of total consolidated revenues for the
year ended December 31, 2019, are primarily derived from commissions or processing fees received from mobile phone
operators for the processing and distribution of prepaid mobile airtime and commissions earned from the distribution of other
electronic content, vouchers, and physical gifts. The proportion of epay Segment revenues earned from the distribution of
prepaid mobile phone time as compared with other electronic products has decreased over time, and digital media content now
produces approximately 63% of epay Segment revenues. Other electronic content offered by this segment includes digital
content such as music, games and software, as well as, other products including prepaid long distance calling card plans,
prepaid Internet plans, prepaid debit cards, gift cards, vouchers, transport payments, lottery payments, bill payment, and money
transfer.
Money Transfer Segment — Revenues in the Money Transfer Segment, which represented approximately 40% of total
consolidated revenues for the year ended December 31, 2019, are primarily derived from transaction fees, as well as the margin
earned from purchasing foreign currency at wholesale exchange rates and selling the foreign currency to customers at retail
exchange rates. We have a sending agent network in place comprised of agents, customer service representatives, Company-
owned stores, primarily in North America, Europe and Malaysia, and Ria, and xe branded websites, along with a worldwide
network of correspondent agents, consisting primarily of financial institutions in the transfer destination countries. Sending and
correspondent agents each earn fees for cash collection and distribution services, which are recognized as direct operating costs
at the time of sale.
The Company offers a money transfer product called Walmart-2-Walmart Money Transfer Service which allows customers to
transfer money to and from Walmart stores in the U.S. Our Ria business executes the transfers with Walmart serving as both the
sending agent and payout correspondent. Ria earns a lower margin from these transactions than its traditional money transfers;
however, the arrangement has added a significant number of transactions to Ria's business. The agreement with Walmart
establishes Ria as the only party through which Walmart will sell U.S. domestic money transfers branded with Walmart marks.
The agreement is effective until April 2020. Thereafter, it will automatically renew for subsequent one-year terms unless either
party provides notice to the contrary. The agreement imposes certain obligations on each party, the most significant being
service level requirements by Ria and money transfer compliance requirements by Walmart. Any violation of these
requirements by Ria could result in an obligation to indemnify Walmart or termination of the contract by Walmart. However,
the agreement allows the parties to resolve disputes by mutual agreement without termination of the agreement.
Corporate Services, Eliminations and Other — In addition to operating in our principal operating segments described above,
our “Corporate Services, Eliminations and Other” category includes non-operating activity, certain inter-segment eliminations
and the cost of providing corporate and other administrative services to the operating segments, including most share-based
compensation expense. These services are not directly identifiable with our reportable operating segments.
OPPORTUNITIES AND CHALLENGES
Our expansion plans and opportunities are focused on eight primary areas:
•
•
•
•
increasing the number of ATMs and cash deposit terminals in our independent ATM networks;
increasing transactions processed on our network of owned and operated ATMs and POS devices;
signing new outsourced ATM and POS terminal management contracts;
expanding value added services and other products offered by our EFT Processing Segment, including the sale of
DCC, acquiring and other prepaid card services to banks and retailers;
72
•
•
•
•
expanding our epay processing network and portfolio of digital content;
expanding our money transfer services, cross-currency payments products and bill payment network;
expanding our cash management solutions and foreign currency risk management services; and
developing our credit and debit card outsourcing business.
EFT Processing Segment — The continued expansion and development of our EFT Processing Segment business will depend
on various factors including, but not necessarily limited to, the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the impact of competition by banks and other ATM operators and service providers in our current target markets;
the demand for our ATM outsourcing services in our current target markets;
our ability to develop products or services, including value added services, to drive increases in transactions and
revenues;
the expansion of our various business lines in markets where we operate and in new markets;
our entry into additional card acceptance and ATM management agreements with banks;
our ability to obtain required licenses in markets we intend to enter or expand services;
our ability to enter into sponsorship agreements where our licenses are not applicable;
our ability to enter into and renew ATM network cash supply agreements with financial institutions;
the availability of financing for expansion;
our ability to efficiently install ATMs contracted under newly awarded outsourcing agreements;
our ability to renew existing contracts at profitable rates;
our ability to maintain pricing at current levels or mitigate price reductions in certain markets;
the impact of changes in rules imposed by international card organizations such as Visa and Mastercard on card
transactions on ATMs, including reductions in ATM interchange fees, restrictions on the ability to apply direct
access fees, the ability to offer DCC transactions on ATMs, and increases in fees charged on DCC transactions;
the impact of changes in laws and regulations affecting the profitability of our services, including regulation of
DCC transactions by the E.U.;
the impact of overall market trends on ATM transactions in our current target markets:
our ability to expand and sign additional customers for the cross-border merchant processing and acquiring
business; and
the continued development and implementation of our software products and their ability to interact with other
leading products.
We consistently evaluate and add prospects to our list of potential ATM outsource customers. However, we cannot predict the
increase or decrease in the number of ATMs we manage under outsourcing agreements because this depends largely on the
willingness of banks to enter into outsourcing contracts with us. Due to the thorough internal reviews and extensive
negotiations conducted by existing and prospective banking customers in choosing outsource vendors, the process of entering
into or renewing outsourcing agreements can take several months. The process is further complicated by the legal and
regulatory considerations of local countries. These agreements tend to cover large numbers of ATMs, so significant increases
and decreases in our pool of managed ATMs could result from the acquisition or termination of one or more of these
management contracts. Therefore, the timing of both current and new contract revenues is uncertain and unpredictable.
Software products are an integral part of our product lines, and our investment in research, development, delivery and customer
support reflects our ongoing commitment to an expanded customer base.
73
epay Segment — The continued expansion and development of the epay Segment business will depend on various factors,
including, but not necessarily limited to, the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
our ability to maintain and renew existing agreements, and to negotiate new agreements in additional markets
with mobile operators, digital content providers, agent financial institutions and retailers;
our ability to use existing expertise and relationships with mobile operators, digital content providers and retailers
to our advantage;
the continued use of third-party providers such as ourselves to supply electronic processing solutions for existing
and additional digital content;
the development of mobile phone networks in the markets in which we do business and the increase in the number
of mobile phone users;
the overall pace of growth in the prepaid mobile phone and digital content market, including consumer shifts
between prepaid and postpaid services;
our market share of the retail distribution capacity;
the development of new technologies that may compete with POS distribution of prepaid mobile airtime and other
products;
the level of commission that is paid to the various intermediaries in the electronic payment distribution chain;
our ability to fully recover monies collected by retailers;
our ability to add new and differentiated products in addition to those offered by mobile operators;
our ability to develop and effectively market additional value added services;
our ability to take advantage of cross-selling opportunities with our EFT Processing and Money Transfer
Segments, including providing money transfer services through our distribution network; and
the availability of financing for further expansion.
In all of the markets in which we operate, we are experiencing significant competition which will impact the rate at which we
may be able to grow organically. Competition among prepaid mobile airtime and electronic content distributors results in the
increase of commissions paid to retailers and increases in retailer attrition rates. To grow, we must capture market share from
other prepaid mobile airtime and electronic content distributors, offer a superior product offering and demonstrate the value of a
global network. In certain markets in which we operate, many of the factors that may contribute to rapid growth (growth in
electronic content, expansion of our network of retailers and access to products of mobile operators and other content
providers) remain present.
74
Money Transfer Segment — The continued expansion and development of our Money Transfer Segment business will depend
on various factors, including, but not necessarily limited to, the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the continued growth in worker migration and employment opportunities;
the mitigation of economic and political factors that have had an adverse impact on money transfer volumes, such
as changes in the economic sectors in which immigrants work and the developments in immigration policies in
the countries in which we operate;
the continuation of the trend of increased use of electronic money transfer and bill payment services among high-
income individuals, immigrant workers and the unbanked population in our markets;
our ability to maintain our agent and correspondent networks;
our ability to offer our products and services or develop new products and services at competitive prices to drive
increases in transactions;
the development of new technologies that may compete with our money transfer network, and our ability to
acquire, develop and implement new technologies;
the expansion of our services in markets where we operate and in new markets;
our ability to strengthen our brands;
our ability to fund working capital requirements;
our ability to recover from agents funds collected from customers and our ability to recover advances made to
correspondents;
our ability to maintain compliance with the regulatory requirements of the jurisdictions in which we operate or
plan to operate;
our ability to take advantage of cross-selling opportunities with our epay Segment, including providing prepaid
services through our stores and agents worldwide;
our ability to leverage our banking and merchant/retailer relationships to expand money transfer corridors to
Europe, Asia and Africa, including high growth corridors to Central and Eastern European countries;
the availability of financing for further expansion;
the ability to maintain banking relationships necessary for us to service our customers;
our ability to successfully expand our agent network in Europe using our payment institution licenses under the
Second Payment Services Directive ("PSD2") and using our various licenses in the United States; and
our ability to provide additional value-added products under the xe brand.
The accounting policies of each segment are the same as those referenced in the summary of significant accounting policies
(see Note 3, Summary of Significant Accounting Policies and Practices, to the Consolidated Financial Statements).
For all segments, our continued expansion may involve additional acquisitions that could divert our resources and management
time and require integration of new assets with our existing networks and services. Our ability to effectively manage our
growth has required us to expand our operating systems and employee base, particularly at the management level, which has
added incremental operating costs. An inability to continue to effectively manage expansion could have a material adverse
effect on our business, growth, financial condition or results of operations. Inadequate technology and resources would impair
our ability to maintain current processing technology and efficiencies, as well as deliver new and innovative services to
compete in the marketplace.
75
SEGMENT REVENUES AND OPERATING INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(in thousands)
EFT Processing
Epay
Money Transfer
Total
Corporate services, eliminations and other
Total
SUMMARY
Revenues
Operating Income (Expense)
2019
888,712 $
769,329
1,096,226
2,754,267
(4,158 )
2,750,109 $
2018
753,651 $
743,784
1,042,962
2,540,397
(3,768 )
2,536,629 $
2019
296,640 $
89,204
134,790
520,634
(45,440 )
475,194 $
2018
197,245
78,997
122,526
398,768
(40,854 )
357,914
$
$
Our annual consolidated revenues increased by 8% for 2019 compared to 2018.
The increase in revenues for 2019 was primarily due to an increase in the number of ATMs under management, along with an
increase in demand for DCC, domestic and international surcharge and other value added services in our EFT Processing
Segment, growth in the number of money transfers processed by the core Ria business, and an increase in the number of
transactions processed by our epay subsidiaries.
The increases in operating income for 2019 was primarily due to the increase in ATMs under management, along with the
increase in demand for DCC, domestic and international surcharge and other value added services, the increase in the number
of money transfer transactions processed, and the increase in the number of transactions processed for epay.
Net income attributable to Euronet for 2019 and 2018 was $346.7 million, or $6.31 per diluted share and $232.9 million, or
$4.26 per diluted share, respectively.
Impact of changes in foreign currency exchange rates
Our revenues and local expenses are recorded in the functional currencies of our operating entities, and then are translated into
U.S. dollars for reporting purposes; therefore, amounts we earn outside the U.S. are negatively impacted by a stronger U.S.
dollar and positively impacted by a weaker U.S. dollar. Considering the results by country and the associated functional
currency, our 2019 consolidated operating income was approximately 5% less due to changes in foreign currency exchange
rates when compared to 2018. If significant, in our discussion we will refer to the impact of fluctuations in foreign currency
exchange rates in our comparison of operating segment results.
To provide further perspective on the impact of foreign currency exchange rates, the following table shows the changes in
values relative to the U.S. dollar during 2019 and 2018, of the currencies of the countries in which we have our most significant
operations:
Currency
Australian dollar
British pound
Euro
Hungarian forint
Indian rupee
Malaysian ringgit
New Zealand dollar
Polish zloty
Average Translation Rate
Year Ended December 31,
2019
2018
2019 Increase
(Decrease) Percent
0.6954 $
1.2771 $
1.1194 $
0.0034 $
0.0142 $
0.2416 $
0.6591 $
0.2606 $
$
$
$
$
$
$
$
$
76
0.7476
1.3352
1.1809
0.0037
0.0147
0.2482
0.6924
0.2774
(7 )%
(4 )%
(5 )%
(8 )%
(3 )%
(3 )%
(5 )%
(6 )%
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 – BY
OPERATING SEGMENT
EFT PROCESSING SEGMENT
The following table summarizes the results of operations for our EFT Processing Segment for the years ended December 31,
2019 and 2018:
(dollar amounts in thousands)
Total revenues
Operating expenses:
Direct operating costs
Salaries and benefits
Selling, general and administrative
Depreciation and amortization
Total operating expenses
Operating income
Transactions processed (millions)
ATMs as of December 31
Average ATMs
Revenues
Year Ended December 31,
Year-over-Year Change
2019
888,712 $
$
Increase
(Decrease)
Amount
2018
753,651 $ 135,061
Increase
Percent
18 %
397,132
87,603
35,518
71,819
592,072
296,640 $
3,052
46,070
44,756
30,155
366,977
11,812
75,791
46,925
(11,407 )
5,106
66,713
556,406
35,666
197,245 $ 99,395
331
5,716
4,662
2,721
40,354
40,094
$
8 %
16 %
(24 )%
8 %
6 %
50 %
12 %
14 %
12 %
EFT Processing Segment total revenues for 2019 were $888.7 million, an increase of $135.1 million or 18% as compared to
2018. The increase in total revenues is primarily due to an increase in the number of ATMs under management and additional
DCC and surcharge revenues. Foreign currency movements decreased total revenues for 2019 by approximately 45.4 million as
compared to 2018.
Average monthly revenues per ATM were $1,655 for 2019 compared to $1,566 for 2018. Revenues per transaction were $0.29
for 2019 and $0.28 for 2018. The increases in average monthly revenues per ATM and revenues per transaction were
attributable to the revenue growth from DCC, which earns higher revenues per transaction than other ATM or card-based
services, surcharges partially offset by the U.S. dollar strengthening against key foreign currencies.
Direct operating costs
EFT Processing Segment direct operating costs were $397.1 million for 2019, an increase of $30.2 million or 8% as compared
to 2018. Direct operating costs in the EFT Processing Segment consist primarily of site rental fees, cash delivery costs, cash
supply costs, maintenance, insurance, telecommunications, data center operations-related personnel, as well as the processing
centers’ facility-related costs and other processing center-related expenses and commissions paid to retail merchants, banks and
card processors involved with POS DCC transactions. The increase in direct operating costs was primarily due to the increase
in the number of ATMs under management. Foreign currency movements decreased direct operating costs for 2019 by
approximately $22.0 million as compared to 2018.
Gross profit
Gross profit, which is calculated as revenues less direct operating costs, was $491.6 million for 2019 compared to $386.7
million for 2018. The increase in gross profit was primarily due to the growth in revenues from the increases in ATMs under
management, DCC transactions and domestic and international surcharge. Gross profit as a percentage of revenues (“gross
margin”) was 55.3% and 51.3% for 2019 and 2018, respectively. The increase in gross margin was attributable to the increases
in DCC transactions and domestic and international surcharge.
77
Salaries and benefits
Salaries and benefits increased $11.8 million or 16% for 2019 compared to 2018. The increase in salaries and benefits was
primarily attributable to additional headcount to support an increase in the number of ATMs and POS devices under
management. As a percentage of revenues, these costs decreased to 9.9% for 2019 from 10.1% for 2018.
Selling, general and administrative
Selling, general and administrative expenses for 2019 were $35.5 million, a decrease of $11.4 million or 24% as compared to
2018. As a percentage of revenues, these expenses decreased to 4.0% for 2019 from 6.2% for 2018. The decrease was primarily
due to non-recurring VAT benefits.
Depreciation and amortization
Depreciation and amortization expense increased $5.1 million for 2019 compared to 2018. The increase was primarily
attributable to the deployment of additional ATMs and software assets. As a percentage of revenues, depreciation and
amortization expense decreased to 8.1% for 2019 from 8.9% for 2018. The decrease is primarily due to certain intangible assets
becoming fully depreciated in 2019.
Operating income
EFT Processing Segment operating income for 2019 was $296.6 million, an increase of $99.4 million or 50% as compared to
2018. Operating income for 2019 increased primarily due to higher revenues from the additional number of ATMs under
management, growth in revenues earned from DCC, surcharges and other value-added service transactions.
Operating income as a percentage of revenues (“operating margin”) was 33.4% for 2019 compared to 26.2% for 2018. The
increase in operating margin was primarily due to higher operating revenues partially offset by expenses incurred to support the
increased revenues and additional ATMs under management. Operating income per transaction increased to $0.10 for 2019
from $0.07 for 2018.
epay SEGMENT
The following table summarizes the results of operations for our epay Segment for the years ended December 31, 2019 and
2018:
Year Ended December 31,
Year-over-Year Change
(dollar amounts in thousands)
Total revenues
Operating expenses:
Direct operating costs
Salaries and benefits
Selling, general and administrative
Depreciation and amortization
Total operating expenses
Operating income
Transactions processed (billions)
Increase
(Decrease)
Percent
3 %
2 %
7 %
(2 )%
(4 )%
2 %
13 %
34 %
2019
769,329 $
$
Increase
(Decrease)
Amount
2018
743,784 $ 25,545
12,505
3,792
(695 )
564,252
57,748
35,749
7,038
(264 )
664,787
15,338
78,997 $ 10,207
0.39
1.15
576,757
61,540
35,054
6,774
680,125
89,204 $
1.54
$
78
Revenues
epay Segment total revenues for 2019 were $769.3 million, an increase of $25.5 million or 3% as compared to 2018. The
increase in total revenues was primarily due to an increase in the number of transactions processed. Foreign currency
movements decreased total revenues by approximately $35.0 million as compared to 2018.
Revenues per transaction decreased to $0.50 for 2019 from $0.65 for 2018. The decrease in revenues per transaction was
primarily driven by the increase in the number of mobile transactions processed in a region where we generally earn lower
revenues per transaction.
Direct operating costs
epay Segment direct operating costs were $576.8 million for 2019, an increase of $12.5 million or 2% as compared to 2018.
Direct operating costs in our epay Segment include the commissions we pay to retail merchants for the distribution and sale of
prepaid mobile airtime and other prepaid products, expenses incurred to operate POS terminals and the cost of vouchers sold
and physical gifts fulfilled. The increase in direct operating costs was primarily due to the increase in the number of
transactions processed.
Gross profit
Gross profit was $192.6 million for 2019 compared to $179.5 million for 2018. The increase in gross profit was primarily due
to growth in transactions processed. Gross margin increased to 25% for 2019 from 24.1% for 2018, due to overall growth of the
business.
Salaries and benefits
Salaries and benefits increased $3.8 million or 7% for 2019 as compared to 2018. The increase was primarily due to higher
headcount in an effort to grow the segment. As a percentage of revenues, salaries and benefits remained relatively flat at 8.0%
for 2019 compared to 7.8% for 2018.
Selling, general and administrative
Selling, general and administrative expenses for 2019 were $35.1 million, a decrease of $0.7 million or 2% as compared to
2018. Selling, general and administrative expenses for 2019 decreased mainly due to cost control efforts. As a percentage of
revenues, these expenses remained relatively flat at 4.6% for 2019 compared to 4.8% for 2018.
Depreciation and amortization
Depreciation and amortization expense primarily represents depreciation of POS terminals we install in retail stores and
amortization of acquired intangible assets. Depreciation and amortization expense decreased $0.3 million or 4% in 2019 as
compared to 2018. The decrease is primarily due to certain fixed assets becoming fully depreciated in 2019. As a percentage of
revenues, these expenses remained flat at 0.9% for both 2019 and 2018.
Operating income
epay Segment operating income for 2019 was $89.2 million, an increase of $10.2 million or 13% as compared to 2018.
Operating margin increased to 11.6% for 2019 from 10.6% for 2018. Operating income per transaction decreased to $0.06 for
2019 from $0.07 for 2018. The increases of operating income and margin were mainly due to an increase in the portion of
lower-margin mobile transactions.
79
MONEY TRANSFER SEGMENT
The following table summarizes the results of operations for our Money Transfer Segment for the years ended December 31,
2019 and 2018:
(dollar amounts in thousands)
Total revenues
Operating expenses:
Direct operating costs
Salaries and benefits
Selling, general and administrative
Goodwill and acquired intangible assets impairment
Depreciation and amortization
Total operating expenses
Year Ended December 31,
Year-over-Year Change
2019
2018
Increase
Amount
Increase
Percent
$ 1,096,226 $ 1,042,962 $ 53,264
586,730
208,792
133,068
—
32,846
961,436
560,930
194,808
125,647
7,049
32,002
920,436
25,800
13,984
7,421
(7,049 )
844
41,000
5 %
5 %
7 %
6 %
n/m
3 %
4 %
Operating income
$
134,790
$
122,526
$ 12,264
10 %
Transactions processed (millions)
114.5
107.6
6.9
6 %
____________________
n/m — Not meaningful.
Revenues
Money Transfer Segment total revenues were $1,096.2 million for 2019, an increase of $53.3 million or 5% as compared to
2018. The increase in revenues was primarily due to increases in the number of money transfers processed, driven by growth in
our U.S. and foreign agent and correspondent payout networks. Revenues per transaction was essentially flat at $9.57 for 2019
as compared to $9.69 for 2018. Foreign currency movements decreased total revenues for 2019 by approximately $26.7 million
as compared to 2018.
Direct operating costs
Money Transfer Segment direct operating costs were $586.7 million for 2019, an increase of $25.8 million or 5% as compared
to 2018. Direct operating costs in the Money Transfer Segment primarily consist of commissions paid to agents who originate
money transfers on our behalf and correspondent agents who disburse funds to the customers’ destination beneficiaries,
together with less significant costs, such as bank depository fees. The increase in direct operating costs in 2019 was primarily
due to growth in the number of money transfer transactions processed in both the U.S. and foreign markets, partially offset by
the impact of the U.S. dollar strengthening against key foreign currencies.
Gross profit
Gross profit was $509.5 million for 2019 compared to $482.0 million for 2018. The increase in gross profit was primarily due
to growth in the number of money transfer transactions processed in both the U.S. and foreign markets. Gross margins
remained flat at 46.5% for 2019 compared to 46.2% for 2018.
Salaries and benefits
Salaries and benefits increased $14.0 million or 7% for 2019 compared to 2018. The increase in salaries and benefits was
primarily due to the expansion of our operations. As a percentage of revenues, salaries and benefits increased slightly to 19.0%
for 2019 from 18.7% for 2018.
80
Selling, general and administrative
Selling, general and administrative expenses for 2019 were $133.1 million, an increase of $7.4 million or 6% as compared to
2018. The increase was primarily due to expenses incurred to support the growth of our money transfer services and the
expansion of new products in both the U.S. and foreign markets. As a percentage of revenues, selling, general and
administrative expenses remained flat at 12.1% for 2019 compared to 12.0% for 2018.
Acquired intangible assets impairment
Acquired intangible assets impairment charge for 2018 was $7.0 million due to the Company's decision to re-brand the HiFX
trade name to xe. There was no impairment recorded in 2019.
Goodwill is not amortized but instead is at least annually tested for impairment as of October 1, or more frequently if events or
circumstances indicate that the carrying amount of goodwill may be impaired. The Company first performed a qualitative
review of all reporting units to determine that it was more likely than not that the fair value of each of the reporting units
exceeded the carrying value. The Company determined that it was more likely than not that the fair value of the reporting units
exceeded the carrying value except for one reporting unit. A quantitative impairment test was performed for the one reporting
unit. When performing the quantitative impairment test, the fair value is estimated with the income method by using the
discounted cash flows and use of the guideline public company method using market multiple valuation techniques.
As of October 1, 2019, the fair value of the reporting unit exceeded the carrying value indicating no impairment.
The estimates of fair value require significant judgment. We based our fair value estimates on assumptions that we believe to be
reasonable but that are inherently uncertain, including estimates of future growth rates and operating margins and assumptions
about the overall economic climate and the competitive environment for our business units. There can be no assurance that our
estimates and assumptions made for purposes of our goodwill impairment testing as of the time of testing will prove to be
accurate predictions of the future.
Depreciation and amortization
Depreciation and amortization expense increased $0.8 million for 2019 compared to 2018. Depreciation and amortization
primarily represent amortization of acquired intangible assets and depreciation of money transfer terminals, computers and
software, leasehold improvements and office equipment. For 2019, depreciation and amortization expense increased compared
to 2018 primarily due to investments made to support the growth in the business. As a percentage of revenues, depreciation and
amortization expense decreased to 3.0% for 2019 from 3.1% for 2018, primarily due to certain intangible assets becoming fully
amortized in 2018.
Operating income
Money Transfer Segment operating income was $134.8 million for 2019, an increase of $12.3 million or 10% as compared to
2018. Operating income increased primarily due to the growth in the number of money transfers processed. Operating margin
increased to 12.3% for 2019 from 11.7%. Operating income per transaction increased to $1.18 for 2019 from $1.14 for 2018.
The increase was primarily due to the growth in the number of money transfers processed which did not require similar
increases in support costs.
81
CORPORATE SERVICES
The components of Corporate Services' operating expenses for 2019, and 2018 were as follows:
Year Ended December 31,
(dollar amounts in thousands)
2019
2018
Year-over-Year
Change
2019 Increase
(Decrease) Percent
Salaries and benefits
Selling, general and administrative
Depreciation and amortization
Total operating expenses
Corporate operating expenses
$
$
$
36,809
8,326
305
45,440 $
32,085
8,501
268
40,854
15 %
(2 )%
14 %
11 %
Overall, operating expenses for Corporate Services increased 11% for 2019 as compared to 2018. The increase is primarily
attributable to the increase in salaries and benefits expenses mainly attributable to an increase in incentive compensation related
to the Company's performance relative to its targets, partly offset by a decrease in selling, general and administrative expense
primarily due to a decrease in professional services.
OTHER EXPENSE, NET
(dollar amounts in thousands)
2019
2018
Year Ended December 31,
Year-over-Year
Change
2019
(Decrease)
Increase
Percent
Interest income
Interest expense
(Loss) Income from unconsolidated affiliates
Other gains, net
Foreign currency exchange (loss) gain, net
Other expense, net
____________________
n/m — Not meaningful.
Interest income
$
$
1,969
$
(36,237 )
—
(9,820 )
2,701
(41,387 ) $
1,320
(37,573 )
(117 )
27
(26,655 )
(62,998 )
49 %
(4 )%
n/m
n/m
n/m
(34 )%
The Company received interest on cash balances held with banks. The increase is interest income in 2019 is primarily due to an
increase in those balances.
Other gains, net
In 2019, the Company provided a notice of redemption on the outstanding Retired Convertible Notes. Prior to the redemption
date, approximately $352.4 million principal amount of the Retired Convertible Notes was submitted for conversion for the
remainder. The Company settled the principal amount with cash and issuing shares of Common Stock valued at $147.24 per
share. In accordance with ASC 470, the Company recognized a loss of $9.8 million on the conversion and redemption of the
debt, representing the difference between the fair value of the Retired Convertible Notes and the carrying value of the Retired
Convertible Notes at the time of conversion.
82
Foreign currency exchange (loss) gain, net
Foreign currency exchange activity includes gains and losses on certain foreign currency exchange derivative contracts and the
impact of remeasurement of assets and liabilities denominated in foreign currencies. Assets and liabilities denominated in
currencies other than the local currency of each of our subsidiaries give rise to foreign currency exchange gains and losses.
Foreign currency exchange gains and losses that result from remeasurement of these assets and liabilities are recorded in net
income. The majority of our foreign currency exchange gains or losses are due to the remeasurement of intercompany loans
which are not considered a long-term investment in nature and are in a currency other than the functional currency of one of the
parties to the loan. For example, we make intercompany loans based in euros from our corporate division, which is comprised
of U.S. dollar functional currency entities, to certain European entities that use the euro as the functional currency. As the U.S.
dollar strengthens against the euro, foreign currency exchange losses are recognized by our corporate entities because the
number of euros to be received in settlement of the loans decreases in U.S. dollar terms. Conversely, in this example, in periods
where the U.S. dollar weakens, our corporate entities will record foreign currency exchange gains.
We recorded a net foreign currency exchange gain of $2.7 million in 2019 and a loss of $26.7 million in 2018. These realized
and unrealized foreign currency exchange gains and losses primarily reflect the respective weakening and strengthening of the
U.S. dollar against the currencies of the countries in which we operate.
INCOME TAX EXPENSE
Our effective income tax rates as reported and as adjusted are calculated below:
Year Ended December 31,
2019
2018
$
$
$
$
$
$
$
$
433,807
(87,112 )
346,695
20.1 %
433,807
—
(9,820 )
2,701
440,926
$
(87,112 ) $
25,728
—
10,990
$
(123,830 ) $
28.1 %
294,916
(62,785 )
232,131
21.3 %
294,916
(7,049 )
27
(26,655 )
328,593
(62,785 )
12,262
1,506
8,743
(85,296 )
26.0 %
(dollar amounts in thousands)
Income before income taxes
Income tax expense
Net income
Effective income tax rate
Income before income taxes
Adjust: Goodwill and acquired intangible assets impairment
Adjust: Other gains, net
Adjust: Foreign currency exchange (loss) gain, net
Income before income taxes, as adjusted
Income tax expense
Adjust: Income tax benefit (expense) attributable to 2017 U.S. tax reform
Adjust: Income tax benefit attributable to acquired intangible assets
impairment
Adjust: Income tax benefit (expense) attributable to foreign currency
exchange (loss) gain, net
Income tax expense, as adjusted
Effective income tax rate, as adjusted
83
We calculate our effective income tax rate by dividing income tax expense by pre-tax book income. Our effective income tax
rates were 20.1% and 21.3% for the years ended December 31, 2019 and 2018, respectively. On December 22, 2017, the U.S.
enacted into law what is informally called the Tax Cuts and Jobs Act of 2017 ("U.S. Tax Reform"). In 2017 we had a net
provisional tax expense of $41.6 million resulting from U.S. Tax Reform. In the fourth quarter of 2018, we adjusted our
accounting for the tax effects of U.S. Tax Reform. The net provisional tax expense was decreased in that period by
approximately $12.3 million to $29.3 million. In the fourth quarter of 2019 after additional regulatory guidance was issued by
applicable taxing authorities, the Company elected to claim U.S. tax credits for foreign tax paid on foreign source income,
which reduced the net tax expense by $25.7 million for a total tax expense from U.S. Tax Reform of $3.6 million. See Note 13,
Income Taxes, to the Consolidated Financial Statements for further information. The effective income tax rates were also
significantly influenced by the impact of foreign currency exchange gains (losses). Excluding these items from pre-tax income,
as well as the related tax effects for these items, our adjusted effective income tax rates were 28.1% and 26.0% for the years
ended December 31, 2019 and 2018, respectively.
The effective income tax rate, as adjusted, for 2019 and 2018 was higher than the applicable statutory income tax rate of 21%
primarily because of higher income tax rates in foreign countries where we have significant operations and the tax effects of the
global intangible low-taxed income ("GILTI") provision of U.S. Tax Reform. The effective income tax rate, as adjusted, for
2019 is higher than 2018 as a result of substantially more foreign earnings of the Company being subject to higher foreign
statutory income tax rates.
We determine income tax expense based upon enacted tax laws applicable in each of the taxing jurisdictions where we conduct
business. Based on our interpretation of such laws and considering the evidence of available facts and circumstances and
baseline operating forecasts, we have accrued the estimated income tax effects of certain transactions, business ventures,
contractual and organizational structures, and the estimated future reversal of timing differences. Should a taxing jurisdiction
change its laws or dispute our conclusions, or should management become aware of new facts or other evidence that could alter
our conclusions, the resulting impact to our estimates could have a material adverse effect on our results of operations and
financial condition.
Income before income taxes, as adjusted, income tax expense, as adjusted and effective income tax rate, as adjusted, are non-
U.S. GAAP financial measures that management believes are useful for understanding why our effective income tax rates are
significantly different than would be expected. These non-U.S. GAAP measures are used by management to conduct and
evaluate its business during its regular review of operating results for the periods presented.
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
Net loss attributable to noncontrolling interests was $0.1 million for 2019 and $0.7 million for 2018. Noncontrolling interests
represent the elimination of net income or loss attributable to the minority shareholders’ portion of the following consolidated
subsidiaries that are not wholly owned:
Subsidiary
Movilcarga
Euronet China
Euronet Pakistan
Euronet Infinitium Solutions
Percent
Owned
95%
85%
Segment - Country
epay - Spain
EFT - China
70%
65%
EFT - Pakistan
EFT - India
NET INCOME ATTRIBUTABLE TO EURONET
Net income attributable to Euronet was $346.7 million and $232.9 million for 2019 and 2018, respectively. Net income
attributable to Euronet increased $113.9 million in 2019 compared to 2018. The increase in net income for 2019 was primarily
due to an increase in operating income of $117.3 million, an increase of $29.4 million in net foreign currency exchange gain, a
decrease in interest expense of $1.3 million, an increase in interest income of $0.6 million, and an increase in income from
unconsolidated affiliates of $0.1 million. The increases were partly offset by an increase in income tax expense of $24.3
million, an increase in net loss attributable to early retirement of debt of $9.8 million, and a decrease of net loss attributable to
noncontrolling interests of $0.7 million.
84
TRANSLATION ADJUSTMENT
Translation gains and losses are the result of translating our foreign entities' balance sheets from local functional currency to the
U.S. dollar reporting currency prior to consolidation and are recorded in comprehensive income. As required by U.S. GAAP,
during this translation process, asset and liability accounts are translated at current foreign currency exchange rates and equity
accounts are translated at historical rates. Historical rates represent the rates in effect when the balances in our equity accounts
were originally created. By using this mix of rates to convert the balance sheet from functional currency to U.S. dollars,
differences between current and historical exchange rates generate this translation adjustment.
We recorded a net loss on translation adjustments of $13.9 million in 2019 and a loss of $56.7 million in 2018. During 2019
and 2018, the U.S. dollar strengthened compared to most currencies, resulting in translation losses which were recorded in
comprehensive income.
LIQUIDITY AND CAPITAL RESOURCES
Working capital
As of December 31, 2019, we had working capital of $1,284.8 million, which is calculated as the difference between total
current assets and total current liabilities, compared to working capital of $709.2 million as of December 31, 2018. The
increase in working capital is primarily due to the issuance Convertible Notes and Senior Notes in 2019. Our ratio of current
assets to current liabilities was 1.79 and 1.51 as of December 31, 2019 and December 31, 2018, respectively.
We require substantial working capital to finance operations. The Money Transfer Segment funds the payout of the majority of
our consumer-to-consumer money transfer services before receiving the benefit of amounts collected from customers by agents.
Working capital needs increase due to weekends and banking holidays. As a result, we may report more or less working capital
for the Money Transfer Segment based solely upon the day on which the reporting period ends. The epay Segment produces
positive working capital, but much of it is restricted in connection with the administration of its customer collection and vendor
remittance activities. In our EFT Processing Segment, we obtain a significant portion of the cash required to operate our ATMs
through various cash supply arrangements, the amount of which is not recorded on Euronet's Consolidated Balance Sheets.
However, in certain countries, we fund the cash required to operate our ATM network from borrowings under the revolving
credit facilities and cash flows from operations. As of December 31, 2019, we had approximately $665.6 million of our own
cash in use or designated for use in our ATM network, which is recorded in ATM cash on Euronet's Consolidated Balance
Sheet.
We had cash and cash equivalents of $1,817 million as of December 31, 2019, of which $1,504 million was held outside of the
U.S. and is expected to be indefinitely reinvested for continued use in foreign operations. Repatriation of these assets to the
U.S. could have negative tax consequences.
The following table identifies cash and cash equivalents provided by/(used in) our operating, investing and financing activities
for the years ended December 31, 2019 and 2018 (in thousands):
Liquidity
Cash and cash equivalents and restricted cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of foreign currency exchange rate changes on cash and cash equivalents and
restricted cash
Increase in cash and cash equivalents and restricted cash
Year Ended December 31,
2019
2018
$
$
504,488 $
(229,027 )
416,298
(5,332 )
686,427 $
397,233
(132,283 )
2,024
(36,540 )
230,434
85
Operating cash flow
Cash flows provided by operating activities were $504.5 million for 2019 compared to $397.2 million for 2018. The increase in
operating cash flows was primarily due to improved operating results, partly offset by fluctuations in working capital mainly
associated with the timing of the settlement processes with content providers in the epay Segment, with correspondents in the
Money Transfer Segment, and with card organizations and banks in the EFT Processing Segment.
Investing activity cash flow
Cash flows used in investing activities were $229.0 million for 2019 compared to $132.3 million for 2018. The increase was
primarily due to acquisitions and increased capital expenditures mainly related to our ATM network expansion. During 2019,
we used $94.2 million for acquisitions. The Company completed four investments in 2019 and two investments in 2018. The
acquisitions have been accounted for in accordance with U.S. GAAP and the results of operations have been included from the
respective dates of acquisition. Purchases of property and equipment were $131.3 million and $112.5
million for 2019 and 2018, respectively. Cash used for software development and long-term assets totaled $7.3
million for 2019 and $8.5 million for 2018. Other investing activities consist mainly of proceeds from the sale of property and
equipment of $3.7 million for 2019 and $1.6 million in 2018.
Financing activity cash flow
Cash flows provided by financing activities were $416.3 million for 2019 compared to $2.0 million for 2018. We generally
borrow amounts under our revolving credit facility seasonally to fund our independent ATM network as well as several times
each month to support the short-term cash needs of our Money Transfer segment in order to fund the correspondent network in
advance of collecting remittance amounts from the agency network. These borrowings related to the Money Transfer Segment
are repaid over a very short period of time, generally within a few days. Net borrowings on debt obligations were $500.2
million in 2019 compared to net repayments of $170.5 million for 2018. The increase in net borrowings as compared to 2018
was primarily the result of borrowing additional amounts under the revolving credit facility for ATM cash needs. Additionally,
for 2019 and 2018, we paid $6.5 million and $6.1 million, respectively, for finance lease obligations. We used $74.5 million
and $177.9 million for the repurchase of shares during 2019 and 2018, respectively. Of the $74.5 million repurchased shares,
$70.9 million in value of Euronet Common Stock were under the Repurchase Program. Further, we received proceeds of $15.0
million and $18.6 million during 2019 and 2018, respectively, for the issuance of stock in connection with our Stock Incentive
Plan.
Other sources of capital
Credit Facility — On October 17, 2018, the Company entered into a new $1.0 billion unsecured credit agreement (the "Credit
Facility") that expires on October 17, 2023. The Credit Facility allows for borrowings in Australian Dollars, British Pounds
Sterling, Canadian Dollars, Czech Koruna, Danish Krone, Euros, Hungarian Forints, Japanese Yen, New Zealand Dollars,
Norwegian Krone, Polish Zlotys, Swedish Krona, Swiss Francs, and U.S. Dollars. The revolving credit facility contains a $200
million sublimit for the issuance of letters of credit, a $50 million sublimit for U.S. Dollar swingline loans, and a $90 million
sublimit for certain foreign currencies swingline loans.
As of December 31, 2019, fees and interest on borrowings are based upon the Company's corporate credit rating (as defined in
the credit agreement) and are based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over
the London InterBank Offered Rate ("LIBOR") or a margin over the base rate, as selected by us, with the applicable margin
ranging from 1.125% to 2.0% (or 0.175% to 1.0% for base rate loans).
As of December 31, 2019, we had no borrowings and the outstanding stand-by letters of credit under the revolving credit
facility were $53.0 million. The remaining $947.0 million under the revolving credit facility was available for borrowing. As of
December 31, 2019, the weighted average interest rate under the revolving credit facility was 2.7%, excluding amortization of
deferred financing costs.
Convertible debt — On March 18, 2019, we completed the sale of $525.0 million in principal amount of Convertible Senior
Notes due 2049 (“Convertible Notes”), and retired $401.5 million Convertible Senior Notes that would have been due in 2044
("Retired Notes"). The Retired Notes had an interest rate of 1.5% per annum payable semi-annually in April and October, and
were convertible into shares of Euronet Common Stock
86
The Convertible Notes were issued pursuant to an indenture, dated as of March 18, 2019 (the “Indenture”), by and between the
Company and U.S. Bank National Association, as trustee. The Convertible Notes have an interest rate of 0.75% per annum
payable semi-annually in March and September, and are convertible into shares of Euronet Common Stock at a conversion
price of approximately $188.73 per share if certain conditions are met (relating to the closing prices of Euronet Common Stock
exceeding certain thresholds for specified periods). Holders of the Convertible Notes have the option to require the Company to
repurchase for cash all or part of their Convertible Notes on each of March 15, 2025, 2029, 2034, 2039 and 2044 at a
repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but
excluding, the relevant repurchase date. In connection with the issuance of the Convertible Notes, we recorded $12.8 million in
debt issuance costs, which are being amortized through March 1, 2025.
Senior Notes—On May 22, 2019, the Company completed the sale of €600 million ($669.9 million) aggregate principal
amount of Senior Notes that expire on May 2026 (the “Senior Notes”). The Senior Notes accrue interest at a rate of 1.375% per
year, payable annually in arrears commencing May 22, 2020, until maturity or earlier redemption. As of December 31, 2019,
the Company has outstanding €600 million ($673.4 million) principal amount of the Senior Notes. In addition, the Company
may redeem some or all of these notes on or after February 22, 2026 at their principal amount plus any accrued and unpaid
interest.
Other debt obligations — Certain of our subsidiaries have available credit lines and overdraft facilities to generally supplement
short-term working capital requirements, when necessary. There were $6.2 million and $38.5 million outstanding under these
other obligation arrangements as of December 31, 2019 and 2018, respectively. Short-term debt obligations at December 31,
2019 were primarily comprised of $6.2 million due in 2020 under these other obligation arrangements.
Other uses of capital
Capital expenditures and needs — Total capital expenditures for 2019 were $131.3 million. These capital expenditures were
primarily for the purchase of ATMs to expand our IAD network in Europe, the purchase and installation of ATMs in key under-
penetrated markets, the purchase of POS terminals for the epay and Money Transfer Segments, and office, data center and
company store computer equipment and software. Total capital expenditures for 2020 are currently estimated to be
approximately $145 million to $150 million.
At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and
amounts available under our revolving credit facility and other existing and potential future financing will be sufficient to meet
our debt, leasing, and capital expenditure obligations. If our capital resources are not sufficient to meet these obligations, we
will seek to refinance our debt and/or issue additional equity under terms acceptable to us. However, we can offer no
assurances that we will be able to obtain favorable terms for the refinancing of any of our debt or other obligations or for the
issuance of additional equity.
Share repurchase plan
The Company's Board of Directors has authorized a stock repurchase program ("Repurchase Program"), allowing Euronet to
repurchase up to $375 million in value or 10.0 million shares of stock through March 31, 2020. On March 11, 2019, in
connection with the issuance of the Convertible Notes, the Board of Directors authorized an additional repurchase program of
$120 million in value of the Company's common stock through March 11, 2021. Repurchases under either program may take
place in the open market or in privately negotiated transactions, including derivative transactions, and may be made under a
Rule 10b5-1 plan. For the year end December 31, 2019, the Company repurchased 0.5 million shares under the Repurchase
Program at a weighted average purchase price of $143.76 for a total value of $70.9 million. For the year ended December 31,
2018, the Company repurchased 2.0 million shares under the Repurchase Program at a weighted average purchase price of
$86.10 for a total value of $175.0 million.
Inflation and functional currencies
Generally, the countries in which we operate have experienced low and stable inflation in recent years. Therefore, the local
currency in each of these markets is the functional currency. Currently, we do not believe that inflation will have a significant
effect on our results of operations or financial position. We continually review inflation and the functional currency in each of
the countries where we operate.
87
OFF BALANCE SHEET ARRANGEMENTS
We have certain significant off balance sheet items described below, in the following section, “Contractual Obligations” and in
Note 19, Commitments, to the Consolidated Financial Statements.
On occasion, we grant guarantees of the obligations of our subsidiaries and we sometimes enter into agreements with
unaffiliated third parties that contain indemnification provisions, the terms of which may vary depending on the negotiated
terms of each respective agreement. Our liability under such indemnification provisions may be subject to time and materiality
limitations, monetary caps and other conditions and defenses. To date, we are not aware of any significant claims made by the
indemnified parties or parties to whom we have provided guarantees on behalf of our subsidiaries and, accordingly, no
liabilities have been recorded as of December 31, 2019.
CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations as of December 31, 2019:
Payments due by period
(in thousands)
Long-term debt obligations, including interest
Obligations under operating leases
Obligations under finance leases
Purchase obligations
Total
$ 1,278,106 $
392,525
14,585
14,168
Less than
1 year
1-3 years
3-5 years
More than
5 years
13,197 $
125,231
6,322
8,646
26,395 $
154,609
7,665
2,733
26,395 $ 1,212,119
43,105
69,580
—
598
922
1,867
Total
$ 1,699,384 $
153,396 $
191,402 $
98,440 $ 1,256,146
The computation of interest for debt obligations with variable interest rates reflects interest rates in effect at December 31, 2019
and assumes no change in our revolving credit borrowings prior to the maturity date of our credit facility. For additional
information on debt obligations, see Note 10, Debt Obligations, to the Consolidated Financial Statements.
For additional information on capital and operating lease obligations, see Note 12, Leases, to the Consolidated Financial
Statements. Purchase obligations primarily consist of ATM maintenance and services as well as telecommunications services
and professional fees.
Our total liability for uncertain tax positions under Accounting Standards Codification ("ASC") 740-10-25 and -30 was $44.5
million as of December 31, 2019. The application of ASC 740-10-25 and -30 requires significant judgment in assessing the
outcome of future income tax examinations and their potential impact on the Company's estimated effective income tax rate
and the value of deferred tax assets, such as those related to the Company's net operating loss carryforwards. It is reasonably
possible that the balance of gross unrecognized tax benefits could significantly change within the next twelve months, as a
result of the resolution of audit examinations and expirations of certain statutes of limitations and, accordingly, materially affect
our consolidated financial statements. At this time, it is not possible to estimate the range of change due to the uncertainty of
potential outcomes.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP which requires management to make estimates,
judgments and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes.
Management considers an accounting policy and estimate to be critical if it requires the use of assumptions that were uncertain
at the time the estimate was made and if changes in the estimate or selection of a different estimate could have a material effect
on the Company’s financial condition and results of operations. Our most critical estimates and assumptions are used for
computing income taxes, allocating the purchase price to assets acquired and liabilities assumed in acquisitions, and potential
impairment of long-lived assets and goodwill. We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the
88
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially
from these estimates. For a summary of all of the Company’s significant accounting policies, see Note 3, Summary of
Significant Accounting Policies and Practices, to the accompanying Consolidated Financial Statements.
Accounting for income taxes
The deferred income tax effects of transactions reported in different periods for financial reporting and income tax return
purposes are recorded under the asset and liability method prescribed under ASC Topic 740, Income Taxes (“ASC 740”). This
method gives consideration to the future tax consequences of deferred income or expense items and immediately recognizes
changes in income tax laws upon enactment. The statement of income effect is generally derived from changes in deferred
income taxes, net of valuation allowances, on the balance sheet as measured by differences in the book and tax bases of our
assets and liabilities.
We have significant tax loss carryforwards, and other temporary differences, which are recorded as deferred tax assets and
liabilities. Deferred tax assets realizable in future periods are recorded net of a valuation allowance based on an assessment of
each entity's, or group of entities', ability to generate sufficient taxable income within an appropriate period, in a specific tax
jurisdiction.
In assessing the recognition of deferred tax assets, we consider whether it is more likely than not that some portion or all of the
deferred tax assets will be realized. As more fully described in Note 13, Taxes, to the Consolidated Financial Statements, gross
deferred tax assets were $278.6 million as of December 31, 2019, partially offset by a valuation allowance of $83.2 million.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. We make judgments and estimates on the scheduled reversal of deferred
tax liabilities, historical and projected future taxable income in each country in which we operate, and tax planning strategies in
making this assessment.
Based upon the level of historical taxable income and current projections for future taxable income over the periods in which
the deferred tax assets are deductible, we believe it is more likely than not that we will realize the benefits of these deductible
differences, net of the existing valuation allowance at December 31, 2019. If we have a history of generating taxable income in
a certain country in which we operate, and baseline forecasts project continued taxable income in this country, we will reduce
the valuation allowance for those deferred tax assets that we expect to realize.
Additionally, we follow the provisions of ASC 740-10-25 and -30 to account for uncertainty in income tax positions. Applying
the standard requires substantial management judgment and use of estimates in determining whether the impact of a tax
position is “more likely than not” of being sustained on audit by the relevant taxing authority. We consider many factors when
evaluating and estimating our tax positions, which may require periodic adjustments and which may not accurately anticipate
actual outcomes. It is reasonably possible that amounts reserved for potential exposure could change significantly as a result of
the conclusion of tax examinations and, accordingly, materially affect our operating results.
89
Business combinations
In accordance with ASC Topic 805, Business Combinations (“ASC 805”), we allocate the acquisition purchase price of an
acquired entity to the assets acquired, including identifiable intangibles, and liabilities assumed based on their estimated fair
values at the date of acquisition. Management applies various valuation methodologies to these acquired assets and assumed
liabilities which often involve a significant degree of judgment, particularly when liquid markets do not exist for the particular
item being valued. Examples of such items include loans, deposits, identifiable intangible assets and certain other assets and
liabilities acquired or assumed in business combinations. Management uses significant estimates and assumptions to value such
items, including, projected cash flows and discount rates. For larger or more complex acquisitions, we generally obtain third-
party valuations to assist us in estimating fair values. The use of different valuation techniques and assumptions could change
the amounts and useful lives assigned to the assets and liabilities acquired and related amortization expense. During the
measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets
acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period,
any subsequent adjustments are recorded to earnings.
Goodwill and intangible assets
In accordance with ASC Topic 350, Intangibles - Goodwill and Other (“ASC 350”), we evaluate the carrying value of our
indefinite-lived assets, including goodwill, at least annually or more frequently whenever events or changes in circumstances
indicate that the asset may be impaired, or in the case of goodwill, that the fair value of the reporting unit may be less than its
carrying amount. Impairment tests are performed annually during the fourth quarter and are performed at the reporting unit
level. Our annual process for evaluating goodwill requires us to perform a qualitative assessment for all reporting units not
subjected directly to the quantitative goodwill impairment test. The qualitative factors evaluated by the Company include:
economic conditions of the local business environment, overall financial performance, sensitivity analysis from the most recent
quantitative test, and other entity specific factors as deemed appropriate. If we determine a quantitative goodwill impairment
test is appropriate, the test involves comparing the fair value of a reporting unit to its carrying amount, including goodwill, after
any long-lived asset impairment charges. Generally, the fair value represents discounted projected future cash flows and market
multiple of earnings. If the carrying amount of the reporting unit's goodwill exceeds the fair value of the goodwill, an
impairment loss is recognized in an amount equal to the excess. Determining the fair value of reporting units requires
significant management judgment in estimating future cash flows and assessing potential market and economic conditions. It is
reasonably possible that our operations will not perform as expected, or that estimates or assumptions could change, which may
result in the recording of material non-cash impairment charges during the year in which these determinations take place.
Acquired finite-lived intangible assets are amortized over their estimated useful lives. We evaluate the recoverability of our
intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets
may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely
independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the
carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the
carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. In addition
to the recoverability assessment, we routinely review the remaining estimated useful lives of our finite-lived intangible assets.
If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized over
the revised estimated useful life.
As of December 31, 2019, the Consolidated Balance Sheets includes goodwill of $743.8 million and acquired intangible assets,
net of accumulated amortization, of $141.8 million. For the year ended December 31, 2019, no impairment of goodwill or
acquired intangible assets has been identified.
Recently Issued Accounting Pronouncements
See Item 8 of Part II, "Financial Statements and Supplementary Data - Note 3 - Summary of Significant Accounting Policies
and Practices.
90
FORWARD-LOOKING STATEMENTS
This document contains statements that constitute forward-looking statements within the meaning of section 27A of the
Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934 (“Exchange Act”). Generally, the words
"believe," "expect," "anticipate," "intend," "estimate," "will" and similar expressions identify forward-looking statements.
However, the absence of these words or similar expressions does not mean the statement is not forward-looking. All statements
other than statements of historical facts included in this document are forward-looking statements, including, but not limited to,
statements regarding the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our business plans and financing plans and requirements;
trends affecting our business plans and financing plans and requirements;
trends affecting our business;
the adequacy of capital to meet our capital requirements and expansion plans;
the assumptions underlying our business plans;
our ability to repay indebtedness;
our estimated capital expenditures;
the potential outcome of loss contingencies;
our expectations regarding the closing of any pending acquisitions;
business strategy;
government regulatory action;
the expected effects of changes in laws or accounting standards;
technological advances; and
projected costs and revenues.
Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no
assurance that these expectations will prove to be correct.
Investors are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and
uncertainties. Actual results may materially differ from those in the forward-looking statements as a result of various factors,
including, but not limited to, conditions in world financial markets and general economic conditions, including the effects in
Europe of the U.K.'s departure from the E.U. and economic conditions in specific countries and regions; technological
developments affecting the market for our products and services; our ability to successfully introduce new products and
services; foreign currency exchange rate fluctuations; the effects of any breach of our computer systems or those of our
customers or vendors, including our financial processing networks or those of other third parties; interruptions in any of our
systems or those of our vendors or other third parties; our ability to renew existing contracts at profitable rates; changes in fees
payable for transactions performed for cards bearing international logos or over switching networks such as card transactions
on ATMs; our ability to comply with increasingly stringent regulatory requirements, including anti-money laundering, anti-
terrorism, anti-bribery, consumer and data protection and the European Union's General Data Protection Regulation and Second
Revised Payment Service Directive requirements; changes in laws and regulations affecting our business, including tax and
immigration laws and any laws regulating payments, including DCC transactions, changes in our relationships with, or in fees
charged by, our business partners; competition; the outcome of claims and other loss contingencies affecting Euronet; the cost
of borrowing, availability of credit and terms of and compliance with debt covenants; impacts from the COVID-19 virus; and
renewal of sources of funding as they expire and the availability of replacement funding and those factors referred to above and
as set forth and more fully described in Part I, Item 1A — Risk Factors. Any forward-looking statements made in this Form 10-
K speak only as of the date of this report. Except as required by law, we do not intend, and do not undertake, any obligation to
update any forward-looking statements to reflect future events or circumstances after the date of such statements.
91
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
As of December 31, 2019, our total debt outstanding, excluding unamortized debt issuance costs, was $1.1 billion. Of this
amount, $437.0 million, net of debt discounts, or 39% of our total debt obligations, relates to contingent convertible notes
having a fixed coupon rate. Our $525.0 million outstanding principal amount of contingent convertible notes accrue cash
interest at a rate of 0.75% of the principal amount per annum. Based on quoted market prices, as of December 31, 2019, the fair
value of our fixed rate convertible notes was $569.4 million, compared to a carrying value of $437.0 million. Interest expense
for these notes, including accretion and amortization of deferred debt issuance costs, has a weighted average interest rate of
4.4% annually. Further, as of December 31, 2019 we had no borrowings under our Credit Facility. Additionally, $673.4 million,
or 60% of our total debt obligations, relates to Senior Notes having a fixed coupon rate. Our €600 million outstanding principal
amount of Senior Notes accrue cash interest at a rate of 1.375% of the principal per annum. Based on quoted market prices, as
of December 31, 2019, the fair value of our fixed rate Senior Notes was $668.2 million, compared to a carrying value of $673.4
million. The remaining $6.2 million, or 1% of our total debt obligations, is related to borrowings by certain subsidiaries to fund,
from time to time, working capital requirements. These arrangements generally are due within one year and accrue interest at
variable rates.
Additionally, as of December 31, 2019, we had approximately $14.0 million of finance leases with fixed payment and interest
terms that expire between the years of 2020 and 2024 and bear interest at rates between 0.8% and 16.8%.
Our excess cash is invested in instruments with original maturities of three months or less or in certificates of deposit that may
be withdrawn at any time without penalty; therefore, as investments mature and are reinvested, the amount we earn will
increase or decrease with changes in the underlying short-term interest rates.
FOREIGN CURRENCY EXCHANGE RATE RISK
For the years ended December 31, 2019 and 2018, 74% and 72% of our revenues, respectively, were generated in non-U.S.
dollar countries. We expect to continue generating a significant portion of our revenues in countries with currencies other than
the U.S. dollar.
We are particularly vulnerable to fluctuations in exchange rates of the U.S. dollar to the currencies of countries in which we
have significant operations, primarily the euro, British pound, Australian dollar, Polish zloty, Indian rupee, New Zealand dollar,
Malaysian ringgit and Hungarian forint. As of December 31, 2019, we estimate that a 10% fluctuation in these foreign currency
exchange rates would have the combined annualized effect on reported net income and working capital of approximately
$77 million to $82 million. This effect is estimated by applying a 10% adjustment factor to our non-U.S. dollar results from
operations, intercompany loans that generate foreign currency gains or losses and working capital balances that require
translation from the respective functional currency to the U.S. dollar reporting currency.
Additionally, we have other non-current, non-U.S. dollar assets and liabilities on our balance sheet that are translated to the
U.S. dollar during consolidation. These items primarily represent goodwill and intangible assets recorded in connection with
acquisitions in countries other than the U.S. We estimate that a 10% fluctuation in foreign currency exchange rates would have
a non-cash impact on total comprehensive income of approximately $140 million to $145 million as a result of the change in
value of these items during translation to the U.S. dollar. For the fluctuations described above, a strengthening U.S. dollar
produces a financial loss, while a weakening U.S. dollar produces a financial gain.
We believe this quantitative measure has inherent limitations and does not take into account any governmental actions or
changes in either customer purchasing patterns or our financing or operating strategies. Because a majority of our revenues and
expenses are incurred in the functional currencies of our international operating entities, the profits we earn in foreign
currencies are positively impacted by a weakening of the U.S. dollar and negatively impacted by a strengthening of the U.S.
dollar. Additionally, our debt obligations are primarily in U.S. dollars; therefore, as foreign currency exchange rates fluctuate,
the amount available for repayment of debt will also increase or decrease.
We use derivatives to minimize our exposures related to changes in foreign currency exchange rates and to facilitate foreign
currency risk management services by writing derivatives to customers. Derivatives are used to manage the overall market risk
associated with foreign currency exchange rates; however, we do not perform the extensive record-keeping required to account
92
for the derivative transactions as hedges. Due to the relatively short duration of the derivative contracts, we use the derivatives
primarily as economic hedges. Since we do not designate foreign currency derivatives as hedging instruments pursuant to the
accounting standards, we record gains and losses on foreign exchange derivatives in earnings in the period of change.
A majority of our consumer-to-consumer money transfer operations involve receiving and disbursing different currencies, in
which we earn a foreign currency spread based on the difference between buying currency at wholesale exchange rates and
selling the currency to consumers at retail exchange rates. We enter into foreign currency forward and cross-currency swap
contracts to minimize exposure related to fluctuations in foreign currency exchange rates. The changes in fair value related to
these contracts are recorded in Foreign currency exchange (loss) gain, net on the Consolidated Statements of Income. As of
December 31, 2019, we had foreign currency derivative contracts outstanding with a notional value of $159.0 million,
primarily in Australian dollars, British pounds, Canadian dollars, euros and Mexican pesos, that were not designated as hedges
and mature within a few days.
For derivative instruments our xe operations write to customers, we aggregate the foreign currency exposure arising from
customer contracts, and hedge the resulting net currency risks by entering into offsetting contracts with established financial
institution counterparties as part of a broader foreign currency portfolio. The changes in fair value related to the total portfolio
of positions are recorded in Revenues on the Consolidated Statements of Income. As of December 31, 2019, we held foreign
currency derivative contracts outstanding with a notional value of $1.2 billion, primarily in U.S. dollars, euros, British pounds,
Australian dollars and New Zealand dollars, that were not designated as hedges and for which the majority mature within the
next twelve months.
We use longer-term foreign currency forward contracts to mitigate risks associated with changes in foreign currency exchange
rates on certain foreign currency denominated other asset and liability positions. As of December 31, 2019, the Company had
foreign currency forward contracts outstanding with a notional value of $43 million, primarily in euros.
See Note 11, Derivative Instruments and Hedging Activities to our Consolidated Financial Statements for additional
information.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm……………………………………………………………….
Consolidated Balance Sheets………………………………………………………………………………………………
Consolidated Statements of Income……………………………………………………………………………………….
Consolidated Statements of Comprehensive Income……………………………………………………………………...
Consolidated Statements of Changes in Equity……………………………………………………………………………
Consolidated Statements of Cash Flows…………………………………………………………………………………..
Notes to Consolidated Financial Statements………………………………………………………………………………
(1) Organization………………………………………………………………………………………………………….
(2) Basis of Preparation…………………………………………………………………………………………………..
(3) Summary of Significant Accounting Policies and Practices…………………………………………………………
(4) Stockholders' Equity………………………………………………………………………………………………….
(5) Acquisitions…………………………………………………………………………………………………………..
(6) Restricted Cash……………………………………………………………………………………………………….
(7) Property and Equipment, Net………………………………………………………………………………………...
(8) Goodwill and Acquired Intangible Assets, Net………………………………………………………………………
(9) Accrued Expenses and Other Current Liabilities…………………………………………………………………….
(10) Debt Obligations…………………………………………………………………………………………………….
(11) Derivative Instruments and Hedging Activities……………………………………………………………………..
(12) Leases……………………………………………………………………………………………………………….
(13) Income Taxes………………………………………………………………………………………………………..
(14) Valuation and Qualifying Accounts…………………………………………………………………………………
(15) Stock Plans………………………………………………………………………………………………………….
(16) Business Segment Information……………………………………………………………………………………...
(17) Financial Instruments and Fair Value Measurements……………………………………………………………….
(18) Litigation and Contingencies………………………………………………………………………………………..
(19) Commitments……………………………………………………………………………………………………….
(20) Related Party Transactions………………………………………………………………………………………….
(21) Selected Quarterly Data (Unaudited)……………………………………………………………………………….
Page
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Euronet Worldwide, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Euronet Worldwide, Inc. and subsidiaries (the Company) as
of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, changes in equity, and
cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the
consolidated financial statements.) We also have audited the Company’s internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2019 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
Change in Accounting Principle
As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for leases
in 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.
As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for
revenue recognition in 2018 due to the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with
Customers.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in the accompanying Management’s Report On Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
96
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation of the sufficiency of audit evidence over revenue
As discussed in Note 3 to the consolidated financial statements, the Company earned $2.75 billion of revenue in 2019. The
Company earned revenue by payment and transaction processing and distribution solutions to financial institutions, retailers,
service providers and individual consumers (collectively services). The services were provided to customers in 170 countries
through 66 different business offices in 41 countries within 3 different reportable operating segments.
We identified the evaluation of the sufficiency of audit evidence over revenue as a critical audit matter. The Company’s
geographical dispersion of services worldwide, amongst various business lines required especially subjective auditor judgment
in evaluating the sufficiency of audit evidence over revenue. Further, our audit team consisted of auditors located in various
countries worldwide. This required especially challenging auditor judgment in the level of audit procedures and supervision
applied at each country.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal
controls over the Company’s revenue process, including controls related to the consolidation of global revenue amounts. We
assessed the training and experience of the auditors on our audit team that were located in countries other than the United
States. We tested a sample of individual revenue transactions at certain locations by comparing amounts recognized by the
Company to relevant contracts and or payment and transaction support. After completion of these procedures, we evaluated the
overall sufficiency of the audit evidence over revenues.
Assessment of the carrying value of goodwill of one reporting unit in the Money Transfer segment
As discussed in Notes 3 and 9 to the consolidated financial statements, the Company performs goodwill impairment testing on
an annual basis and whenever events and changes in circumstances indicate that it is more likely than not (more than 50%) that
the fair value of a reporting unit is less than its carrying amount. The goodwill balance as of December 31, 2019 was $743.8
million. The Company performed a goodwill impairment test for each reporting unit using a qualitative approach, except for
one reporting unit in the Money Transfer segment which was tested using the quantitative approach.
97
We identified the assessment of the carrying value of goodwill for this one reporting unit in the Money Transfer segment using
the quantitative approach as a critical audit matter, because significant auditor judgment was required to evaluate the
impairment test. The fair value of that reporting unit was performed using a weighting of a discounted cash flow model and
market multiples valuation technique and included key assumptions related to (1) the forecasted revenue growth rates, (2) the
forecasted earnings before interest, income taxes, depreciation, and amortization (EBITDA) margin, (3) the discount rate, and
(4) the EBITDA market multiple. Changes to these key assumptions could have a significant effect on the fair value
determination and assessment of the carrying value of the goodwill.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal
controls over the Company’s goodwill impairment assessment process, including controls related to the development of the key
assumptions. We evaluated the Company’s forecasted revenue growth rates and forecasted EBITDA margin assumptions by
comparing them to external market and industry data. We compared the Company’s historical forecasted results to actual results
to assess the Company’s ability to accurately forecast. We involved valuation professionals with specialized skills and
knowledge, who assisted in evaluating 1) the Company’s discount rate by comparing it against a discount rate range that was
independently developed using publicly available third-party market data for comparable entities and 2) the Company’s
EBITDA market multiple, by comparing it against a range of EBITDA multiples to publicly available third-party market data
for comparable entities.
We have served as the Company's auditor since 2003.
Kansas City, Missouri
February 28, 2020
/s/ KPMG LLP
98
CONSOLIDATED FINANCIAL STATEMENTS
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents
ATM cash
Restricted cash
Settlement assets
Trade accounts receivable, net
Prepaid expenses and other current assets
Total current assets
Operating right of use lease assets
Property and equipment, net of accumulated depreciation of $410,243 at December 31, 2019 and $373,180 at December 31, 2018
Goodwill
Acquired intangible assets, net of accumulated amortization of $204,853 at December 31, 2019 and $190,920 at December 31, 2018
Other assets, net of accumulated amortization of $46,788 at December 31, 2019 and $50,821 at December 31, 2018
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Settlement obligations
Trade accounts payable
Accrued expenses and other current liabilities
Current portion of operating lease obligations
Short-term debt obligations and current maturities of long-term debt obligations
Income taxes payable
Deferred revenue
Total current liabilities
Debt obligations, net of current portion
Operating lease obligations, net of current portion
Deferred income taxes
Other long-term liabilities
Total liabilities
Equity:
Euronet Worldwide, Inc. stockholders’ equity:
Preferred Stock, $0.02 par value. 10,000,000 shares authorized; none issued
Common Stock, $0.02 par value. 90,000,000 shares authorized; 62,775,762 issued at December 31, 2019 and 59,897,309 issued at
December 31, 2018
Additional paid-in capital
Treasury stock, at cost, 8,554,908 shares at December 31, 2019 and 8,077,311 shares at December 31, 2018
Retained earnings
Accumulated other comprehensive loss
Total Euronet Worldwide, Inc. stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
See accompanying notes to the Consolidated Financial Statements.
99
As of December 31,
2019
2018
$
786,081 $
665,641
34,301
1,013,067
201,935
217,707
2,918,732
377,543
359,980
743,823
141,847
115,741
385,031
395,378
31,237
915,460
202,514
157,967
2,087,587
—
291,869
704,197
114,485
123,017
$
4,657,666 $
3,321,155
$
1,013,067 $
81,743
294,557
127,353
6,089
52,583
58,588
1,633,980
1,090,939
241,977
56,067
55,361
915,460
72,908
252,557
—
38,017
40,159
59,293
1,378,394
589,782
—
57,145
62,992
3,078,324
2,088,313
—
1,256
1,190,058
(463,704 )
1,016,554
(164,890 )
1,579,274
68
1,579,342
$
4,657,666 $
—
1,198
1,104,264
(391,551 )
669,805
(151,043 )
1,232,673
169
1,232,842
3,321,155
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
Revenues
Operating expenses:
Direct operating costs
Salaries and benefits
Selling, general and administrative
Goodwill and acquired intangible assets impairment
Depreciation and amortization
Total operating expenses
Operating income
Other income (expense):
Interest income
Interest expense
(Loss) Income from unconsolidated affiliates
Foreign currency exchange gain (loss), net
Other (losses) gains, net
Other expense, net
Income before income taxes
Income tax expense
Net income
Less: Net loss (income) attributable to noncontrolling interests
Year Ended December 31,
2019
2018
2017
$ 2,750,109 $ 2,536,629 $ 2,252,422
1,556,483
394,744
211,944
—
111,744
2,274,915
475,194
1,488,406
360,432
216,807
7,049
106,021
2,178,715
357,914
1,356,250
310,787
190,302
34,056
95,030
1,986,425
265,997
1,969
(36,237 )
—
2,701
(9,820 )
(41,387 )
433,807
(87,112 )
346,695
54
1,320
(37,573 )
(117 )
(26,655 )
27
(62,998 )
294,916
(62,785 )
232,131
720
232,851 $
2,443
(32,571 )
48
20,300
118
(9,662 )
256,335
(99,395 )
156,940
(95 )
156,845
Net income attributable to Euronet Worldwide, Inc.
$
346,749 $
Earnings per share attributable to Euronet Worldwide, Inc. stockholders:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
$
$
6.49 $
6.31 $
4.52 $
4.26 $
2.99
2.85
53,449,834
54,913,887
51,487,557
54,627,747
52,523,272
55,116,327
See accompanying notes to the Consolidated Financial Statements.
100
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Other comprehensive income (loss), net of tax:
Translation adjustment
Comprehensive income
Comprehensive (income) loss attributable to noncontrolling interests
Year Ended December 31,
2019
346,695 $
2018
232,131 $
2017
156,940
$
(13,894 )
332,801
101
(56,656 )
175,475
791
116,401
273,341
(292 )
Comprehensive income attributable to Euronet Worldwide, Inc.
$
332,902
$
176,266
$
273,049
See accompanying notes to the Consolidated Financial Statements.
101
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except share data)
Balance as of December 31, 2016
52,303,401
$
1,168
$ 1,045,663
$
(215,462 )
Number of
Shares
Outstanding
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Net income
Other comprehensive loss
Stock issued under employee stock plans
Share-based compensation
Repurchase of shares
Other
504,757
10
(1,699 )
10,104
15,618
620
Balance as of December 31, 2017
52,808,158
1,178
1,072,005
(217,161 )
Net income (loss)
Other comprehensive loss
Stock issued under employee stock plans
Share-based compensation
Repurchase of shares
Other
Balance as of December 31, 2018
Net income (loss)
Other comprehensive loss
Stock issued under employee stock plans
Share-based compensation
Issuance of convertible notes, net of tax
Repurchase of shares
Redemptions and conversions of convertible notes, net of
tax
Other
1,039,480
20
(2,032,599 )
4,959
15,634
16,764
(139 )
610
(175,000 )
51,819,998
1,198
1,104,264
(391,551 )
405,617
8
(493,010 )
13,216
21,439
71,659
(1,277 )
(70,876 )
2,488,249
$
50
(20,517 )
(3 )
Balance as of December 31, 2019
54,220,854
$
1,256
$ 1,190,058
$
(463,704 )
See accompanying notes to the Consolidated Financial Statements.
102
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued)
(in thousands)
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interests
Total
Balance as of December 31, 2016
Net income
Other comprehensive income
Stock issued under employee stock plans
Share-based compensation
Repurchase of shares
Other
Balance as of December 31, 2017
Net income (loss)
Other comprehensive loss
Stock issued under employee stock plans
Share-based compensation
Repurchase of shares
Other
Balance as of December 31, 2018
Net income (loss)
Other comprehensive loss
Stock issued under employee stock plans
Share-based compensation
Issuance of convertible notes, net of tax
$
278,842
$
156,845
(210,662 ) $
116,204
$
1,008
95
197
1,267
436,954
232,851
(94,458 )
(56,585 )
(340 )
960
(720 )
(71 )
669,805
346,749
(151,043 )
(13,847 )
169
(54 )
(47 )
Repurchase of shares
Redemptions and conversions of convertible notes, net of tax
Other
900,557
156,940
116,401
8,415
15,618
—
1,547
1,199,478
232,131
(56,656 )
16,264
16,764
(175,000 )
(139 )
1,232,842
346,695
(13,894 )
11,947
21,439
71,659
(70,876 )
(20,467 )
(3 )
Balance as of December 31, 2019
$ 1,016,554
$
(164,890 )
68
$ 1,579,342
See accompanying notes to the Consolidated Financial Statements.
103
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Share-based compensation
Unrealized foreign exchange (gain) loss, net
Non-cash impairment of goodwill and acquired intangible assets
Deferred income taxes
Loss on early retirement of debt
Loss (income) from unconsolidated affiliates
Accretion of convertible debt discount and amortization of debt issuance
costs
Changes in working capital, net of amounts acquired:
Income taxes payable, net
Trade accounts receivable
Prepaid expenses and other current assets
Trade accounts payable
Deferred revenue
Accrued expenses and other current liabilities
Changes in non-current assets and liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Acquisitions, net of cash acquired
Purchases of property and equipment
Purchases of other long-term assets
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of shares
Repurchase of shares
Borrowings from revolving credit agreements
Repayments of revolving credit agreements
Repayments of long-term debt obligations
Repayments of finance lease obligations
Net borrowing from short-term debt obligations
Proceeds from long-term debt obligations
Debt issuance costs
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents and restricted
cash
Increase in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at beginning of period
Cash and cash equivalents and restricted cash at end of period
$
104
Year Ended December 31,
2019
346,695 $
2018
232,131 $
2017
156,940
$
111,744
21,439
(2,701 )
—
17,113
9,831
—
106,021
16,764
26,655
7,049
2,425
—
117
95,030
15,618
(20,300 )
34,056
(10,861 )
—
(48 )
17,088
14,121
13,504
13,177
(87,882 )
(68,945 )
53,550
132
98,459
(25,212 )
504,488
(13,317 )
26,497
(29,066 )
45,562
9,349
(37,595 )
(9,480 )
397,233
(94,187 )
(131,287 )
(7,274 )
3,721
(229,027 )
(12,854 )
(112,484 )
(8,528 )
1,583
(132,283 )
23,183
(198,089 )
35,451
3,840
3,724
106,350
27,878
286,276
—
(97,235 )
(6,039 )
1,416
(101,858 )
14,979
(74,456 )
2,498,298
(2,714,203 )
(446,702 )
(6,474 )
(32,091 )
1,194,900
(17,947 )
(6 )
416,298
18,608
(177,855 )
5,773,294
(5,560,089 )
(52,199 )
(6,137 )
9,472
—
(3,071 )
1
2,024
10,990
(3,065 )
2,409,203
(2,566,621 )
(8,907 )
(4,883 )
1,853
—
—
281
(161,149 )
(5,332 )
686,427
1,130,952
1,817,379 $
(36,540 )
230,434
900,518
1,130,952 $
65,161
88,430
812,088
900,518
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(in thousands)
The table below reconciles Cash, Cash and cash equivalents, ATM cash, Restricted cash, Cash and cash equivalents and
Restricted cash included within settlement assets.
Cash and cash equivalents
Restricted cash
ATM cash
Settlement cash and cash equivalents
Settlement restricted cash
$
786,081 $
34,301
665,641
282,188
49,168
385,031 $
31,237
395,378
273,948
45,358
Cash and cash equivalents and restricted cash at end of period
$
1,817,379 $ 1,130,952 $
280,128
32,185
253,847
285,169
49,189
900,518
Supplemental Cash Flow Disclosures:
Interest paid during the period
Income taxes paid during the period
Supplemental disclosure of non-cash investing and financing activities:
Non-cash consideration received from sale of investment
$
$
$
13,125 $
74,086 $
23,554 $
84,382 $
20,457
48,644
— $
— $
—
See accompanying notes to the Consolidated Financial Statements.
105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION
Euronet Worldwide, Inc. (the “Company” or “Euronet”) was established as a Delaware corporation on December 13, 1997 and
succeeded Euronet Holding N.V. as the group holding company, which was founded and established in 1994. Euronet is a
leading electronic payments provider. Euronet offers payment and transaction processing and distribution solutions to financial
institutions, retailers, service providers and individual consumers. Euronet's primary product offerings include comprehensive
automated teller machine (“ATM”), point-of-sale (“POS”), card outsourcing, card issuing and merchant acquiring services,
electronic distribution of prepaid mobile airtime and other electronic payment products, and global money transfer services.
(2) BASIS OF PREPARATION
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the
United States (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
The consolidated financial statements include the accounts of Euronet and its wholly owned and majority owned subsidiaries
and all significant intercompany balances and transactions have been eliminated. Euronet's investments in companies that it
does not control, but has the ability to significantly influence, are accounted for under the equity method. Euronet is not
involved with any variable interest entities. Results from operations related to entities acquired during the periods covered by
the consolidated financial statements are reflected from the effective date of acquisition.
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires that management make a
number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities and the reported amounts of revenues and expenses. Significant items subject to such estimates and
assumptions include computing income taxes, contingent purchase price consideration, estimating the useful lives and potential
impairment of long-lived assets and goodwill, as well as allocating the purchase price to assets acquired and liabilities assumed
in acquisitions and revenue recognition. Actual results could differ from those estimates.
Seasonality
Euronet’s EFT Processing Segment experiences its heaviest demand for dynamic currency conversion services during the third
quarter of the fiscal year, coinciding with the tourism season. Additionally, the EFT Processing and epay Segments are
impacted by seasonality during the fourth quarter and first quarter of each year due to higher transaction levels during the
holiday season and lower levels following the holiday season. Seasonality in the money transfer segment varies by region of
the world. In most markets, Euronet usually experiences increased demand for money transfer services from the month of May
through the fourth quarter of each year, coinciding with the increase in worker migration patterns and various holidays, and its
lowest transaction levels during the first quarter of the year.
Settlement Assets and Obligations
As of December 31, 2019, we have recast our Consolidated Balance Sheets to include three new balance sheet captions entitled
Settlement assets, Settlement obligations, and ATM cash. The historically reported Cash and cash equivalents and Restricted
cash are now presented in Cash and cash equivalents, Restricted cash, ATM cash, or part of Settlement assets.
ATM cash represents cash included within the ATM network. Settlement assets represents funds received or to be received from
agents for unsettled money transfers and due from merchants or unsettled prepaid transactions. Settlement assets consist of cash
and cash equivalents, restricted cash, receivables and prepaid expenses and other current assets. Settlement obligations consist
of money transfers, payables to agents and content providers. Amounts presented in Cash and cash equivalents as recast
represents cash available from operations. Prior year amounts have been recast to conform to current year presentation.
106
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
Foreign currencies
Assets and liabilities denominated in currencies other than the functional currency of a subsidiary are remeasured at rates of
exchange on the balance sheet date. Resulting gains and losses on foreign currency transactions are included in the
Consolidated Statements of Income.
The financial statements of foreign subsidiaries where the functional currency is not the U.S. dollar are translated to U.S.
dollars using (i) exchange rates in effect at period end for assets and liabilities, and (ii) weighted average exchange rates during
the period for revenues and expenses. Adjustments resulting from translation of such financial statements are reflected in
accumulated other comprehensive income (loss) as a separate component of consolidated equity.
Cash equivalents
The Company considers all highly liquid investments, with an original maturity of three months or less, and certificates of
deposit, which may be withdrawn at any time at the discretion of the Company without penalty, to be cash equivalents.
ATM Cash
ATM cash represents cash within the ATM network either included within ATMs, within dedicated accounts, or in-transit to
ATMs.
Settlement Assets and Obligations
Settlement assets represent funds received or to be received from agents for unsettled money transfers and from merchants for
unsettled prepaid transactions. The Company records corresponding settlement obligations relating to amounts payable.
Settlement assets consist of cash and cash equivalents, restricted cash, receivables and prepaid expenses and other current
assets. Cash received by Euronet agents and merchants generally become available to the Company within two weeks after
initial receipt by the business partner. Receivables, net from business partners represent funds collected by such business
partners, but in transit to the Company.
Euronet has a large and diverse business partner base, thereby reducing the credit risk of the Company from any one business
partner. In addition, the Company performs ongoing credit evaluations of its business partners’ financial condition and credit
worthiness. Inventories represent prepaid cards and prepaid pin numbers that are used to settle amounts due to content
providers.
Settlement obligations consist of money transfers, payables to agents and content providers. Money transfer payables represent
amounts to be paid to transferees when they request funds. Most agents typically settle with transferees first then obtain
reimbursement from the Company. Money order payables represent amounts not yet presented for payment. Due to the agent
funding and settlement process, payables to agents represent amounts due to agents for money transfers that have not been
settled with transferees.
107
(in thousands)
Settlement assets:
Settlement cash and cash equivalents
Settlement restricted cash
Account receivables
Prepaid expenses and other current assets
Total settlement assets
Settlement obligations:
Trade account payables
Accrued expenses and other current liabilities
Total settlement obligations
Property and equipment
As of December 31, 2019 As of December 31, 2018
$
$
$
$
282,188 $
49,168
574,410
107,301
1,013,067 $
504,667 $
508,400
1,013,067 $
273,948
45,358
491,102
105,052
915,460
456,005
459,455
915,460
Property and equipment are stated at cost, less accumulated depreciation. Property and equipment acquired in acquisitions have
been recorded at estimated fair values as of the acquisition date.
Depreciation is generally calculated using the straight-line method over the estimated useful lives of the respective assets.
Depreciation and amortization rates are generally as follows:
ATMs or ATM upgrades
Computers and software
POS terminals
Vehicles and office equipment
Leasehold improvements
Goodwill and other intangible assets
5 - 7 years
3 - 5 years
3 - 5 years
3 - 10 years
Over the lesser of the lease term or estimated useful life
The Company accounts for goodwill and other intangible assets in accordance with Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles - Goodwill and Other (“ASC 350”). ASC 350
requires that the Company test for impairment on an annual basis and whenever events or circumstances dictate. Goodwill is
allocated among and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level
below an operating segment.
ASC 350 provides an entity the option to first assess qualitative factors to determine whether the existence of events or
circumstances leads to a determination that it is more likely than not (more than 50%) that the estimated fair value of a
reporting unit is less than its carrying amount. If an entity elects to perform a qualitative assessment and determines that an
impairment is more likely than not, the entity is then required to perform the existing quantitative impairment test (described
below), otherwise no further analysis is required. An entity also may elect not to perform the qualitative assessment and,
instead, proceed directly to the quantitative impairment test. The Company has a policy for its annual review of goodwill to
perform the qualitative assessment for all reporting units not subjected directly to the quantitative impairment test.
Under the qualitative assessment, various events and circumstances (or factors) that would affect the estimated fair value of a
reporting unit are identified (similar to impairment indicators). These factors are then classified by the type of impact they
would have on the estimated fair value using positive, neutral, and adverse categories based on current business conditions.
Furthermore, the Company considers the results of the most recent quantitative impairment test completed for a reporting unit
and compares, among other factors, the weighted average cost of capital ("WACC") between the current and prior years for
each reporting unit.
108
Under the quantitative impairment test, the evaluation of impairment involves comparing the current fair value of each
reporting unit to its carrying value, including goodwill. The Company uses weighted results from the income approach or the
discounted cash flow model ("DCF model") and guideline public company method ("Market Approach model") to estimate the
current fair value of its reporting units when testing for impairment, as management believes forecasted cash flows and
EBITDA are the best indicator of such fair value. A number of significant assumptions and estimates are involved in the
application of the DCF model to forecast operating cash flows, including sales volumes and gross margins, tax rates, capital
spending, discount rates and working capital changes. Most of these assumptions vary significantly among the reporting units.
Significant assumptions in the Market Approach model are projected EBITDA, selected market multiple, and the estimated
control premium. If the carrying value of goodwill exceeds its fair value, an impairment loss equal to such excess would be
recognized.
The Company completed its annual goodwill impairment test in the fourth quarter of 2019. It determined, after performing a
qualitative review of each reporting unit, that it is more likely than not that the fair value of each of our reporting units exceeds
the respective carrying amounts, except for one reporting unit. Accordingly, there was an indication of impairment, and the
quantitative goodwill impairment test was performed. The quantitative goodwill impairment test showed that there was no
indication for impairment for the affected reporting unit.
Other Intangible Assets - In accordance with ASC 350, intangible assets with finite lives are amortized over their estimated
useful lives. Unless otherwise noted, amortization is calculated using the straight-line method over the estimated useful lives of
the assets as follows:
Non-compete agreements
Trademarks and trade names
Software
Customer relationships
2 - 5 years
2 - 20 years
3 - 10 years
6 - 20 years
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If such events or changes in circumstances are present, a loss is recognized
if the carrying value of the asset is in excess of the sum of the undiscounted cash flows expected to result from the use of the
asset and its eventual disposition. An impairment loss is measured as the amount by which the carrying amount of the asset
exceeds the fair value of the asset. During 2019, the company did not identify an impairment. During 2018, the Company
recorded a non-cash impairment charge of $7.0 million related to certain trade names as a result of combining HiFX into xe in
order to operate the businesses under one brand name, xe. During 2017, the Company recorded a non-cash impairment charge
of $2.3 million related to certain customer relationships as a result of the closure of the Pure Commerce office in South Korea.
See Note 8, Goodwill and Acquired Intangible Assets, Net, to the Consolidated Financial Statements for additional information
regarding the impairment of goodwill and other intangible assets.
Other assets
Other assets include investments in unconsolidated affiliates, capitalized software development costs and capitalized payments
for new or renewed contracts, contract renewals and customer conversion costs. Euronet capitalizes initial payments for new or
renewed contracts to the extent recoverable through future operations, contractual minimums and/or penalties in the case of
early termination. The Company's accounting policy is to limit the amount of capitalized costs for a given contract to the lesser
of the estimated ongoing net future cash flows related to the contract or the termination fees the Company would receive in the
event of early termination of the contract by the customer.
ASC Topic 340, Other Assets and Deferred Costs (“ASC 340”) requires the deferral of incremental costs to obtain customer
contracts, known as contract assets, which are then amortized to expense as part of selling, general and administrative expense
over the respective periods of expected benefit. Deferred contract costs are reported on our balance sheet within current or non-
current other assets based on the expected life of the related contract. At December 31, 2019 and 2018, we had $43.7 million,
and $32.1 million, respectively, of deferred contract costs related to the fulfillment of future contract obligations. For the years
109
ended December 31, 2019, 2018 and 2017, we had $6.9 million , $6.3 million and $7.2 million of amortization related to these
costs, respectively.
The Company accounts for investments in affiliates using the equity method of accounting when it has the ability to exercise
significant influence over the affiliate, but does not have a controlling interest. Equity losses in affiliates are generally
recognized until the Company's investment is zero. As of December 31, 2019 and 2018, the Company had no material
investments in unconsolidated affiliates.
Convertible notes
The Company accounts for its convertible debt instruments that may be settled in cash upon conversion in accordance with
ASC Topic 470, Debt (“ASC 470”), which requires the proceeds from the issuance of such convertible debt instruments to be
allocated between debt and equity components so that debt is discounted to reflect the Company's nonconvertible debt
borrowing rate. Further, the Company applies ASC 470-20-35-13, which requires the debt discount to be amortized over the
period the convertible debt is expected to be outstanding as additional non-cash interest expense.
Noncontrolling interests
The Company accounts for noncontrolling interests in its consolidated financial statements according to ASC Topic 810,
Consolidations (“ASC 810”), which requires noncontrolling interests to be reported as a component of equity.
Business combinations
The Company accounts for business combinations in accordance with ASC Topic 805, Business Combinations (“ASC 805”),
which requires most identifiable assets, liabilities, noncontrolling interests and goodwill acquired in a business combination to
be recorded at “full fair value” at the acquisition date. Transaction-related costs are expensed in the period incurred.
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
In accordance with ASC Topic 740, Income Taxes (“ASC 740”), the Company's policy is to record estimated interest and
penalties related to the underpayment of income taxes as income tax expense in the Consolidated Statements of Income. See
Note 13, Taxes, to the Consolidated Financial Statements for further discussion regarding these provisions.
Presentation of taxes collected and remitted to governmental authorities
The Company presents taxes collected and remitted to governmental authorities on a net basis in the accompanying
Consolidated Statements of Income.
Fair value measurements
The Company applies the provisions of ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), regarding fair
value measurements for assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value and
requires certain disclosures about fair value measurements. The provisions apply whenever other accounting pronouncements
require or permit fair value measurements. See Note 17, Financial Instruments and Fair Value Measurements, to the
Consolidated Financial Statements for the required fair value disclosures.
110
Accounting for derivative instruments and hedging activities
The Company accounts for derivative instruments and hedging activities in accordance with ASC Topic 815, Derivatives and
Hedging (“ASC 815”), which requires that all derivative instruments be recognized as either assets or liabilities on the balance
sheet at fair value. Primarily in the Money Transfer Segment, the Company enters into foreign currency derivative contracts,
mainly forward contracts, to offset foreign currency exposure related to money transfer settlement assets and liabilities in
currencies other than the U.S. dollar, derivative contracts written to its customers arising from its cross-currency money transfer
services and certain assets and liability positions denominated in currencies other than the U.S. dollar. These contracts are
considered derivative instruments under the provisions of ASC 815; however, the Company does not designate such
instruments as hedges for accounting purposes. Accordingly, changes in the value of these contracts are recognized
immediately as a component of foreign currency exchange gain (loss), net in the Consolidated Statements of Income.
Cash flows resulting from derivative instruments are included in operating activities in the Company's Consolidated Statements
of Cash Flows. The Company enters into derivative instruments with highly credit-worthy financial institutions and does not
use derivative instruments for trading or speculative purposes. See Note 11, Derivative Instruments and Hedging Activities, to
the Consolidated Financial Statements for further discussion of derivative instruments.
Share-based compensation
The Company follows the provisions of ASC Topic 718, Compensation - Stock Compensation (“ASC 718”), for equity
classified awards, which requires the determination of the fair value of the share-based compensation at the grant date and
subsequent recognition of the related expense over the period in which the share-based compensation is earned (“requisite
service period”).
The amount of future compensation expense related to awards of nonvested shares or nonvested share units (“restricted stock”)
is based on the market price for Euronet Common Stock at the grant date. The grant date is the date at which all key terms and
conditions of the grant have been determined and the Company becomes contingently obligated to transfer equity to the
employee who renders the requisite service, generally the date at which grants are approved by the Company's Board of
Directors or Compensation Committee thereof. Share-based compensation expense for awards with only service conditions is
generally recognized as expense on a “straight-line” basis over the requisite service period. For awards that vest based on
achieving periodic performance conditions, expense is recognized on a “graded attribution method.” The graded attribution
method results in expense recognition on a straight-line basis over the requisite service period for each separately vesting
portion of an award. The Company has elected to use the “with and without method” when calculating the income tax benefit
associated with its share-based payment arrangements. See Note 15, Stock Plans, for further disclosure.
Revenue recognition
The Company recognizes revenue when control of the promised goods or services is transferred to our customers, in an amount
that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Sales and usage-
based taxes are excluded from revenues. A description of the major components of revenue by business segment is as follows:
EFT Processing - Revenues in the EFT Processing Segment are primarily derived from transaction and management fees and
foreign currency exchange margin from owned and outsourced ATM, POS and card processing networks and from the sale of
EFT software solutions for electronic payment and transaction delivery systems, and fees or margin earned from value added
services, including dynamic currency conversion and domestic and international surcharge.
Transaction-based fees include charges for cash withdrawals, debit or credit card transactions, balance inquiries, transactions
not completed because the relevant card issuer does not give authorization and prepaid mobile airtime recharges. Outsourcing
services are generally billed on the basis of a fixed monthly fee per ATM, plus a transaction-based fee. Transaction-based fees
are recognized at the time the transactions are processed and outsourcing management fees are recognized ratably over the
contract period. These fees can be variable based on transaction volume tiered discounts; however, as all tiered discounts are
calculated monthly, the actual discount is recorded on a monthly basis.
111
Certain of the Company's non-cancelable customer contracts provide for the receipt of up-front fees from the customer and/or
decreasing or increasing fee schedules over the agreement term for substantially the same level of services to be provided by
the Company. The Company recognizes revenue under these contracts based on proportional performance of services over the
term of the contract. This generally results in “straight-line” (i.e., consistent value per period) revenue recognition of the
contracts' total cash flows, including any up-front payment received from the customer.
epay - Revenue generated in the epay Segment is primarily derived from commissions or processing fees associated with
distribution and/or processing of prepaid mobile airtime and digital media products. These fees and commissions are received
from mobile operators, content vendors or distributors or from retailers. In accordance with ASC 606, commissions are
recognized as revenue during the period in which the Company provides the service. The portion of the commission that is paid
to retailers is generally recorded as a direct operating cost. However, in circumstances where the Company is not the principle
obligor in the distribution of the electronic payment products, those commissions are recorded as a reduction of revenue. In
selling certain products, the Company is the principle obligor in the arrangements; accordingly, the gross sales value of the
products are recorded as revenue and the purchase cost as direct operating cost. Transactions are processed through a network
of POS terminals and direct connections to the electronic payment systems of retailers. Transaction processing fees are
recognized at the time the transactions are processed.
Money Transfer - In accordance with ASC 606, revenues for money transfer and other services represent a transaction fee in
addition to a margin earned from purchasing currency at wholesale exchange rates and selling the currency to customers at
retail exchange rates. Revenues and the associated direct operating cost are recognized at the time the transaction is processed.
The Company has origination and distribution agents in place, which each earn a fee for the respective service. These fees are
reflected as direct operating costs.
Revenues
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”)
2014-09, “Revenue from Contracts with Customers (Topic 606)” (“Topic 606”), and subsequently modified the standard with
several ASUs. The Company adopted the standard on January 1, 2018 using the modified retrospective method applied to those
contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are
presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with historic
accounting under Topic 605.
The Company completed its review of customer contracts relative to the requirements of Topic 606 and concluded that
revenues from certain customer contracts in the epay Segment should be recorded differently under the principal versus agent
guidance of Topic 606. With respect to those contracts, the Company concluded that it earns a commission from content
providers for distributing and processing their prepaid mobile airtime and other electronic payment products, but it is not the
principal for the products themselves. As a result, the impact of the change in accounting principle was a reduction of $88.5
million in both revenues and direct operating expenses for the year ended December 31, 2018, with no impact on reported net
income.
Deferred Revenues - The Company records deferred revenues when cash payments are received or due in advance of its
performance. The decrease in the deferred revenue balance for the year ended December 31, 2019 is primarily driven by $41.4
million of revenues recognized that were included in the deferred revenue balance as of December 31, 2018, largely offset by
$40.7 million of cash payments received in the current year for which the Company has not yet satisfied the performance
obligations.
Disaggregation of Revenues - The following table presents the Company's revenues disaggregated by segment and region. The
Company believes disaggregation by segment and region best depicts how the nature, amount, timing, and uncertainty of
revenue and cash flows are affected by economic factors. The disaggregation of revenues by segment and region is based on
management's assessment of segment performance together with allocation of financial resources, both capital and operating
support costs, on a segment and regional level. Both segments and regions benefit from synergies achieved through
concentration of operations and are influenced by macro-economic, regulatory and political factors in the respective segment
112
and region. The Company recognizes foreign exchange revenues from derivative instruments in its xe operations in accordance
with ASC Topic 815 and not ASC Topic 606. These revenues are not significant to the Company's consolidated revenues and
are included in the following tables.
For the Year Ended December 31, 2019
(in thousands)
Europe
North America
Asia Pacific
Other
Eliminations
Total
(in thousands)
Europe
North America
Asia Pacific
Other
Eliminations
Total
$
EFT
Processing
724,163 $
35,461
129,060
28
—
$
888,712 $
Total
epay
524,907 $
151,016
76,491
16,915
—
Money
Transfer
373,302 $ 1,622,372
759,493
573,016
330,485
124,934
41,917
24,974
—
(4,158 )
769,329 $ 1,096,226 $ 2,750,109
For the Year Ended December 31, 2018
EFT
Processing
$
$
608,993 $
32,306
112,294
58
—
753,651 $
Total
epay
491,282 $
165,930
71,242
15,330
—
Money
Transfer
328,592 $ 1,428,867
767,241
569,005
310,593
127,057
18,308
33,696
—
(3,768 )
743,784 $ 1,042,962 $ 2,536,629
(1) As noted above, prior period amounts have not been adjusted under the modified retrospective method.
(in thousands)
Europe
North America
Asia Pacific
Other
Eliminations
Total
For the Year Ended December 31, 2017
$
EFT
Processing
501,161 $
31,469
101,787
142
—
epay
561,232 $
63,148
91,516
18,102
—
$
634,559 $
733,998 $
Total
Money
Transfer
262,280 $ 1,324,673
608,485
513,868
294,308
101,005
27,949
9,705
—
(2,993 )
886,858 $ 2,252,422
(1) As noted above, prior period amounts have not been adjusted under the modified retrospective method.
Recently issued accounting pronouncements
The Company adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), as amended, as of January 1, 2019,
using the modified retrospective approach and comparative periods were not restated. The new standard provides a number of
optional practical expedients in transition. The Company elected the “package of practical expedients” which permits the
Company not to reassess under the new standard the Company’s prior conclusions about lease identification, lease
classification and initial direct costs. The Company also elected to combine lease and non-lease components and to include
short term leases with an initial term of 12 months or less on the Consolidated Balance Sheets. In addition, the Company
elected the hindsight practical expedient to determine the lease term for existing leases. The election of the hindsight practical
expedient resulted in, for substantially all leases in effect on January 1, 2019, the lease term for implementation of this
pronouncement, as the period from January 1, 2019 through the lease’s contractual termination date, rather than the actual lease
life as set out in the lease agreement. Lease lives for lease agreements committed to on January 1, 2019 and, thereafter, are
included based on the lease’s commencement date and termination date. In the application of hindsight, the Company evaluated
the performance of all the leases and the associated markets in relation to the Company’s operations, which resulted in the
determination that the exercise of renewal options would not be reasonably certain in determining the expected lease term.
113
Adoption of the new standard resulted in the recognition of additional operating right of use lease assets and lease liabilities of
approximately $269.9 million, as of January 1, 2019.
In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13,Financial Instruments - Credit Losses
(Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on
historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss
model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this
standard did not have a significant impact on the Company's consolidated financial statements and related disclosures.
(4) STOCKHOLDER’S EQUITY
Earnings Per Share
Basic earnings per share has been computed by dividing earnings available to common stockholders by the weighted average
number of common shares outstanding during the respective period. Diluted earnings per share has been computed by dividing
earnings available to common stockholders by the weighted average shares outstanding during the respective period, after
adjusting for the potential dilution of options to purchase the Company's Common Stock, assumed vesting of restricted stock
and the assumed conversion of the Company's convertible debt.
The following table provides the computation of diluted weighted average number of common shares outstanding:
Year Ended December 31,
2019
2018
2017
Computation of diluted weighted average shares outstanding:
Basic weighted average shares outstanding
Incremental shares from assumed exercise of stock options and vesting of
restricted stock
53,449,834
51,487,557
52,523,272
1,464,053
1,499,713
1,793,375
Incremental shares from assumed conversion of convertible debentures
—
1,640,477
799,680
Diluted weighted average shares outstanding
54,913,887
54,627,747
55,116,327
The table includes all stock options and restricted stock that are dilutive to the Company's weighted average common shares
outstanding during the period. The calculation of diluted earnings per share excludes stock options or shares of restricted stock
that are anti-dilutive to the Company's weighted average common shares outstanding for the years ended December 31, 2019,
2018 and 2017 of approximately 380,000, 458,000 and 798,000, respectively.
The Company issued new Convertible Senior Notes ("Convertible Notes") due March 2049 on March 18, 2019 and retired the
existing convertible notes ("Retired Convertible Notes") that would have matured in 2044 on May 28, 2019. The Company's
Convertible Notes currently have, and the Retired Convertible Notes had, a settlement feature requiring the Company upon
conversion to settle the principal amount of the debt and any conversion value in excess of the principal value ("conversion
premium"), for cash or shares of the Company's common stock or a combination thereof, at the Company's option. The
Company has stated its intent to settle any conversion of these notes by paying cash for the principal value and issuing common
stock for any conversion premium. Accordingly, the Convertible Notes and the Retired Convertible Notes were included in the
calculation of diluted earnings per share if their inclusion was dilutive. The dilutive effect increases the more the market price
exceeds the conversion price. The Retired Convertible Notes had a dilutive effect for the years ended December 31, 2018 and
2017 as the $102.38 and $84.27 market price per share of Common Stock as of December 31, 2018 and 2017 exceeded the
$72.18 conversion price per share. The Convertible Notes would only have a dilutive effect if the market price per share of
common stock exceeds the conversion price of $188.73 per share. Therefore, according to ASC Topic 260, Earnings per Share
(“ASC 260”), there was no dilutive effect of the assumed conversion of the debentures as of December 31, 2019, whereas the
114
dilutive effect was 1,640,477 and 799,680 shares for the years ended December 31, 2018 and 2017, respectively. See Note 10,
Debt Obligations, to the Consolidated Financial Statements for more information about the convertible notes.
Share repurchases
The Company's Board of Directors has authorized a stock repurchase program ("Repurchase Program"), allowing Euronet to
repurchase up to $375 million in value or 10.0 million shares of stock through March 31, 2020. On March 11, 2019, in
connection with the issuance of the Convertible Notes, the Board of Directors authorized an additional repurchase program of
$120 million in value of the Company's common stock through March 11, 2021. On February 26, 2020, the Company put a
repurchase program in place to repurchase up to $250 million in value, but not more than five million shares of common stock
through February 28, 2022. Repurchases under either program may take place in the open market or in privately negotiated
transactions, including derivative transactions, and may be made under a Rule 10b5-1 plan. For the year ended December 31,
2019, the Company repurchased $70.9 million in value of Euronet Common Stock under the Repurchase Program. For the year
ended December 31, 2018, the company repurchased $175 million in value of Euronet common stock under the Repurchase
Program. No repurchases were made during 2017.
Preferred Stock
The Company has the authority to issue up to 10 million shares of preferred stock, of which no shares are currently issued or
outstanding.
Accumulated other comprehensive loss
As of December 31, 2019 and 2018, accumulated other comprehensive loss consists entirely of foreign currency translation
adjustments. The Company recorded a foreign currency translation loss of $13.9 million, a loss of $56.7 million and a gain of
$116.4 million for the years ended December 31, 2019, 2018, and 2017, respectively. There were no reclassifications of foreign
currency translation into the Consolidated Statements of Income for the years ended December 31, 2019, 2018, and 2017.
Dividends
No dividends were paid on any class of the Company's stock during 2019, 2018, and 2017.
(5) ACQUISITIONS
In accordance with ASC 805, the Company allocates the purchase price of its acquisitions to the tangible assets, liabilities and
intangible assets acquired based on fair values. Any excess purchase price over those fair values is recorded as goodwill. The
fair value assigned to intangible assets acquired is supported by valuations using estimates and assumptions provided by
management. For certain large acquisitions, management engages an appraiser to assist in the valuation process.
2019 Acquisitions
On November 30, 2019, the Company completed the acquisition of a North American based ATM operator with
approximately 1,800 ATMs.
The purchase price was $92.5 million in cash. Approximately $10.1 million of the cash consideration was placed in escrow
accounts to satisfy indemnification and working capital obligations of the seller, pursuant to the terms of the purchase agreement.
The purchase price was preliminarily allocated to the assets acquired and liabilities assumed, including identifiable intangible
assets, based on their respective fair values at the date of acquisition. The acquisition has been accounted for as business
combinations in accordance with U.S. GAAP and the results of operations have been included from the date of acquisition in the
EFT Processing Segment. The historical revenue and earnings were not significant for the purpose of presenting pro forma
information for the current or prior-year periods.
115
The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the acquisition
date.
(in thousands)
Cash and cash equivalents
Trade accounts receivable
Other current assets
Property and equipment
Intangible assets
Total assets acquired
Trade accounts payable
Accrued expenses and other current liabilities
Total liabilities assumed
Goodwill
Net assets acquired
$
As of November 30, 2019
5,325
2,167
798
16,542
39,000
63,832
$
$
$
$
(6,790 )
(80 )
(6,870 )
35,540
92,502
The Company acquired customer relationship intangible assets with a preliminary fair value of $39.0 million, which are being
amortized on a straight-line basis over 20 years.
Goodwill, with a preliminary value of $35.5 million, arising from the acquisition was included in the EFT Processing Segment
and was attributable to expected growth opportunities in the United States. Goodwill and intangible assets associated with this
acquisition are deductible for tax purposes.
Other
The Company completed three acquisitions for immaterial amounts.
2018 Acquisitions
The Company completed the acquisitions of two small European businesses for an immaterial amount of cash consideration,
completing one acquisition in the first quarter of 2018 and completing the other acquisition in the second quarter of 2018. The
acquisitions have been accounted for as business combinations in accordance with U.S. GAAP and the results of operations
have been included from the respective dates of acquisition in the EFT Processing Segment.
116
(6) RESTRICTED CASH
The restricted cash balances as of December 31, 2019 and 2018 were as follows:
(in thousands)
Cash held in trust and/or cash held on behalf of others
Restricted cash
Cash held in trust and/or cash held on behalf of others
Collateral on bank credit arrangements and other
Restricted cash included within settlement assets
Total Restricted Cash
As of December 31,
2019
34,301 $
34,301 $
2018
31,237
31,237
44,366 $
4,802
49,168 $
35,926
9,432
45,358
83,469
$
76,595
$
$
$
$
$
Cash held in trust and/or cash held on behalf of others is in connection with the administration of the customer collection and
vendor remittance activities by certain subsidiaries within the Company's epay and EFT Processing Segments. Amounts
collected on behalf of certain mobile phone operators and/or merchants are deposited into a restricted cash account. The bank
credit arrangements primarily represent cash collateral on deposit with commercial banks to cover guarantees.
(7) PROPERTY AND EQUIPMENT, NET
The components of property and equipment, net of accumulated depreciation and amortization as of December 31, 2019 and
2018 are as follows:
(in thousands)
ATMs
POS terminals
Vehicles and office equipment
Computers and software
Land and buildings
Less accumulated depreciation
Total
As of December 31,
2019
474,611 $
38,235
64,970
191,172
1,235
770,223
(410,243 )
359,980 $
2018
378,009
36,521
66,117
183,150
1,252
665,049
(373,180 )
291,869
$
$
Depreciation and amortization expense related to property and equipment, including property and equipment recorded under
finance leases, for the years ended December 31, 2019, 2018 and 2017 was $83.5 million, $75.1 million and $63.4 million,
respectively.
117
(8) GOODWILL AND ACQUIRED INTANGIBLE ASSETS, NET
Goodwill represents the excess of the purchase price of the acquired business over the estimated fair value of the underlying net
tangible and intangible assets acquired. The following table summarizes intangible assets as of December 31, 2019 and 2018:
As of December 31, 2019
As of December 31, 2018
(in thousands)
Customer relationships
Trademarks and trade names
Software
Non-compete agreements
Total
$
Gross Carrying
Amount
240,027 $
45,347
59,244
2,082
Accumulated
Amortization
Gross Carrying
Amount
199,581 $
45,233
58,515
2,076
Accumulated
Amortization
(133,863 )
(25,837 )
(29,420 )
(1,800 )
(139,319 ) $
(28,123 )
(35,362 )
(2,049 )
$
346,700
$
(204,853 ) $
305,405
$
(190,920 )
The following table summarizes the goodwill and amortizable intangible assets activity for the years ended December 31, 2019
and 2018:
(in thousands)
Balance as of January 1, 2018
Increases (decreases):
Acquisitions
Impairment
Amortization
Other (primarily changes in foreign currency exchange rates)
Balance as of December 31, 2018
Increases (decreases):
Acquisitions
Impairment
Amortization
Other (primarily changes in foreign currency exchange rates)
Balance as of December 31, 2019
Acquired
Intangible
Assets
150,543 $
$
Goodwill
717,386 $
20,742
—
—
(33,931 )
704,197
—
(7,049 )
(22,562 )
(6,447 )
114,485
46,246
—
(20,374 )
1,490
141,847 $
35,305
—
—
4,321
743,823 $
$
Total
Intangible
Assets
867,929
20,742
(7,049 )
(22,562 )
(40,378 )
818,682
81,551
—
(20,374 )
5,811
885,670
The Company performs its annual goodwill impairment test during the fourth quarter of each year. The annual goodwill
impairment test completed during the fourth quarter of 2019 resulted in no impairment charges. During the fourth quarter of
2018, the Company recorded a $7.0 million non-cash impairment charge for acquired intangible assets, specifically the HiFX
trade name, related to rebranding the HiFX business to xe.
Of the total goodwill balance of $743.8 million as of December 31, 2019, $474.7 million relates to the Money Transfer
Segment, $128.9 million relates to the epay Segment and the remaining $140.2 million relates to the EFT Processing Segment.
Amortization expense for intangible assets with finite lives was $20.4 million, $22.6 million and $24.5 million for the years
ended December 31, 2019, 2018 and 2017, respectively. Estimated annual amortization expense, before income taxes, on
intangible assets with finite lives as of December 31, 2019, is expected to total $23.1 million for 2020, $22.2 million for 2021,
$21.1 million for 2022, $16.3 million for 2023 and $9.8 million for 2024.
118
(9) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
The balances as of December 31, 2019 and 2018 were as follows:
(in thousands)
Accrued expenses
Derivative liabilities
Current portion of finance lease obligations
Deferred income taxes
Total
(10) DEBT OBLIGATIONS
Debt obligations consist of the following as of December 31, 2019 and 2018:
(in thousands)
Credit Facility:
Revolving credit agreements
Convertible Debt:
0.75% convertible notes, unsecured, due 2049
1.50% convertible notes, unsecured, due 2044
1.375% Senior Notes, due 2026
Other obligations
Total debt obligations
Unamortized debt issuance costs
Carrying value of debt
$
As of December 31,
2019
246,699 $
41,935
5,919
4
2018
210,997
36,102
5,458
—
$
294,557
$
252,557
As of December 31,
2019
2018
$
— $
215,725
436,965
—
—
379,859
673,440
6,215
—
38,513
$ 1,116,620
$
634,097
(19,592 )
(6,298 )
$ 1,097,028
$
627,799
Short-term debt obligations and current maturities of long-term debt obligations
(6,089 )
(38,017 )
Long-term debt obligations
$ 1,090,939
$
589,782
As of December 31, 2019, aggregate annual maturities of long-term debt are $6.1 million in 2020, $0.1 million due in 2021, no
maturities between 2022 and 2024, and $1.2 billion thereafter. This maturity schedule reflects the revolving credit facility
maturing in 2023 the Convertible Notes maturing in 2025, coinciding with the terms of the initial put option by holders of the
Convertible Notes. It also reflects the maturing of the 1.375% Senior Note of €600 million ($673.4 million) due in 2026.
Credit Facility
In the early fourth quarter of 2018, the Company early retired the senior secured revolving bank credit facility (the "Credit
Facility") with a syndicate of financial institutions. The Credit Facility was subsequently replaced by a new unsecured credit
agreement for $1.0 billion that expires on October 17, 2023. Fees and interest on borrowings are based upon the Company's
corporate credit rating and are based, in the case of letter of credit fees, on a margin , and in the case of interest, on a margin
over London Inter-Bank Offered Rate (“LIBOR”) or a margin over the base rate, as selected by the Company, with the
applicable margin ranging from 1.125% to 2.0% (or 0.175% to 1.0% for base rate loans). The unsecured credit agreement
allows for borrowings in Australian Dollars, British Pounds Sterling, Canadian Dollars, Czech Koruna, Danish Krone, Euros,
Hungarian Forints, Japanese Yen, New Zealand Dollars, Norwegian Krone, Polish Zlotys, Swedish Krona, Swiss Francs, and
119
U.S. Dollars. The revolving credit facility contains a $200 million sublimit for the issuance of letters of credit, a $50 million
sublimit for U.S. Dollar swingline loans, and a $90 million sublimit for certain foreign currencies swingline loans.
The retired Credit Facility provided an aggregate amount of $675 million, consisting of a $590 million five-year revolving
credit facility, a $10 million five-year India revolving credit facility and a $75 million five-year term loan. Fees and interest on
borrowings varied based upon the Company's consolidated total leverage ratio (as defined in the amended and restated credit
agreement) and were based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over LIBOR
or a margin over the base rate, as selected by the Company, with the applicable margin ranging from 1.375% to 2.375% (or
0.375% to 1.375% for base rate loans). The base rate is the highest of (i) the Bank of America prime rate, (ii) the Federal Funds
rate plus 0.50% or (iii) the Fixed LIBOR rate plus 1.00%. The term loan was subject to scheduled quarterly amortization
payments, as set forth in the amended and restated credit agreement.
As of December 31, 2019 and 2018, the Company had stand-by letters of credit/bank guarantees outstanding against the
revolving credit facilities of $53.0 million and $47.1 million, respectively. Stand-by letters of credit/bank guarantees reduce the
Company's borrowing capacity under the revolving credit facility and are generally used to secure trade credit and performance
obligations. As of December 31, 2019 and 2018, the stand-by letters of credit interest charges were each 1.1% per annum,
respectively.
The unsecured credit agreement contains customary affirmative and negative covenants, events of default and financial
covenants, including: (i) as of the end of each fiscal quarter ended on March 31, September 30 and December 31, a
Consolidated Total Leverage Ratio not to be greater than 3.5 to1.0; (ii) as of the end of each fiscal quarter ended on June 30, a
Consolidated Total Leverage Ratio not to be greater than 4.0 to1.0; provided that, not more than two times prior to the
expiration date, that a Material Acquisition has been consummated, for any period of four consecutive fiscal quarters following
such Material Acquisition, the Consolidated Total Leverage Ratio will be not greater than 4.0 to1.0 for fiscal quarters ended on
March 31, September 30 and December 31 and not greater than 4.5 to1.0 for fiscal quarters ended on June 30; provided,
further, that following such four consecutive fiscal quarters for which the maximum Consolidated Total Leverage Ratio is
increased, the maximum Consolidated Total Leverage Ratio shall revert to the levels set forth in clauses (i) and (ii) above for
not fewer than two fiscal quarters before a subsequent Increase Notice is delivered to the syndicate of financial institutions; and
(iii) a Consolidated Interest Coverage Ratio not less than 4.0 to 1.0. Subject to meeting certain leverage ratio and liquidity
requirements as contained in the unsecured credit agreement, the Company is permitted to pay dividends, repurchase common
stock and repurchase subordinated debt. The Company was in compliance with all debt covenants, as of December 31, 2019.
The Company and certain subsidiaries have guaranteed the repayment of obligations under the credit agreement.
Uncommitted Line of Credit
During 2019, the Company entered into an Uncommitted Loan Agreement with Bank of America which may provide Euronet
up to $100.0 million under an uncommitted line of credit. Interest on borrowings is equal to LIBOR plus 0.65% and the
agreement expires September 4, 2020. As of December 31, 2019, no amounts were outstanding under the line of credit.
Convertible Debt
On March 18, 2019, the Company completed the sale of $525.0 million of Convertible Senior Notes ("Convertible Notes"). The
Convertible Notes mature in March 2049 unless redeemed or converted prior to such date, and are convertible into shares of
Euronet Common Stock at a conversion price of approximately $188.73 per share if certain conditions are met (relating to the
closing price of Euronet Common Stock exceeding certain thresholds for specified periods). Holders of the Convertible Notes
have the option to require the Company to purchase their notes on each of March 15, 2025, March 15, 2029, March 15, 2034,
March 15, 2039 and March 15, 2044 at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be
repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date. In connection with the issuance of
the Convertible Notes, the Company recorded $12.8 million in debt issuance costs, which are being amortized through March
1, 2025.
The Company may not redeem the Notes prior to September 20, 2022. The Company may redeem for cash all or any portion of
the Convertible Notes, at its option, (i) on or after September 20, 2022 if the closing sale price of the Company's Common
Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive)
120
during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the
trading day immediately preceding the date on which the Company provides notice of redemption and (ii) on or after March 20,
2025 and prior to the maturity date, regardless of the foregoing sale price condition, in each case at a redemption price equal to
100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the
redemption date. No sinking fund is provided for the Convertible Notes. In addition, if a fundamental change, as defined in the
Indenture, occurs prior to the maturity date, holders may require the Company to repurchase for cash all or part of their
Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus
accrued and unpaid interest to, but excluding, the fundamental change repurchase date. As of December 31, 2019, the
conversion threshold was not met and the Convertible Notes were not convertible during the first quarter of 2020.
In accordance with ASC 470-20-30-27, proceeds from the issuance of convertible debt is allocated between debt and equity
components so that debt is discounted to reflect the Company's nonconvertible debt borrowing rate. ASC 470-20-35-13 requires
the debt discount to be amortized over the period the convertible debt is expected to be outstanding as additional non-cash
interest expense. The allocation resulted in an increase to additional paid-in capital of $99.7 million for the Convertible Notes.
The Company used $94.2 million of the net proceeds from the issuance of the new debt to repurchase $49 million aggregate
principal amount of the Company's 1.5% Convertible Senior Notes due 2044 (the "Retired Convertible Notes") from a limited
number of holders in privately negotiated transactions.
On March 18, 2019, the Company provided a notice of redemption to the trustee of the indenture governing the Retired
Convertible Notes (the "Existing Indenture"), pursuant to which the Company would redeem all of the remaining principal
amount outstanding of the Retired Convertible Notes on May 28, 2019 (the "Redemption Date") for cash at a redemption price
equal to 100% of the principal amount of the Retired Convertible Notes redeemed plus accrued and unpaid interest, if any, to,
but excluding, the Redemption Date. The issuance of the Convertible Notes and the conversion of the Retired Convertible
Notes, resulted in a $25.6 million recognition and a $34.2 million reversal of deferred tax liabilities within the additional paid-
in capital as of December 31, 2019, respectively.
Prior to the Redemption Date, approximately $352.4 million principal amount of the Retired Convertible Notes were submitted
for conversion. The Company elected to settle the conversion of such Retired Convertible Notes through a combination of cash
and stock. The Company paid cash equal to $1,000 for each $1,000 principal amount of Retired Convertible Notes submitted
for conversion and satisfied the remainder of the conversion obligation by issuing shares of the Company's Common Stock
valued at $147.24 per share. As a result, the Company paid cash of $352.4 million and issued approximately 2.5 million shares
of its Common Stock. In accordance with ASC 470, the Company recognized a loss of $9.8 million on the conversion and
redemption for the year ended December 31, 2019, representing the difference between the fair value of the Retired Convertible
Notes converted and the carrying value of the bonds at the time of conversion. The Company is using the remainder of the net
proceeds from the issuance of the Convertible Notes to finance the further growth of the business.
Contractual interest expense for the Retired Convertible Notes was $1.5 million and $6.0 million for the year ended
December 31, 2019 and 2018, respectively. Accretion expense was $4.6 million for the year ended December 31, 2019 and
$11.5 million for the year ended December 31, 2018.
Contractual interest expense for the Convertible Notes was $3.1 million for the year ended December 31, 2019. Accretion
expense was $11.6 million for the year ended December 31, 2019. The effective interest rate was 4.4% for the year ended
December 31, 2019. As of December 31, 2019, the unamortized discount was $88.0 million and will be amortized through
March 2025.
1.375% Senior Notes due 2026
On May 22, 2019, the Company completed the sale of €600 million ($669.9 million) aggregate principal amount of Senior
Notes that expire on May 2026 (the “Senior Notes”). The Senior Notes accrue interest at a rate of 1.375% per year, payable
annually in arrears commencing May 22, 2020, until maturity or earlier redemption. As of December 31, 2019, the Company
121
has outstanding €600 million ($673.4 million) principal amount of the Senior Notes. In addition, the Company may redeem
some or all of these notes on or after February 22, 2026 at their principal amount plus any accrued and unpaid interest.
Other obligations
Certain of the Company's subsidiaries have available lines of credit and overdraft credit facilities that generally provide for
short-term borrowings that are used from time to time for working capital purposes. As of December 31, 2019 and 2018,
borrowings under these arrangements were $6.2 million and $38.5 million, respectively. As of December 31, 2019, there was
$6.2 million due in 2020 under these other obligation arrangements.
(11) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to foreign currency exchange risk resulting from (i) the collection of funds or the settlement of money
transfer transactions in currencies other than the U.S. dollar, (ii) derivative contracts written to its customers in connection with
providing cross-currency money transfer services and (iii) certain foreign currency denominated other asset and liability
positions. The Company enters into foreign currency derivative contracts, primarily foreign currency forwards and cross-
currency swaps, to minimize its exposure related to fluctuations in foreign currency exchange rates. As a matter of Company
policy, the derivative instruments used in these activities are economic hedges and are not designated as hedges under ASC
815, primarily due to either the relatively short duration of the contract term or the effects of fluctuations in currency exchange
rates are reflected concurrently in earnings for both the derivative instrument and the transaction and have an offsetting effect.
Foreign currency exchange contracts - Ria Operations and Corporate
In the United States, the Company uses short-duration foreign currency forward contracts, generally with maturities up to 14
days, to offset the fluctuation in foreign currency exchange rates on the collection of money transfer funds between initiation of
a transaction and its settlement. Due to the short duration of these contracts and the Company’s credit profile, the Company is
generally not required to post collateral with respect to these foreign currency forward contracts. Most derivative contracts
executed with counterparties in the U.S. are governed by an International Swaps and Derivatives Association agreement that
includes standard netting arrangements; therefore, asset and liability positions from forward contracts and all other foreign
exchange transactions with the same counterparty are net settled upon maturity. As of December 31, 2019 and 2018, the
Company had foreign currency forward contracts outstanding in the U.S. with a notional value of $159.0 million and $251.1
million, respectively. The foreign currency forward contracts consist primarily in Australian dollars, Canadian dollars, British
pounds, euros and Mexican pesos.
In addition, the Company uses forward contracts, typically with maturities from a few days to less than one year, to offset
foreign exchange rate fluctuations on certain short-term borrowings that are payable in currencies other than the U.S dollar. As
of December 31, 2019 and 2018, the Company had foreign currency forward contracts outstanding with a notional value of $43
million and $64.3 million, respectively, primarily in euros.
Foreign currency exchange contracts - xe Operations
xe, writes derivative instruments, primarily foreign currency forward contracts and cross-currency swaps, mostly with
counterparties comprised of individuals and small-to-medium size businesses and derives a currency margin from this activity
as part of its operations. xe aggregates its foreign currency exposures arising from customer contracts and hedges the resulting
net currency risks by entering into offsetting contracts with established financial institution counterparties. Foreign exchange
revenues from xe's total portfolio of positions were $18.9 million, $69.2 million and $72.5 million for the years ended
December 31, 2019, 2018 and 2017, respectively. All of the derivative contracts used in the Company' s xe operations are
economic hedges and are not designated as hedges under ASC 815. The duration of these derivative contracts is generally less
than one year.
The fair value of xe's total portfolio of positions can change significantly from period to period based on, among other factors,
market movements and changes in customer contract positions. xe manages counterparty credit risk (the risk that counterparties
will default and not make payments according to the terms of the agreements) on an individual counterparty basis. It mitigates
this risk by entering into contracts with collateral posting requirements and/or by performing financial assessments prior to
122
contract execution, conducting periodic evaluations of counterparty performance and maintaining a diverse portfolio of
qualified counterparties. xe does not expect any significant losses from counterparty defaults.
The aggregate equivalent U.S. dollar notional amounts of foreign currency derivative customer contracts held by the Company
in its xe operations as of December 31, 2019 and 2018, was approximately $1.2 billion and $1.8 billion, respectively. The
significant majority of customer contracts are written in major currencies such as the euro, U.S. dollar, British pound,
Australian dollar and New Zealand dollar.
Balance Sheet Presentation
The following table summarizes the fair value of the derivative instruments as recorded in the Consolidated Balance Sheets as
of the dates below:
(in thousands)
Balance Sheet Location
December
31, 2019
December
31, 2018
Balance Sheet Location
December
31, 2019
December
31, 2018
Asset Derivatives
Liability Derivatives
Fair Value
Fair Value
Derivatives not
designated as hedging
instruments
Foreign currency
exchange contracts
Other current assets
$
54,765
$
44,637
Other current
liabilities
$
(41,935 ) $
(36,102 )
The following tables summarize the gross and net fair value of derivative assets and liabilities as of December 31,
2019 and 2018 (in thousands):
Offsetting of Derivative Assets
As of December 31, 2019
Derivatives subject to a master
netting arrangement or similar
agreement
As of December 31, 2018
Derivatives subject to a master
netting arrangement or similar
agreement
Gross Amounts Not Offset in
the Consolidated Balance Sheet
Gross
Amounts of
Recognized
Assets
Gross
Amounts
Offset in the
Consolidated
Balance Sheet
Net Amounts
Presented in the
Consolidated
Balance Sheet
Financial
Instruments
Cash
Collateral
Received
Net Amounts
$
54,765
$
—
$
54,765
$
(34,935 ) $
(7,362 ) $
12,468
$
44,637
$
—
$
44,637
$
(25,187 ) $
(9,918 ) $
9,532
123
Offsetting of Derivative Liabilities
As of December 31, 2019
Derivatives subject to a master
netting arrangement or similar
agreement
As of December 31, 2018
Derivatives subject to a master
netting arrangement or similar
agreement
Income Statement Presentation
Gross Amounts Not Offset in
the Consolidated Balance Sheet
Gross
Amounts of
Recognized
Liabilities
Gross
Amounts
Offset in the
Consolidated
Balance Sheet
Net Amounts
Presented in the
Consolidated
Balance Sheet
Financial
Instruments
Cash
Collateral
Paid
Net Amounts
$
(41,935 ) $
—
$
(41,935 ) $
34,935
$
827
$
(6,173 )
$
(36,102 ) $
—
$
(36,102 ) $
25,187
$
2,048
$
(8,867 )
The following tables summarize the location and amount of gains on derivatives in the Consolidated Statements of Income for
the years ended December 31, 2019, 2018 and 2017:
(in thousands)
Location of Gain (Loss)
Recognized in Income on
Derivative Contracts
Amount of Gain Recognized in Income on
Derivative Contracts (a)
Year Ended December 31,
2019
2018
2017
Foreign currency exchange contracts - Ria
Operations
Foreign currency exchange
gain, net
$
62
$
173
$
175
(a) The Company enters into derivative contracts such as foreign currency exchange forwards and cross-currency swaps as part
of its xe operations. These derivative contracts are excluded from this table as they are part of the broader disclosure of foreign
currency exchange revenues for this business discussed above.
See Note 17, Financial Instruments and Fair Value Measurements, for the determination of the fair values of derivatives.
(12) LEASES
The Company enters into operating leases for ATM sites, office spaces, retail stores and equipment. The Company's finance
leases are immaterial. Right of use assets and lease liabilities are recognized at the lease commencement date based on the
present value of the lease payments over the lease terms.
The present value of lease payments is determined using the incremental borrowing rate based on information available at the
lease commencement date. All leases with fixed payments, including leases with an initial term of 12 months or less are
recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease
term.
Most leases include an option to renew, with renewal terms that can extend the lease terms. The exercise of lease renewal
options is at the Company’s sole discretion. The depreciable life of assets and leasehold improvements are limited by the
expected lease terms. The Company also has a unilateral termination right for most of the ATM site leases. Since the Company
is not reasonably certain to exercise the renewal or termination options, the options are not considered in determining the lease
terms, and associated payment impacts are excluded from lease payments.
124
Certain of the Company's lease agreements include variable rental payments based on revenues generated from the use of the
leased location and certain leases include rental payments adjusted periodically for inflation. Variable lease payments are
recognized when the event, activity or circumstance in the lease agreement on which those payments are assessed occurs and
are excluded from the right of use assets and lease liabilities balances. The lease agreements do not contain any material
residual value guarantees or material restrictive covenants.
Future minimum lease payments
Future minimum lease payments under the operating leases as of December 31, 2019 are:
Maturity of Lease Liabilities (in thousands)
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less: imputed interest
Present value of lease liabilities
As of December 31, 2019
Operating Leases
$
$
$
125,231
90,330
64,279
44,113
25,467
43,105
392,525
(23,195 )
369,330
Future minimum lease payments under the non-cancelable operating leases (with initial lease terms in excess of one year) as of
December 31, 2018 were:
(in thousands)
Year ending December 31,
2019
2020
2021
2022
2023
Thereafter
Total minimum lease payments
Lease expense recognized in the Consolidated Statements of Income is summarized as follows:
Lease Expense (in thousands)
Operating lease expense
Variable lease expense
Total lease expense
Income Statement Classification
Selling, general and administrative and Direct
operating costs
Selling, general and administrative and Direct
operating costs
Operating
Leases
$
$
80,803
65,590
49,052
37,823
30,192
48,191
311,651
Year ended December
31, 2019
$
$
130,487
43,907
174,394
Other information about lease amounts recognized in the consolidated financial statements is summarized as follows:
Lease Term and Discount Rate of Operating Leases
As of December 31, 2019
Weighted- average remaining lease term (years)
Weighted- average discount rate
4.4
3.1 %
125
The following table presents supplemental cash flow and non-cash information related to leases:
Other Information (in thousands)
Cash paid for amounts included in the measurement of lease liabilities (a)
Supplemental non-cash information on lease liabilities arising from obtaining ROU assets:
ROU assets obtained in exchange for new operating lease liabilities
$
$
(a) Included in Net cash provided by operating activities on the Company's Consolidated Statements of Cash Flows.
Year ended December 31,
2019
129,609
229,107
(13) INCOME TAXES
The sources of income before income taxes for the years ended December 31, 2019, 2018 and 2017 are presented as follows:
(in thousands)
Income before taxes:
United States
Foreign
Total income before income taxes
Year Ended December 31,
2019
2018
2017
$
$
44,290 $
389,517
433,807 $
35,467 $
259,449
294,916 $
55,117
201,218
256,335
The Company's income tax expense for the years ended December 31, 2019, 2018 and 2017 consisted of the following:
(in thousands)
Current tax expense (benefit):
U.S.
Foreign
Total current
Deferred tax expense (benefit):
U.S.
Foreign
Total deferred
Total tax expense
Year Ended December 31,
2019
2018
2017
$
$
(4,885 ) $
83,792
78,907
(8,711 ) $
70,244
61,533
29,620
79,475
109,095
(8,424 )
16,629
8,205
87,112 $
6,871
(5,619 )
1,252
62,785 $
14,056
(23,756 )
(9,700 )
99,395
126
The following is a reconciliation of the federal statutory income tax rates of 21% for the years ended December 31, 2019 and
2018 and 35% for the year ended December 31, 2017 to the effective income tax rate for the same years:
(dollar amounts in thousands)
U.S. federal income tax expense at applicable statutory rate
Tax effect of:
State income tax expense (benefit) at statutory rates
Non-deductible expenses
Share-based compensation
Other permanent differences
Difference between U.S. federal and foreign tax rates
Provision in excess of statutory rates
Change in federal and foreign valuation allowance
Impairment of goodwill and acquired intangibles assets
GILTI, net of tax credits
U.S. Tax Reform - transition tax and rate change
Tax credits
Other
Total income tax expense
Effective tax rate
Year Ended December 31,
2019
91,099
$
2018
61,932
$
2017
89,684
$
5,101
2,896
(2,875 )
(864 )
12,281
3,565
2,144
—
6,471
(25,728 )
(4,500 )
(2,478 )
87,112
$
1,680
3,457
(13,750 )
(6,141 )
9,843
3,737
3,075
83
14,111
(12,262 )
—
(2,980 )
62,785
$
968
5,648
(4,845 )
8,458
(24,270 )
8,426
(30,224 )
8,248
—
41,597
—
(4,295 )
99,395
20.1 %
21.3 %
38.8 %
$
We calculate our provision for federal, state and international income taxes based on current tax law. On December 22, 2017,
the U.S. enacted into law what is informally called the Tax Cuts and Jobs Act of 2017 ("U.S. Tax Reform"). The most
significant provisions of U.S. Tax Reform are the transition tax on previously undistributed foreign earnings of foreign
subsidiaries, the reduction of the U.S. corporate statutory income tax rate from 35% to 21% beginning on January 1, 2018, and
new taxes on certain foreign sourced earnings.
In 2017, the Company initially recorded a net provisional tax expense of $41.6 million resulting from the enactment of U.S.
Tax Reform. In the fourth quarter of 2018, the Company adjusted its accounting for the tax effects of U.S. Tax Reform. The net
provisional tax expense was decreased in that period by approximately $12.3 million to $29.3 million largely due to changes in
the transition tax calculations. In the fourth quarter of 2019 after additional regulatory guidance was issued by applicable taxing
authorities, the Company elected to claim U.S. tax credits on foreign tax paid on foreign source income, which reduced the net
tax expense by $25.7 million.
127
The tax effect of temporary differences and carryforwards that give rise to deferred tax assets and liabilities from continuing
operations are as follows:
(in thousands)
Deferred tax assets:
Tax loss carryforwards
Share-based compensation
Accrued expenses
Property and equipment
Goodwill and intangible amortization
Intercompany notes
Accrued revenue
Tax credits
Lease accounting
Other
Gross deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Intangible assets related to purchase accounting
Goodwill and intangible amortization
Accrued expenses
Intercompany notes
Accrued interest
Capitalized research and development
Property and equipment
Accrued revenue
Lease accounting
Other
Total deferred tax liabilities
Net deferred tax liabilities
$
As of December 31,
2019
2018
34,357 $
7,366
19,048
8,602
8,143
5,977
24,721
65,063
89,965
15,379
278,621
(83,184 )
195,437
(16,379 )
(20,806 )
(29,084 )
(10,498 )
(27,902 )
(6,048 )
(15,467 )
(4,727 )
(89,965 )
(8,997 )
30,689
7,395
17,242
16,377
10,619
6,913
36,273
—
—
11,876
137,384
(21,857 )
115,527
(22,877 )
(16,115 )
(28,274 )
(14,034 )
(32,372 )
(8,299 )
(8,408 )
(4,388 )
—
(5,841 )
(229,873 )
(34,436 ) $
(140,608 )
(25,081 )
$
Subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2019 are
expected to be allocated to income taxes in the Consolidated Statements of Income.
As of December 31, 2019, and 2018, the Company's foreign tax loss carryforwards were $119.1 million and $109.8 million,
respectively, and U.S. state tax loss carryforwards were $97.6 million and $91.8 million, respectively. In 2019, the Company
has recognized $59.1 million in U.S. foreign tax credits which are largely not expected to be utilized in future periods.
In assessing the Company's ability to realize deferred tax assets, management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable
income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the
Company will only realize the benefits of these deductible differences, net of the existing valuation allowances, as of
December 31, 2019.
128
As of December 31, 2019, the Company had foreign tax net operating loss carryforwards of $119.1 million, which will expire
as follows:
(in thousands)
Year ending December 31,
2020
2021
2022
2023
2024
Thereafter
Unlimited
Total
Gross
Tax Effected
$
$
1,274 $
3,790
2,800
2,577
8,713
39,040
60,935
119,129 $
315
934
720
605
2,152
9,851
14,427
29,004
In addition, the Company's state tax net operating loss carryforwards of $97.6 million will expire periodically from 2020
through 2039, U.S. foreign tax credit carryforwards of $59.1 million that will expire periodically from 2021 through 2027, U.S.
research and expenditure credit carryforwards of $3.2 million that will expire over an indefinite number of years, and foreign
tax credits of $2.8 million that will expire over an indefinite number of years.
While U.S. tax expense has been recognized as a result of the transition tax and Global Intangible Low-Taxed Income
("GILTI") provisions of U.S. Tax Reform, the Company has not provided additional deferred taxes with respect to items such as
certain foreign exchange gains or losses, foreign withholding taxes or additional state taxes, if any, on undistributed earnings
attributable to foreign subsidiaries and it is not practical to determine the income tax liability that would be payable if such
earnings were not reinvested indefinitely. Gross undistributed earnings reinvested indefinitely in foreign subsidiaries
aggregated approximately $1,810 million as of December 31, 2019.
Accounting for uncertainty in income taxes
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2019 and
2018 is as follows:
(in thousands)
Beginning balance
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Statute of limitations expiration
Ending balance
Year Ended December 31,
2019
30,915 $
15,569
6
(1,703 )
—
(252 )
44,535 $
2018
28,537
4,787
966
(1,705 )
(807 )
(863 )
30,915
$
$
As of December 31, 2019 and 2018, approximately $42.7 million and $28.0 million, respectively, of the unrecognized tax
benefits would impact the Company's provision for income taxes and effective income tax rate, if recognized. Total estimated
accrued interest and penalties related to the underpayment of income taxes was $5.2 million and $4.4 million as of
December 31, 2019 and 2018, respectively. The following income tax years remain open in the Company's major jurisdictions
as of December 31, 2019:
129
Jurisdictions
U.S. (Federal)
Germany
Greece
Spain
U.K.
Periods
2014 through 2019
2016 through 2019
2014 through 2019
2014 through 2019
2009 through 2019
It is reasonably possible that the balance of gross unrecognized tax benefits could significantly change within the next twelve
months as a result of the resolution of audit examinations and expirations of certain statutes of limitations and, accordingly,
materially affect the Company's operating results. At this time, it is not possible to estimate the range of change due to the
uncertainty of potential outcomes.
(14) VALUATION AND QUALIFYING ACCOUNTS
Trade accounts receivable balances and accounts receivable included within the settlement assets are stated net of allowance for
doubtful accounts. Historically, the Company has not experienced significant write-offs. The Company records allowances for
doubtful accounts when it is probable that the accounts receivable balance will not be collected. The following table provides a
summary of the allowance for doubtful accounts balances and activity for the years ended December 31, 2019, 2018 and 2017:
(in thousands)
Beginning balance-allowance for doubtful accounts
Additions-charged to expense
Amounts written off
Other (primarily changes in foreign currency exchange rates)
Ending balance-allowance for doubtful accounts
(15) STOCK PLANS
Year Ended December 31,
2019
24,287 $
10,095
(6,179 )
(265 )
27,938 $
2018
20,958 $
8,653
(4,079 )
(1,245 )
24,287 $
2017
18,369
6,631
(5,944 )
1,902
20,958
$
$
The Company has share-based compensation plans (“SCP”) that allow it to grant restricted shares, or options to purchase
shares, of Common Stock to certain current and prospective key employees, directors and consultants of the Company. These
awards generally vest over periods ranging from three to five years from the date of grant, are generally exercisable during the
shorter of a ten-year term or the term of employment with the Company. With the exception of certain awards made to the
Company's employees in Germany, Singapore and Malaysia, awards under the SCP are settled through the issuance of new
shares under the provisions of the SCP. For Company employees in Germany, Singapore and Malaysia, certain awards are
settled through the issuance of treasury shares, which also reduces the number of shares available for future issuance under the
SCP. As of December 31, 2019, the Company has approximately 2.1 million in total shares remaining available for issuance
under the SCP.
Share-based compensation expense was $21.4 million, $16.8 million and $15.6 million for the years ended December 31, 2019,
2018 and 2017, respectively, and was recorded in salaries and benefits expense in the accompanying Consolidated Statements
of Income. The Company recorded a tax benefit of $4.9 million, $2.7 million and $2.3 million during the years ended
December 31, 2019, 2018 and 2017, respectively, for the portion of this expense that relates to foreign tax jurisdictions in
which an income tax benefit is expected to be derived.
130
Stock options
Summary stock options activity is presented in the table below:
Balance at December 31, 2018 (1,637,801 shares exercisable)
Granted
Exercised
Forfeited/Canceled
Expired
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic
Value
(thousands)
57.10
145.92
44.22
89.67
Number of
Shares
2,562,570 $
795,274 $
(295,420 ) $
(46,287 ) $
(362 )
Balance at December 31, 2019
3,015,775
$
81.29
6.2 $
230,052
Exercisable at December 31, 2019
1,653,340
$
46.36
4.1 $
183,846
Vested and expected to vest at December 31, 2019
2,383,821
$
66.65
5.4 $
216,739
Options outstanding that are expected to vest are net of estimated future forfeitures. The Company received cash of $13.1
million, $17.1 million and $9.5 million in connection with stock options exercised in the years ended December 31, 2019, 2018
and 2017, respectively. The intrinsic value of these options exercised was $30.6 million, $73.0 million and $23.2 million in the
years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, unrecognized compensation expense
related to nonvested stock options that are expected to vest totaled $23.9 million and will be recognized over the next 5 years,
with an overall weighted-average period of 3.4 years. The following table provides the fair value of options granted under the
SCP during 2019, 2018 and 2017, together with a description of the assumptions used to calculate the fair value using the
Black-Scholes-Merton option-pricing model:
Volatility
Risk-free interest rate - weighted average
Risk-free interest rate - range
Dividend yield
Assumed forfeitures
Expected lives
Weighted-average fair value (per share)
Year ended December 31,
2019
2018
2017
29.3 %
2.1 %
(a)
— %
8.0 %
5.2 years
43.96
$
29.8 %
2.8 %
(a)
— %
8.0 %
5.6 years
37.16
$
28.8 %
2.2 %
.022
— %
8.0 %
5.5 years
28.59
$
(a) At the date of grant, the risk fee rate for stock options awarded in 2019 and 2018 was 1.7% and 2.8%, respectively.
Restricted stock
Restricted stock awards vest based on the achievement of time-based service conditions and/or performance-based conditions.
For certain awards, vesting is based on the achievement of more than one condition of an award with multiple time-based
and/or performance-based conditions.
131
Summary restricted stock activity is presented in the table below:
Nonvested at December 31, 2018
Granted
Vested
Forfeited
Weighted
Average Grant
Date Fair
Value Per
Share
85.78
145.93
78.77
92.44
Number of
Shares
371,841 $
254,631 $
(115,740 ) $
(16,784 ) $
Nonvested at December 31, 2019
493,948
$
118.20
The fair value of shares vested in the years ended December 31, 2019, 2018 and 2017 was $16.6 million, $14.2 million and
$13.1 million, respectively. As of December 31, 2019, there was $11.4 million of total unrecognized compensation cost related
to unvested time-based restricted stock, which is expected to be recognized over a weighted-average period of 3.3 years. As of
December 31, 2019, there was $11.2 million of total unrecognized compensation costs related to unvested performance-based
restricted stock, which is expected to be recognized based on Company performance over a weighted-average period of 1.8
years. The weighted average grant date fair value of restricted stock granted during the years ended December 31, 2019, 2018
and 2017 was $145.93, $107.88 and $91.28 per share, respectively.
Employee stock purchase plan
The Company has a qualified Employee Stock Purchase Plan (the “ESPP”), which allows qualified employees (as defined by
the plan documents) to participate in the purchase of rights to purchase designated shares of the Company's Common Stock at a
price equal to the lower of 85% of the closing price at the beginning or end of each quarterly offering period. The Company
reserved 1,000,000 shares of Common Stock for purchase under the ESPP. Pursuant to the ESPP, during the years ended
December 31, 2019, 2018 and 2017, the Company issued 16,713, 21,872 and 21,547 rights, respectively, to purchase shares of
Common Stock at a weighted average price per share of $110.37, $71.08 and $69.06, respectively. The grant date fair value of
the option to purchase shares at the lower of the closing price at the beginning or end of the quarterly period, plus the actual
total discount provided, are recorded as compensation expense. Total compensation expense recorded was $0.4 million, $0.4
million, and $0.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. The following table provides
the weighted-average fair value of the ESPP stock purchase rights during the years ended December 31, 2019, 2018 and 2017
and the assumptions used to calculate the fair value using the Black-Scholes-Merton option-pricing model:
Volatility - weighted average
Volatility - range
Risk-free interest rate - weighted average
Risk-free interest rate - range
Dividend yield
Expected lives
Weighted-average fair value (per share)
Year Ended December 31,
2019
2018
2017
24.3 %
20.3% to 28.1%
2.07 %
1.55% to 2.44%
— %
3 months
25.87
$
30.1 %
23.5% to 36.7%
2.01 %
1.73% to 2.45%
— %
3 months
17.22
$
18.4 %
14.6% to 27.2%
0.89 %
0.51% to 1.39%
— %
3 months
15.81
$
132
(16) BUSINESS SEGMENT INFORMATION
Euronet’s reportable operating segments have been determined in accordance with ASC Topic 280, Segment Reporting (“ASC
280”). The Company currently operates in the following three reportable operating segments:
1)
2)
3)
Through the EFT Processing Segment, the Company processes transactions for a network of ATMs and POS
terminals across Europe, the Middle East and Asia Pacific. The Company provides comprehensive electronic
payment solutions consisting of ATM cash withdrawal services, ATM network participation, outsourced ATM and
POS management solutions, credit and debit card outsourcing, dynamic currency conversion, domestic and
international surcharge and other value-added services. Through this segment, the Company also offers a suite of
integrated electronic financial transaction software solutions for electronic payment and transaction delivery
systems.
Through the epay Segment, the Company provides distribution, processing and collection services for prepaid
mobile airtime and other electronic payment products in Europe, the Middle East, Asia Pacific, the U.S. and South
America.
Through the Money Transfer Segment, the Company provides global money transfer services under the brand
names, Ria, IME, and xe. Ria, AFEX and IME provide global consumer-to-consumer money transfer services
through a network of sending agents, Company-owned stores and Company-owned websites, disbursing money
transfers through a worldwide correspondent network. xe offers account-to-account international payment
services to high-income individuals and small-to-medium sized businesses. xe is also a provider of foreign
currency exchange information. The Company also offers customers bill payment services, payment alternatives
such as money orders and prepaid debit cards, comprehensive check cashing services, foreign currency exchange
services and mobile top-up. Furthermore, xe provides cash management solutions and foreign currency risk
management services to small-to-medium sized businesses.
In addition, the Company accounts for non-operating activity, share-based compensation expense, certain intersegment
eliminations and the costs of providing corporate and other administrative services in its administrative division, “Corporate
Services, Eliminations and Other.” These services are not directly identifiable with the Company’s reportable operating
segments.
133
The following tables present the Company’s reportable segment results for the years ended December 31, 2019, 2018 and 2017:
For the Year Ended December 31, 2019
(in thousands)
Total revenues
Operating expenses:
Direct operating costs
Salaries and benefits
Selling, general and administrative
Acquired intangible assets impairment
Depreciation and amortization
Total operating expenses
EFT
Processing
$
888,712 $
Money
Transfer
epay
769,329 $ 1,096,226 $
Consolidated
(4,158 ) $ 2,750,109
Corporate
Services,
Eliminations
and Other
397,132
87,603
35,518
—
71,819
592,072
576,757
61,540
35,054
—
6,774
680,125
586,730
208,792
133,068
—
32,846
961,436
(4,136 )
36,809
8,304
—
305
41,282
1,556,483
394,744
211,944
—
111,744
2,274,915
Operating income (expense)
$
296,640
$
89,204
$
134,790
$
(45,440 ) $
475,194
Other income (expense)
Interest income
Interest expense
Loss from unconsolidated affiliates
Loss on early retirement of debt
Foreign currency exchange loss, net
Other gains, net
Total other expense, net
Income before income taxes
1,969
(36,237 )
—
—
2,701
(9,820 )
(41,387 )
$
433,807
Segment assets as of December 31, 2019
$ 1,914,144
$
962,671
$ 1,560,136
$
220,715
$ 4,657,666
Property and equipment, net as of December 31,
2019
$
266,872
$
41,539
$
51,519
$
50
$
359,980
134
(in thousands)
Total revenues
Operating expenses:
Direct operating costs
Salaries and benefits
Selling, general and administrative
Goodwill and acquired intangible assets
impairment
Depreciation and amortization
Total operating expenses
For the Year Ended December 31, 2018
EFT
Processing
$
753,651 $
Money
Transfer
epay
743,784 $ 1,042,962 $
Consolidated
(3,768 ) $ 2,536,629
Corporate
Services,
Eliminations
and Other
366,977
75,791
46,925
—
66,713
556,406
564,252
57,748
35,749
—
7,038
664,787
560,930
194,808
125,647
7,049
32,002
920,436
(3,753 )
32,085
8,486
—
268
37,086
1,488,406
360,432
216,807
7,049
106,021
2,178,715
Operating income (expense)
$
197,245
$
78,997
$
122,526
$
(40,854 ) $
357,914
Other income (expense)
Interest income
Interest expense
Income from unconsolidated affiliates
Foreign currency exchange gain, net
Other gains, net
Total other expense, net
Income before income taxes
1,320
(37,573 )
(117 )
(26,655 )
27
(62,998 )
$
294,916
Segment assets as of December 31, 2018
$ 1,220,141
$
780,220
$ 1,310,775
$
10,019
$ 3,321,155
Property and equipment, net as of December 31,
2018
$
215,106
$
31,172
$
45,517
$
74
$
291,869
135
For the Year Ended December 31, 2017
Corporate
Services,
Eliminations
and Other
Money
Transfer
(in thousands)
Total revenues
Operating expenses:
Direct operating costs
Salaries and benefits
Selling, general and administrative
Goodwill impairment
Depreciation and amortization
Total operating expenses
EFT
Processing
$
634,559 $
epay
733,998 $
318,875
61,683
33,158
2,286
55,660
471,662
564,032
54,459
36,014
31,770
9,622
695,897
886,858 $
476,322
168,371
108,022
—
29,598
782,313
Consolidated
(2,993 ) $ 2,252,422
(2,979 )
26,274
13,108
—
150
36,553
1,356,250
310,787
190,302
34,056
95,030
1,986,425
Operating income (expense)
$
162,897
$
38,101
$
104,545
$
(39,546 ) $
265,997
Other income (expense)
Interest income
Interest expense
Income from unconsolidated affiliates
Foreign currency exchange loss, net
Other gains, net
Total other expense, net
Income before income taxes
2,443
(32,571 )
48
20,300
118
(9,662 )
$
256,335
Segment assets as of December 31, 2017
$ 1,040,135
$
695,990
$ 1,255,765
$
148,139
$ 3,140,029
Property and equipment, net as of December 31,
2017
$
196,451
$
28,135
$
43,564
$
153
$
268,303
136
Total revenues for the years ended December 31, 2019, 2018 and 2017, and property and equipment and total assets as of
December 31, 2019 and 2018, summarized by geographic location, were as follows:
Revenues
Property and Equipment, net
Total Assets
For the year ended December 31,
as of December 31,
as of December 31,
(in thousands)
United States
2019
716,576 $
2018
721,977 $
2017
572,383 $
2019
49,904 $
2018
29,499 $
2019
717,894 $
2018
493,428
$
Germany
Spain
United Kingdom
Italy
Poland
India
France
Greece
Malaysia
Australia
New Zealand
Other
Total foreign
518,146
189,104
135,006
130,929
130,104
113,146
94,352
79,716
74,948
51,686
47,611
468,785
2,033,533
476,122
155,619
133,132
103,691
126,513
92,468
75,466
71,007
76,380
58,039
48,881
397,334
1,814,652
495,778
115,473
136,977
89,276
128,672
82,389
56,027
71,197
56,287
77,777
47,091
323,095
1,680,039
35,824
55,240
22,420
20,663
42,916
27,281
1,508
11,753
2,629
1,992
3,137
84,713
310,076
25,302
39,238
20,525
15,238
50,359
19,554
1,037
11,267
2,802
2,051
2,718
72,279
262,370
660,730
371,882
520,549
210,910
222,582
163,125
96,636
111,339
114,796
62,844
237,076
1,167,303
3,939,772
508,062
198,082
519,918
157,314
155,821
89,923
76,687
58,419
103,043
61,215
196,869
702,374
2,827,727
Total
$ 2,750,109
$ 2,536,629
$ 2,252,422
$
359,980
$
291,869
$ 4,657,666
$ 3,321,155
Revenues are attributed to countries based on location of the customer, with the exception of software sales made by the
Company's software subsidiary, which are attributed to the U.S.
(17) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Concentrations of credit risk
The Company's credit risk primarily relates to trade accounts receivable and cash and cash equivalents. The EFT Processing
Segment's customer base includes the most significant international card organizations and certain banks in its markets. The
epay Segment's customer base is diverse and includes several major retailers and/or distributors in markets that they operate.
The Money Transfer Segment trade accounts receivable are primarily due from independent agents that collect cash from
customers on the Company's behalf and generally remit the cash within one week. The Company performs ongoing evaluations
of its customers' financial condition and limits the amount of credit extended, or purchases credit enhancement protection,
when deemed necessary, but generally requires no collateral. See Note 14, Valuation and Qualifying Accounts, for further
disclosure.
The Company invests excess cash not required for use in operations primarily in high credit quality, short-term duration
securities that the Company believes bear minimal risk.
137
Fair value measurements
Fair value measurements used in the consolidated financial statements are based upon the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair
value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from
independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed
based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three
broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described
below:
• Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.
• Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not
active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of
the assets or liabilities.
• Level 3 – Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its
own assumptions about the inputs that market participants would use in pricing.
The following table details financial assets measured and recorded at fair value on a recurring basis:
(in thousands)
Balance Sheet Classification
Level 1
Level 2
Level 3
Total
As of December 31, 2019
Assets
Foreign currency exchange contracts
Liabilities
Other current assets
$
— $ 54,765 $
— $ 54,765
Foreign currency exchange contracts
Other current liabilities
$
—
(41,935 ) $
— $ (41,935 )
(in thousands)
Balance Sheet Classification
Level 1
Level 2
Level 3
Total
Assets
Foreign currency exchange contracts
Liabilities
Foreign currency exchange contracts
Other current assets
$
— $ 44,637 $
— $ 44,637
Other current liabilities
$
— $ (36,102 ) $
— $ (36,102 )
As of December 31, 2018
The carrying amounts of cash and cash equivalents, trade accounts receivable, trade accounts payable and short-term debt
obligations approximate fair values due to their short maturities. The carrying values of the Company’s revolving credit
agreements approximate fair values because interest is based on LIBOR that resets at various intervals of less than one year.
The Company estimates the fair value of the Convertible Notes using quoted prices in inactive markets for identical liabilities
(Level 2). As of December 31, 2019 , the fair values of the Convertible Notes and Senior Notes were $569.4 million and $668.2
million, respectively, with carrying values of $437 million and $673.4 million, respectively.
138
(18) LITIGATION AND CONTINGENCIES
From time to time, the Company is a party to legal and regulatory proceedings arising in the ordinary course of its business.
Currently, there are no legal proceedings or regulatory findings that management believes, either individually or in the
aggregate, would have a material adverse effect upon the consolidated financial statements of the Company. In accordance with
U.S. GAAP, the Company records a liability when it is both probable that a liability has been incurred and the amount of the
loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of
negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case.
(19) COMMITMENTS
As of December 31, 2019, the Company had $79.6 million of stand-by letters of credit/bank guarantees issued on its behalf, of
which $3.7 million are collateralized by cash deposits held by the respective issuing banks.
Under certain circumstances, the Company grants guarantees in support of obligations of subsidiaries. As of December 31,
2019, the Company granted off balance sheet guarantees for cash in various ATM networks amounting to $12.5 million over
the terms of the cash supply agreements and performance guarantees amounting to approximately $49.6 million over the terms
of the agreements with the customers.
From time to time, the Company enters into agreements with commercial counterparties that contain indemnification
provisions, the terms of which may vary depending on the negotiated terms of each respective agreement. The amount of such
potential obligations is generally not stated in the agreements. Euronet's liability under such indemnification provisions may be
mitigated by relevant insurance coverage and may be subject to time and materiality limitations, monetary caps and other
conditions and defenses. Such indemnification obligations include the following:
•
•
•
•
•
In connection with contracts with financial institutions in the EFT Processing Segment, the Company is
responsible for damage to ATMs and theft of ATM network cash that, generally, is not recorded on the Company’s
Consolidated Balance Sheets. As of December 31, 2019, the balance of such cash used in the Company's ATM
networks for which the Company was responsible was approximately $489 million. The Company maintains
insurance policies to mitigate this exposure;
In connection with contracts with financial institutions in the EFT Processing Segment, the Company is
responsible for losses suffered by its customers and other parties as a result of the breach of its computer systems,
including in particular, losses arising from fraudulent transactions made using information stolen through its
processing systems. The Company maintains insurance policies to mitigate this exposure;
In connection with the license of proprietary systems to customers, the Company provides certain warranties and
infringement indemnities to the licensee, which generally warrant that such systems do not infringe on intellectual
property owned by third parties and that the systems will perform in accordance with their specifications;
Euronet has entered into purchase and service agreements with vendors and consulting agreements with providers
of consulting services, pursuant to which the Company has agreed to indemnify certain of such vendors and
consultants, respectively, against third-party claims arising from the Company’s use of the vendor’s product or the
services of the vendor or consultant;
In connection with acquisitions and dispositions of subsidiaries, operating units and business assets, the Company
has entered into agreements containing indemnification provisions, which can be generally described as follows:
(i) in connection with acquisitions of operating units or assets made by Euronet, the Company has agreed to
indemnify the seller against third party claims made against the seller relating to the operating unit or asset and
arising after the closing of the transaction, and (ii) in connection with dispositions made by Euronet, Euronet has
agreed to indemnify the buyer against damages incurred by the buyer due to the buyer’s reliance on
representations and warranties relating to the subject subsidiary, operating unit or business assets in the
disposition agreement if such representations or warranties were untrue when made; and
139
•
Euronet has entered into agreements with certain third parties, including banks that provide fiduciary and other
services to Euronet or to the Company’s benefit plans. Under such agreements, the Company has agreed to
indemnify such service providers for third-party claims relating to carrying out their respective duties under such
agreements.
The Company is also required to meet minimum capitalization and cash requirements of various regulatory authorities in the
jurisdictions in which the Company has money transfer operations. The Company has obtained surety bonds in compliance
with money transfer licensing requirements of the applicable governmental authorities.
To date, the Company is not aware of any significant claims made by the indemnified parties or third parties to guarantee
agreements with the Company and, accordingly, no liabilities were recorded as of December 31, 2019 or 2018.
(20) RELATED PARTY TRANSACTIONS
The Company leases an airplane from a company owned by Mr. Michael J. Brown, Euronet's Chief Executive Officer,
President and Chairman of the Board of Directors. The airplane is leased for business use on a per flight hour basis at
competitive commercial rates with no minimum usage requirement. Euronet incurred expenses of $0.3 million, $0.3 million
and $0.4 million during the years ended December 31, 2019, 2018 and 2017, respectively, for the use of this airplane.
In June 2014, the Company signed an ATM operating agreement with Rontec Ltd., a U.K. company in which Gerald Ronson
holds a majority of the shares. Mr. Ronson is the father-in-law of Paul Althasen, one of the Company's directors. This is a
commercial agreement under which the Company leases ATM sites from Rontec Ltd. at rates which it considers to be
competitive commercial rates. The Company paid $50 thousand, $38 thousand and $49 thousand under this agreement in each
of 2019, 2018 and 2017, respectively.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
550,515 $
45,472 $
26,344 $
26,413 $
622,224 $
90,369 $
43,636 $
43,724 $
714,505 $
150,913 $
102,257 $
102,723 $
649,385
71,160
59,894
59,991
0.51 $
0.49 $
0.85 $
0.82 $
2.01 $
1.89 $
1.16
1.10
577,509 $
56,094 $
34,579 $
34,543 $
691,867 $
117,897 $
68,005 $
68,153 $
786,986 $
193,990 $
137,541 $
137,607 $
693,747
107,213
106,570
106,446
0.67 $
0.62 $
1.28 $
1.25 $
2.53 $
2.46 $
1.96
1.91
(21) SELECTED QUARTERLY DATA (Unaudited)
(in thousands, except per share data)
For the Year Ended December 31, 2018
$
Revenues
$
Operating income
Net income (loss)
$
Net income (loss) attributable to Euronet Worldwide, Inc. $
Earnings (loss) per common share:
Basic
Diluted
For the Year Ended December 31, 2019
Revenues
Operating income
Net income
Net income attributable to Euronet Worldwide, Inc.
Earnings per common share:
Basic
Diluted
$
$
$
$
$
$
$
$
140
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our executive management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Exchange Act as of
December 31, 2019. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the
design and operation of these disclosure controls and procedures were effective as of such date to provide reasonable assurance
that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosures.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There has been no change in our internal control over financial reporting during the fourth quarter of 2019 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Stockholders of Euronet Worldwide, Inc.:
Management is responsible for establishing and maintaining an effective internal control over financial reporting as this term is
defined under Rule 13a-15(f) of the Securities Exchange Act of 1934 and has made organizational arrangements providing
appropriate divisions of responsibility and has established communication programs aimed at assuring that its policies,
procedures and principles of business conduct are understood and practiced by its employees. All internal control systems, no
matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and presentation.
Management of Euronet Worldwide, Inc. assessed the effectiveness of the Company's internal control over financial reporting
as of December 31, 2019. In making this assessment, it used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Based on these criteria and our
assessment, we have determined that, as of December 31, 2019, the Company's internal control over financial reporting was
effective.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2019, has been audited by
KPMG LLP, an independent registered public accounting firm, as stated in their audit report, included herein.
/s/ Michael J. Brown
Michael J. Brown
Chief Executive Officer
/s/ Rick L. Weller
Rick L. Weller
Chief Financial Officer and Chief Accounting Officer
February 28, 2020
141
ITEM 9B. OTHER INFORMATION
On February 26, 2020, the Board of Directors of the Company authorized a stock repurchase plan providing for the repurchase
of up to $250 million in value of Euronet common stock, but not more than five million shares, through February 28, 2022.
Repurchases may take place in the open market or in privately negotiated transactions including derivative transactions, and
may be made under a Rule 10b5-1 Plan. The program may be discontinued or amended at any time.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPROATE GOVERNANCE
The information under “Election of Directors,” “Section 16(a) Reports” and “Meetings and Committees of the Board of
Directors” in the Delinquent Proxy Statement for the 2020 Annual Meeting of Stockholders, which will be filed with the SEC
no later than 120 days after December 31, 2019, is incorporated herein by reference. Information concerning our Code of
Business Conduct and Ethics for our employees, including our Chief Executive Officer and Chief Financial Officer, is set forth
under “Availability of Reports, Certain Committee Charters, and Other Information” in Part I of this Annual Report on Form
10-K and incorporated herein by reference. Information concerning executive officers is set forth under “Information about our
Executive Officers” in Part I of this Annual Report on Form 10-K and incorporated herein by reference.
We intend to satisfy the requirement under Item 5.05 of Form 8-K to disclose any amendments to our Code of Business
Conduct and Ethics and any waiver from a provision of our Code of Ethics by disclosing such information on a Form 8-K or on
our Website at www.euronetworldwide.com under For Investors/Corporate Governance.
ITEM 11. EXECUTIVE COMPENSATION
The information under “Compensation Tables,” “Compensation Discussion and Analysis,” “Director Compensation,” “Report
of Compensation Committee” and “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement for
the 2020 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2019, is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information under “Beneficial Ownership of Common Stock”, “Election of Directors” and "Equity Compensation Plan
Information" in the Proxy Statement for the 2020 Annual Meeting of Stockholders, which will be filed with the SEC no later
than 120 days after December 31, 2019, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information under “Certain Relationships and Related Transactions and Director Independence” in the Proxy Statement for
the 2020 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2019, is
incorporated herein by reference.
142
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information under “Audit Matters - Fees of the Company's Independent Auditors” and - "Audit Matters - Audit Committee
Pre-Approval Policy" in the Proxy Statement for the 2020 Annual Meeting of Stockholders, which will be filed with the SEC
no later than 120 days after December 31, 2019, is incorporated herein by reference.
143
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a) List of Documents Filed as Part of this Report.
1. Financial Statements
The Consolidated Financial Statements and accompanying notes, together with the report of KPMG LLP, appear in Part II,
Item 8 - Financial Statements and Supplementary Data, of this Form 10-K.
2. Schedules
None.
3. Exhibits
The exhibits that are required to be filed or incorporated by reference herein are listed in the Exhibit Index below.
EXHIBITS
Exhibit Index
Exhibit
Description
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
Certificate of Incorporation of Euronet Worldwide, Inc., as amended (filed as Exhibit 3.2 to the Company's
Current Report on Form 8-K filed on May 22, 2009 and incorporated by reference herein)
Certificate of Amendment to Certificate of Incorporation of Euronet Worldwide, Inc. (filed as Exhibit 3.1 to the
Company's Current Report on Form 8-K filed on May 22, 2009 and incorporated by reference herein)
Amended and Restated Certificate of Designations, Preferences and Rights of Series A Junior Participating
Preferred Stock (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed on March 29, 2013, and
incorporated herein by reference)
Amended and Restated Bylaws of Euronet Worldwide, Inc. (filed as Exhibit 3.2 to the Company's Current Report
on Form 8-K filed on February 28, 2017, and incorporated herein by reference)
Indenture, dated May 22, 2019, between Euronet Worldwide, Inc. and U.S. Bank National Association, as trustee
(filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 22, 2019 and incorporated by
reference herein)
Supplemental Indenture, dated May 22, 2019, between Euronet Worldwide, Inc. and U.S. Bank National
Association, as trustee (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K filed on May 22, 2019
and incorporated by reference herein)
Form of 1.375% Senior Note due 2026 (included as Exhibit A to Exhibit 4.1 above).
Indenture, dated March 18, 2019, between the Company and U.S. Bank National Association, as trustee (filed as
Exhibit 4.1 to the Company's Current Report on Form 8-K filed on March 18, 2019 and incorporated by reference
herein)
144
4.5
4.6
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11.1
10.11.2
Form of 0.75% Convertible Senior Note due 2049 (included as Exhibit A to Exhibit 4.4 above)
Description of Securities
Form of Employee Restricted Stock Grant Agreement pursuant to Euronet Worldwide, Inc. 2006 Stock Incentive
Plan (filed as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q filed on August 4, 2006, and
incorporated by reference herein) (2)
Form of Employee Restricted Stock Unit Agreement for Executives and Directors pursuant to Euronet
Worldwide, Inc. 2006 Stock Incentive Plan (filed as Exhibit 10.39 to the Company's Annual Report on Form 10-
K filed February 28, 2007, and incorporated by reference herein) (2)
Employment Agreement dated June 19, 2007 between Euronet Worldwide, Inc. and Kevin J. Caponecchi (filed as
Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 25, 2007, and incorporated by reference
herein) (2)
Amended and Restated Employment Agreement dated April 10, 2008 between Euronet Worldwide, Inc. and
Michael J. Brown, Chairman and Chief Executive Officer (filed as Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q filed on May 9, 2008, and incorporated by reference herein) (2)
Amended and Restated Employment Agreement dated April 10, 2008 between Euronet Worldwide, Inc. and Rick
L. Weller, Executive Vice President and Chief Financial Officer (filed as Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q filed on May 9, 2008, and incorporated by reference herein) (2)
Amended and Restated Employment Agreement dated April 10, 2008 between Euronet Worldwide, Inc. and Juan
C. Bianchi, Executive Vice President and Managing Director, Money Transfer Segment (filed as Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q filed on May 9, 2008, and incorporated by reference herein) (2)
Form of Indemnification Agreement, (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
December 22, 2008, and incorporated by reference herein)
Euronet Worldwide, Inc. 2006 Stock Incentive Plan, as amended and restated (filed as Appendix A to the
Company's Definitive Proxy Statement filed on April 15, 2013, and incorporated by reference herein) (2)
Form of Employee Restricted Stock Unit Agreement, as amended, pursuant to Euronet Worldwide, Inc. 2006
Stock Incentive Plan (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on May 7,
2010 and incorporated by reference herein) (2)
Form of Nonqualified Stock Option Agreement, as amended, pursuant to Euronet Worldwide, Inc. 2006 Stock
Incentive Plan (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on May 7, 2010 and
incorporated by reference herein) (2)
Employment Agreement dated May 21, 2018 between Euronet Worldwide, Inc. and Nikos Fountas (filed as
Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 23, 2018 and incorporated by reference
herein) (2)
Deed of Amendment to the Service Agreement dated May 21, 2018 between Euronet Worldwide, Inc. and Nikos
Fountas (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on August 3, 2018 and
incorporated by reference herein) (2)
145
10.12
10.13
10.14
10.15
10.16
10.17
Bonus Compensation Agreement between Euronet Worldwide, Inc. and Nikos Fountas, Senior Vice President -
Managing Director, Europe EFT Processing Segment (filed as Exhibit 10.26 to the Company's Annual Report on
Form 10-K filed on February 25, 2011 and incorporated by reference herein) (2)
Euronet Worldwide, Inc. Employee Stock Purchase Plan, as amended (filed as Exhibit 10.18 to the Company's
Annual Report on Form 10-K filed on February 26, 2016 and incorporated by reference herein) (2)
Euronet Worldwide, Inc. Executive Annual Incentive Plan, as amended and restated (filed as Appendix B to the
Company's Definitive Proxy Statement on Form DEF 14A filed on April 8, 2016 and incorporated by reference
herein) (2)
Credit agreement dated as of October 17, 2018 among Euronet Worldwide, Inc. and certain subsidiaries, as
borrowers, certain subsidiaries, as guarantors, the lenders party thereto, Bank of America, N.A., as administrative
agent, Wells Fargo Bank, National Association and U.S. Bank National Association, as co-syndication agents, et
al. (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on November 2, 2018 and
incorporated by reference herein)
Form of Nonqualified Stock Option Agreement, as amended, pursuant to Euronet Worldwide, Inc. 2006 Stock
Incentive Plan (filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K filed on March 1, 2018 and
incorporated by reference herein) (2)
Form of Restricted Stock Unit Agreement, as amended, pursuant to Euronet Worldwide, Inc. 2006 Stock Incentive
Plan (filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K filed on March 1, 2018 and
incorporated by reference herein) (2)
21.1
Subsidiaries of the Registrant (1)
23.1
Consent of Independent Registered Public Accounting Firm (1)
31.1
Section 302 — Certification of Chief Executive Officer (1)
31.2
Section 302 — Certification of Chief Financial Officer (1)
32.1
Section 906 Certification of Chief Executive Officer (3)
32.2
Section 906 Certification of Chief Financial Officer (3)
101
The following materials from Euronet Worldwide, Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2018, formatted inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance
Sheets at December 31, 2018 and 2017, (ii) Consolidated Statements of Income for the years ended December 31,
2018, 2017 and 2016, (iii) Consolidated Statements of Comprehensive Income for the years ended December 31,
2018, 2017 and 2016, (iv) Consolidated Statements of Changes in Equity for the years ended December 31, 2018,
2017 and 2016, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and
2016, and (vi) Notes to the Consolidated Financial Statements.
104
Cover Page Interactive Data File (contained in Exhibit 101)
___________________________
(1) Filed herewith.
(2) Management contracts and compensatory plans and arrangements required to be filed as Exhibits pursuant to Item 15(a)
of this report.
146
(3) Pursuant to Item 601(b)(32) of Regulation S-K, this Exhibit is furnished rather than filed with this Form 10-K.
PLEASE NOTE: Pursuant to the rules and regulations of the SEC, we have filed or incorporated by reference the agreements
referenced above as exhibits to this Annual Report on Form 10-K. The agreements have been filed to provide investors with
information regarding their respective terms. The agreements are not intended to provide any other factual information about
the Company or its business or operations. In particular, the assertions embodied in any representations, warranties and
covenants contained in the agreements may be subject to qualifications with respect to knowledge and materiality different
from those applicable to investors and may be qualified by information in confidential disclosure schedules not included with
the exhibits. These disclosure schedules may contain information that modifies, qualifies and creates exceptions to the
representations, warranties and covenants set forth in the agreements. Moreover, certain representations, warranties and
covenants in the agreements may have been used for the purpose of allocating risk between the parties, rather than establishing
matters as facts. In addition, information concerning the subject matter of the representations, warranties and covenants may
have changed after the date of the respective agreement, which subsequent information may or may not be fully reflected in the
Company's public disclosures. Accordingly, investors should not rely on the representations, warranties and covenants in the
agreements as characterizations of the actual state of facts about the Company or its business or operations on the date hereof.
147
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Euronet Worldwide, Inc.
Date: February 28, 2020
/s/ Michael J. Brown
Michael J. Brown
Chairman of the Board of Directors, Chief Executive
Officer, President and Director (principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
/s/ Michael J. Brown
Michael J. Brown
February 28, 2020
/s/ Rick L. Weller
Rick L. Weller
February 28, 2020
/s/ Paul S. Althasen
Paul S. Althasen
February 28, 2020
/s/ Andrzej Olechowski
Andrzej Olechowski
February 28, 2020
/s/ Eriberto R. Scocimara
Eriberto R. Scocimara
February 28, 2020
/s/ Thomas A. McDonnell
Thomas A. McDonnell
February 28, 2020
/s/ Andrew B. Schmitt
Andrew B. Schmitt
February 28, 2020
/s/ M. Jeannine Strandjord
M. Jeannine Strandjord
February 28, 2020
/s/ Mark R. Callegari
Mark R. Callegari
February 28, 2020
Chairman of the Board of Directors, Chief Executive Officer,
President and Director (principal executive officer)
Chief Financial Officer and Chief Accounting Officer
(principal financial officer and principal accounting officer)
Director
Director
Director
Director
Director
Director
Director
148
Reconciliation of Adjusted Earnings per Share
(unaudited – in millions, except per share data)
2015
2016
2017
2018
2019
Net income attributable to Euronet Worldwide, Inc.
$ 98.8
$ 174.4
$ 156.9
$ 232.8
$ 346.8
Foreign exchange loss (gain)
Intangible asset amortization
Share-based compensation
Expenses incurred for proposed acquisition of MoneyGram
Post-acquisition adjustment
Goodwill and intangible asset impairment, net of minority interest
Other gains, net
Non-cash convertible debt accretion interest
Income tax effect of above adjustments
Loss on early retirement of debt
U.S. tax reform impact
Non-cash GAAP tax (benefit) expense
41.5
23.9
12.8
-
-
-
-
9.9
(6.0)
-
-
(0.4)
10.1
25.5
14.9
-
-
-
(19.9)
10.4
(1.0)
-
-
3.7
(20.3)
24.5
15.6
4.5
-
34.1
-
11.0
(6.6)
-
41.6
(7.5)
26.7
22.6
16.7
-
6.6
7.0
-
11.5
(11.7)
-
(12.3)
3.4
(2.7)
20.4
21.5
-
(1.3)
-
-
16.2
(4.9)
9.8
(25.7)
12.9
Adjusted earnings1
$ 180.5
$ 218.1
$ 253.8
$ 303.3
$ 393.0
Adjusted earnings per share – diluted1
$ 3.32
$ 4.02
$ 4.58
$ 5.53
$
7.01
Diluted weighted average shares outstanding
Effect of conversion of convertible debentures
Effect of unrecognized share-based compensation on diluted shares outstanding
Adjusted diluted weighted average shares outstanding
54.1
-
0.3
54.4
54.0
-
0.3
54.3
55.1
-
0.3
55.4
54.6
-
0.3
54.9
54.9
0.9
0.3
56.1
(1) Adjusted earnings and adjusted earnings per share are non-GAAP measures that should be considered in addition to, and not as a substitute for, net income and
earnings per share computed in accordance with U.S. GAAP.
Note: Adjusted earnings per share is defined as diluted U.S. GAAP earnings per share excluding, to the extent incurred during the period, the tax-effected impacts of:
a) foreign exchange gains or losses, b) goodwill and acquired intangible asset impairment charges, c) gains or losses from the early retirement of debt, d) share-based
compensation, e) acquired intangible asset amortization, f) non-cash interest expense, g) non-cash income tax expense, and h) other non-operating or non-recurring
items. Adjusted earnings per share includes shares potentially issuable in settlement of convertible bonds or other obligations, if the assumed issuances are dilutive to
adjusted earnings per share. Adjusted earnings per share represents a performance measure and is not intended to represent a liquidity measure.
Operating Income to Adjusted EBITDA
(unaudited – in millions)
Net Income
Add: Income tax expense
Add: Total other expense, net
Operating income
Add: Impairment charges
Post-acquisition adjustment
Add: Expense incurred for proposed acquisition of MoneyGram
Adjusted operating income
Add: Depreciation and amortization
Add: Share-based compensation
Earnings before interest, taxes, depreciation, amortization, share-based compensation,
post acquisition adjustments, impairment charges and other non-operating and
non-recurring items (Adjusted EBITDA)
2015
2016
2017
2018
2019
$ 98.4
$ 174.0
$ 157.0
$ 232.0
$ 346.7
42.5
64.0
58.8
17.0
99.5
9.5
62.8
63.2
87.2
41.3
$ 204.9
$ 249.8
$ 266.0
$ 358.0
$ 475.2
-
-
-
-
-
-
34.1
-
4.5
7.0
6.6
-
-
(1.3)
-
$ 204.9
$ 249.8
$ 304.6
$ 371.6
$ 473.9
70.0
12.8
80.5
14.9
95.0
15.6
106.1
16.7
111.7
21.5
$ 287.7
$ 345.2
$ 415.2
$ 494.4
$ 607.1
Adjusted operating income is defined as operating income excluding goodwill and acquired intangible asset impairment charges and non-recurring items that are
considered expenses or income under U.S. GAAP.
Adjusted EBITDA is defined as operating income excluding depreciation, amortization, share-based compensation expenses and other non-operating or non-recurring
items. Although these items are considered operating costs under U.S. GAAP, these expenses primarily represent non-cash current period allocation of costs associated
with long-lived assets acquired in prior periods. Similarly, expense recorded for share-based compensation does not represent a current or future period cash cost.
Adjusted EBITDA is a non-GAAP measure that should be considered in addition to, and not as a substitute for, EBITDA computed in accordance with GAAP.
149
2 0 + Y E A R S E M P L O Y E E S
Celebrating the employees who have
powered our success for over 20 years.
! K R Z YSZ TO F W YG L Ą DA Ł A
Operations Support Manager
! JA DW I GA J E LO N E K
ATM Network Development
Regional Director
! I WO N A PA LU CH
Chief Accountant
! M ACI EJ M A L I N OWS K I
Real Estate Regional Manager
! JACE K A DA MS K I
Sales Director
! ZS I G M O N D TO R N YOS
Senior Dispatcher
! J OA N N A Ł A KO M I E C
Reconciliation Manager
! J OA N N A L E N A RTOW I CZ
Deputy Chief Accountant
Romania
! M I H A E L A P E T R E
Country Manager
Spain
! A B E L A R D O R I V E RO
AR Manager
! J OS É D O M Í N G U E Z
QA Technician
United Kingdom
! N I CH O L AS H I L L
Director, Trading Risk Management
! J O N AT H A N F R I CK E R
IT Technical Director
! SA M A N T H A F E N TO N
Credit Team Leader
Canada
Hungary
! I L A R I O M O DA F F E R I
Country Manager - Canada
! É VA J U DÁ K
Senior Technical Consultant
Croatia
! A L E KSA N DA R B O G N A R
Assistant Operations Manager
! DA R KO G U ST I N
Country Manager
! N I N A KU C KO
Cash Supply, Reconciliation
and Customer Services
! SA NJA ROZ M A J E R
Finance Manager
France
! K R IST I N A V I ZJA K TASSA
Operations Manager
Germany
! M I C H A E L H O F M A N N
IT-Specialist
! CL AU D I A K L E I N
Project Manager
! M I C H A E L R A P P
Third Level Support
! M A RC E H L E R
Managing Director - Europe
and Middle East
! A N D R EJ Z A B R O DS K Y
Head of ATM Development
and Senior Software Architect
! GA B R I E L E S CH M I E D L
Accountant
Greece
! A R GY R O U L A K ATS I N E L I
Senior Accountant
! VAS I L IS G I K AS
ECS POS Preparation Support
! B Á L I N T KO L L Á R
Manager of Satellite Application
! K R ISZ T I N A TÓVÖ LGY I
Business Operation Specialist
! ZO LTÁ N K ISS
Senior Architect
! JA N E L E U E N B E RG E R
Contract Compliance Administrator
! ZO LTÁ N M ACS E K
Senior Technical System Analyst
! GYÖ RGY K R ACH E R
Infrastructure Architecture Leader
! A N D R ÁS CS E R
EEFT New Platforms Knowledge
Leader
! M I H Á LY CS U VÁ R
Operations Manager
! Z I TA K E L E M E N
Service Transition and Service
Operation Processing Manager
! ZS O LT M I ZS E I
AS400 Administrator
! ZO LTÁ N D U DÁS
Project and Technology
Consulting Manager
! ZS O LT K A R N IS
Test Analyst
Poland
! M A R E K S M O L A R E K
Installation Manager
! P I OT R A DA M E K
Managing Director ePay - Poland
! CE Z A RY DY RCZ
Operations Director - Poland
! K ATA R Z Y N A K W I AT KOWS K A
Sales Director
! E L Ż B I E TA T U RS K A
Accountant
150
2 0 + Y E A R S E M P L O Y E E S
United States
! DAV I D M O R R IS
Senior Software Architect
! M A RY O LS E N
Senior Director of Software
Development
! C H R I STO P H E R R I N G
Development Manager
! TO N Y WA R R E N
Managing Director of Software
Division
! A N A M I L E N A CUY
Store Team Lead
! I R IS C LO P E Z
Sales Associate
! A N A M A R I A CA M P OV E R D E
Regional Manager
! JA M E S M CDA N I E L
Customer Support Technical Analyst
! ROX A N A V E L AS Q U E Z
Store Team Lead
! B E NJA M I N WA L D R O N
IBM Power Systems Manager
! T E S FA G E B R E S E L ASS I E
VP, Human Resources
! J UA N B I A N CH I
EVP and CEO, MT Segment
! A N N E L I Z A B E T H T R UJ I L LO
R U D K E V I CH
Correspondent Oversight Supervisor
! S H A RO N P E R M E
Senior Programmer / Analyst
! JA N N E T T E S O L A N O
Agent Support Supervisor
! M A R I A N A G O N Z A L E Z
Consumer Services Analyst
! PAU L R U SS E L L
Technical Manager
! V E RO N I CA RO D R I G U E Z
Operations Support Manager
! DA L E CO O K
Senior Information Specialist
! J E F F R E Y N E W M A N
General Counsel
! M A R I A A L I CI A CH AV E Z
Compliance Correspondent Reviewer
! J OS E A B R E U
POS Infrastructure Engineer -
Northeast
! A R M A N D O CH AV E Z
VP Retail Operations
! M A R I A M AG DA L E N A G U T I E R R E Z
Sales Associate
! T I M OT H Y A FA N N I N G
Managing Director DCC Americas
! M A R L E N Y M O N TOYA
Sales Associate
! S P E N CE R B IS H O P
Customer Support Supervisor
! RO B E RT B R A K E NS I E K
Vice President of Implementations
and Project Services
! LO R E N A L A L AVA
Store Team Lead
! M I C H A E L J. B ROW N
Chairman/CEO
! J O E M O RGA N
Development Manager
! T H E R E SA GA R L A N D
Technical Manager
! GA I L TAY LO R
Contract Administrator
! FA N N Y A Q U I N T E RO
Sales Associate
! JA M E S M CK E R N A N I I I
Senior Solution Specialist
! M O N I C A M CI M A
Store Team Lead
! M A R I A A GA L L A R D O
Store Team Lead
! SA N D R A P CA R R AS CO
TeleRia Supervisor, Sr
! J OS E O RT I Z
Territory Manager
! PAT R I CI A B E A R D
Senior Billing Specialist
! T I F FA N Y N G U Y E N - H UY N H
User Support Manager
! K A R E N CL E M E N TS
Client Service Supervisor
! ST E P H E N B U TCH E R
Product Manager
! D I A M A N T I N A O CO N
Transaction Review Associate
! M A R LY N L B A R B A
Teleria Specialist
! M A R I A D O LO R E S LO P E Z
Regional Manager
! L AU R A E A N G U I A N O
Store Team Lead
! SA M U E L BY R D
Senior Software Architect
! R U BY CH O N G
Product Manager
! DA R R E N B AU M E R
Systems Analyst
151
! J OV I TA Y CR U Z
Human Resources Generalist
! A N G E L J PA L ACI OS
Sales Associate
! V E RO N I CA N AVA R RO
Credit Analyst
! A N D R E ' WA L K E R
Senior Technical Analyst
! P E R L A E H E R N A N D E Z
Teleria Specialist
! DAV I D G LOV E R
Senior Software Architect
! RO B I N H E N D E RS O N
Change Management Specialist
! M A R I A D E L RO CI O C A LV I L LO
Teleria Specialist
! S I M O N V R U D K E V I CH
Accounting Director - Americas
! CA R LOS A CE A
Teleria Specialist
! S O N I A I L U G O
Teleria Specialist
! D E N IS E ROACH
Senior Programmer / Analyst
! K A R I N A H E R N A N D E Z
Teleria Team Leader
! M A R I A C A LCA L A
Web Support Specialist
! M A R L E N E I SA L M E R O N
Fin Ops Clerk
! N A N CY N SA L A Z A R
Collections Lead
! E L I Z A B E T H B A R R I OS
Teleria Specialist
! B IS M A RCK E LO P E Z
Order Verification Analyst
! S I LV I A E H I DA LG O
Collections Clerk
! M A R I A R SA E N Z
Web Support Supervisor
! M A R I A C ACE V E D O
Sales Associate
! A M A N DA P E R E Z
TeleRia Supervisor
! M A R I A LU ISA D E D E I A N
Quality Coach
! I LSA M E L I N A G U E R R E R O
Teleria Manager
! W I L L I A M E WAU G H
Chief Regulatory Officer
! R I CK E Y H A R R IS O N
Senior Technical Analyst
! G E R E T TA M I L L S
Computer Operator
L O O K I N G F O R W A R D
Annual Meeting
Euronet's 2020 Annual Meeting of Stockholders will be held
online only on Thursday, May 21, 2020.
Visit ir.euronetworldwide.com for access information.
Forward-Looking
Statement
Statements contained in this annual report that concern
Privacy Regulation and Revised Payment Service Directive
Euronet's or its management's intentions, expectations,
requirements; changes in laws and regulations affecting
or predictions of future performance, are forward-looking
our business, including tax and immigration laws and any
statements. Euronet's actual results may vary materially
laws regulating payments, including DCC transactions;
from those anticipated in such forward-looking statements
changes in our relationships with, or in fees charged
as a result of a number of factors, including: conditions in
by, our business partners; competition; the outcome of
world financial markets and general economic conditions,
claims and other loss contingencies affecting Euronet; the
including the effects in Europe of the U.K.'s departure from
cost of borrowing, availability of credit and terms of and
the E.U.. and economic conditions in specific countries and
compliance with debt covenants; impacts from COVID-19;
regions; technological developments affecting the market
and renewal of sources of funding as they expire and
for our products and services; our ability to successfully
the availability of replacement funding. These risks and
introduce new products and services; foreign currency
other risks are described in the Company's filings with the
exchange rate fluctuations; the effects of any breach of
Securities and Exchange Commission, including our Annual
our computer systems or those of our customers or vendors,
Report on Form 10-K, Quarterly Reports on Form 10-Q and
including our financial processing networks or those of
Current Reports on Form 8-K. Copies of these filings may
other third parties; interruptions in any of our systems or
be obtained via the SEC's Edgar website or by contacting
those of our vendors or other third parties; our ability to
the Company. Any forward-looking statements made in
renew existing contracts at profitable rates; changes in
this report speak only as of the date of this release. Except
fees payable for transactions performed for cards bearing
as may be required by law, Euronet does not intend to
international logos or over switching networks such as card
update these forward-looking statements and undertakes
transactions on ATMs; our ability to comply with increasingly
no duty to any person to provide any such update under
stringent regulatory requirements, including anti-money
any circumstances. The Company regularly posts important
laundering, anti-terrorism, anti-bribery, consumer and
information to the investor relations section of its website.
data protection and the European Union's General Data
152
A R O U N D T H E G L O B E
Office Locations and
Local Currency
Amsterdam, the Netherlands
Athens, Greece
Auckland, NZ
Beijing, China
Belgrade, Serbia
Berlin, Germany
Billericay, U.K.
Bracknell, U.K.
Bratislava, Slovakia
Brussels, Belgium
Bucharest, Romania
Budapest, Hungary
Buena Park (LA), CA
Cairo, Egypt
Copenhagen, Denmark
Dakar, Senegal
Denver, CO
Dubai, UAE
Dublin, Ireland
Geneva, Switzerland
Hamburg, Germany
Istanbul, Turkey
Karachi, Pakistan
Kiev, Ukraine
Kracøw, Poland
Kuala Lumpur, Malaysia
Leawood, Kansas
Lisbon, Portugal
Little Rock, Arkansas
London, U.K.
Madrid, Spain
Manama, Bahrain
New Zealand dollar
Milan, Italy
Romanian new leu
Prague, Czech Republic
Martinsried, Germany
euro
Mexico City, Mexico
Milton Keynes, U.K.
Montréal, Canada
Mexican peso
euro
British pound
Canadian dollar
Moscow, Russian Federation
ruble
Mumbai, India
Munich, Germany
Indian rupee
euro
Newmarket, Canada
Canadian dollar
Paris, France
Pune, India
Rome, Italy
San Salvador, El Salvador
Santiago, Chile
Sao Paulo, Brazil
Shanghai, China
Singapore
euro
koruna
Indian rupee
euro
U.S. dollar
Chilean peso
real
yuan
Singapore dollar
Stockholm, Sweden
krona
Sydney, Australia
Toronto, Canada
Vienna, Austria
Warsaw, Poland
Zagreb, Croatia
Australian dollar
Canadian dollar
euro
zloty
kuna
euro
euro
yuan
dinar
euro
British pound
British pound
euro
euro
forint
U.S. dollar
Egyptian pound
Danish krone
West African CFA franc
U.S. dollar
dirham
euro
Swiss franc
euro
lira
Pakistan rupee
hryvnia
zloty
ringgit
U.S. dollar
euro
U.S. dollar
British pound
euro
dinar
153
Euronet Office LocationsCreating an impact with products and services in over 170 countries across the globe. Leawood, KS, USA
euronetworldwide.com