2020 Annual Report
Strength Through Diversity
1
Bright spots in a challenging year
Our foundational strengths enabled us to deliver the products and
services our customers needed during the global pandemic.
COVID posed many
challenges for the
world in 2020
Shelter in place orders
Citizens throughout the
world were ordered to stay
home to prevent the spread
of the virus.
Safer shopping
experiences
When they could venture
outside, consumers and
governments drove retailers
and restaurants to provide
safe environments including
digital and contactless
payments.
Euronet had the answers
Access to movies, games,
music, and shopping at home
Euronet processed transactions
for popular brands, enabling
streaming movies, gaming,
and other digital content to be
accessed by consumers.
Enablement of mobile
and digital purchasing
Euronet processed alternative
payments from digital wallets
using QR codes and other
touchless payments at
retailers worldwide.
ii
Fewer bank branches
and ATMs
Economic pressures forced
banks to close locations,
leaving many consumers
without easy access to the
cash in their accounts.
Retail closings and
limited hours
Consumers could not at times
access services from brick-
and-mortar locations for
extended periods of time.
Layoffs and furloughs
Fearing the worst, many
businesses reduced their
workforces as a precaution
against the slowing world
economy.
Placement of ATMs
throughout the world
Euronet’s ATMs, outsourcing
services, network participation
agreements, and other ATM
programs supplied cash access
in many communities left
behind by bank closures.
Digital offerings of
physical services
Euronet provided digital versions
of popular services. One example
was money transfers, which
in many countries could be
delivered through the Ria Money
Transfer app or website as easily
as they were in a physical store.
Job security for
8,000+ employees
Euronet’s strong balance
sheet enabled company
leaders to proclaim early in
the year that there would
be no layoffs in 2020.
iii
“I am very pleased with the
performance of Euronet and all
8,000-plus employees in 2020,
not just to survive but to thrive.
As the old saying goes, when
you’re handed lemons, make
some lemonade. We decided
early not to lay off our people.
We managed our expenses and
pursued opportunities. We pulled
together and performed admirably
in the face of some very difficult
circumstances. In the pages that
follow, you’ll discover our bright
spots in a challenging year and
our enduring strength: diversity.”
— Michael J. Brown Chairman, President and CEO, Euronet Worldwide, Inc.
i
Our resilience comes from our strength in diversity
These core elements drove Euronet to overcome challenges and exceed goals in 2020.
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Our employees are tech
savvy and accustomed to
working remotely, making
the transition to home
offices quick and efficient.
Our solutions provide a
wide range of transactions,
enabling us to meet the
needs of consumers and
businesses throughout
the pandemic.
We have people and
resources located
throughout the world,
ensuring we served
customer needs despite
local restrictions.
We invested in the
REN Ecosystem years ago,
empowering us to process
digital transactions and
provide cash access
anywhere at any time.
1
ABOUT EURONET
A global leader in payments technologies
and secure financial transactions
Euronet Worldwide offers payment and transaction processing
solutions to financial institutions, retailers, service providers and
individual consumers. These services include comprehensive ATM,
POS and card outsourcing services, card issuing and merchant
acquiring services, software solutions, cash-based and online-
initiated consumer-to-consumer and business-to-business money
transfer services, as well as electronic distribution of digital media
and prepaid mobile phone time.
Euronet’s global payment network is extensive
and includes:
• 45,485 owned and operated ATMs
• Approximately 340,000 EFT POS terminals
• A growing portfolio of outsourced debit and
credit card services
• Card software solutions
• A prepaid processing network of approximately
748,000 POS terminals at approximately
338,000 retailer locations
• A global money transfer network of
approximately 464,000 locations
With corporate headquarters in Leawood, Kansas,
USA, and 66 worldwide offices, Euronet serves
clients in approximately 175 countries.
For more information, please visit the company’s
website at www.euronetworldwide.com.
Budapest, Hungary, is the site of our first ATM more than 25 years
ago and current location for one of our global processing centers.
2
FINANCIAL HIGHLIGHTS
2020 At-A-Glance
Revenue
Revenue
(Millions)
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
$1,959 $2,252 $2,537 $2,750 $2,483
2018
2020
2016
2019
2017
Adjusted Operating Income*
Adjusted
Operating
Income*
(Millions)
$500
$400
$300
$200
$100
$0
$305
$474
2017
2019
Diluted Earnings (Loss) Per Share
$250
2016
$372
2018
$153
2020
Diluted
Earnings
(Loss)
Per Share
Total
Equity
(Millions)
$8
$7
$6
$5
$4
$3
$2
$1
$0
-$1
$3.23 $2.85 $4.26 $6.31 $(0.06)
2018
2020
2019
2017
2016
Total Equity
$2,000
$1,500
$1,000
$500
$0
$901 $1,200 $1,233 $1,579 $1,446
2016
2018
2020
2019
2017
Adjusted
EBITDA*
(Millions)
Adjusted EBITDA
$800
$700
$600
$500
$400
$300
$200
$100
$0
$345
2016
Transactions
$415
2017
$494
2018
$607
2019
$302
2020
Transactions
(Millions)
6,000
5,000
4,000
3,000
2,000
1,000
0
3,978 4,710 5,792
3,631
2019
2017
2018
Adjusted Cash Earnings Per Share*
3,261
2016
2020
Adjusted
Earnings
Per Share*
Total
Assets
(Millions)
$8
$7
$6
$5
$4
$3
$2
$1
$0
$4.02 $4.58 $5.53
2017
2018
2016
Total Assets
$7.01
2019
$2.82
2020
$5,000
$4,000
$3,000
$2,000
$1,000
$0
$2,713 $3,140 $3,321 $4,658 $4,927
2018
2020
2016
2019
2017
Note: We believe that adjusted operating income, adjusted EBITDA and adjusted earnings per share provide useful information to investors because they are indicators of the strength and
performance of our ongoing business operations. While certain of these calculations are used more fully to describe the results of the business, others are commonly used as a basis for
investors, analysts and credit rating agencies to evaluate and compare the operating performance and value of companies within the payment processing industry.
* On page 125, we have defined adjusted operating income, adjusted EBITDA and adjusted earnings per share terms and provided a reconciliation of these non-GAAP financial measures to
their most directly comparable U.S. GAAP financial measure.
3
SHAREHOLDER LETTER
Despite challenges caused by COVID-19,
2020 was a year of accomplishments
When I sat down to write this letter a year ago, the COVID-19 crisis
had just begun to deliver its negative effects on the world. At
the time, the first government-mandated lockdowns and border
closures were being enforced in some areas. As we now know,
the reach of the virus was about to become far more extensive
as our health, economics, politics, travel, work environments,
and so many other areas were all affected during 2020.
In the end, Euronet also was negatively impacted
in terms of our pursuit of another year-over-year
of revenue growth. Despite the challenges caused
by COVID-19, there were many bright spots for the
company in a dark year for the world. And these
successes are what we have decided to use as our
springboard into 2021 — a year that holds as much
promise as any in the company’s history.
Our excitement is based on the diverse strengths
of the company that guided us through the
pandemic and supplied many new innovations
along the way.
To briefly recap the year, Euronet’s leadership
team decided early in 2020 to rely on the cash
on our balance sheet to keep our worldwide
employee base intact. In addition, we decided
we would cut costs wherever possible but would
reject the quick reaction so many other companies
had to get ultra-conservative when it came to
spending on innovation or pursuing worthwhile
opportunities.
With job security on their side, our employees
responded with hard work and focus. The
transition to home offices ordered by most local
governments was quick because of our technical
prowess, and service to our customers was not
interrupted thanks to our global geography. With
these essential areas covered, our employees
dedicated themselves to moving the company
forward in key areas as directed by our leadership
team and managers.
(continued on page 10)
Michael J. Brown
Chairman, President and CEO
4
FINANCIAL OVERVIEW
Our epay and Money Transfer products
were standout performers
We increased the number of transactions we
processed by 23% from the previous year to
5.8 billion, delivering $2.5 billion in revenue and
adjusted earnings per share of $2.82 in 2020.
Despite the constraints of the COVID-19 pandemic,
we remained in a strong financial position with
approximately $1.8 billion in available cash,
approximately $670 million availability on our
revolving credit facility, and no debt maturities
for approximately four years.
The year was highlighted by strong revenue and
operating income growth as well as market share
growth in our epay and Money Transfer segments.
Money Transfer’s Q4 2020 revenues of $331.6
million and epay’s Q4 2020 revenues of $276.1
million were records for each segment.
Optimizing EFT operations
Our EFT segment proved agile, delivering millions
of dollars in savings during 2020 through the
closing of ATMs in areas that were locked down by
the pandemic. At the same time, we continued to
deploy nearly 4,000 ATMs in areas where it made
sense to have them, including many ATMs that
represented targeted wins from the competition.
Additionally, we divested from nearly the same
number of unprofitable locations, which gave us
a higher quality ATM fleet overall. Combined with
increased ATM outsourcing deals, our core EFT
business remained solid and ready for the return of
tourists when travel restrictions are eased in 2021.
In addition to our traditional business segments,
we were also encouraged by the increased
licensing of products within the REN Ecosystem
by financial institutions, governments, retailers,
and brands worldwide. Through the on-premise
solutions of the REN Foundation and API
accessible technologies of the REV Payments
Cloud, we helped shape the future of payments
for our customers and met the expectations of
increasingly mobile-dependent consumers.
All together, we enter 2021 with a solid balance
sheet, a dedicated and motivated workforce,
innovative new technologies, and historically
reliable growth drivers. As more people are
vaccinated, travel restrictions and lockdowns lift,
and lifestyles trend toward pre-pandemic levels,
we are optimistic for another year of expanded
market share and increased revenues.
2020 Segment Economics
Revenue & Adjusted EBITDA Mix
The following charts represent the Revenue and EBITDA
profiles of each segment
Revenue Mix*
Revenue Mix
2020 Revenue* | $2,482 M
48% Money Transfer
33% epay
19% EFT
Adjusted EBITDA Mix*
Adjusted EBITDA Mix
2020 Adjusted EBITDA* | $302.2 M Percent Margin | 12%
56% Money Transfer
15% Margin
32% epay
13% Margin
12% EFT
8% Margin
* Revenues, Adjusted EBITDA, and Percent EBITDA Margin by segment includes eliminations and expenses
incurred by corporate services.
5
PAYMENTS TECHNOLOGIES
REN Ecosystem flexed its
tech backbone in 2020
funds availability, settlement finality, instant
confirmations, and integrated information flows
— all in a payment that is completed in seconds.
Demand leads to new products
To answer consumer and business demand, we
developed and launched REN Connect for financial
institutions and REN RTP for central banks.
By year-end, there were about 60 countries
worldwide with real-time payment networks.
While some networks boast a high number of
participating financial institutions and manage
millions of transactions daily, many do not have
near that level of activity. In these countries,
many financial institutions also face technical or
resource limitations. REN Connect provides the
answer — a visual low code tool that simplifies the
connection of a bank’s back-end systems to their
country’s real-time payments network.
On the central bank side, REN RTP supplies
the infrastructure required to properly build
and host a real-time payments network. In
addition to providing the additional notifications
and settlement speeds required for real-
time transactions, REN RTP leverages REN’s
inherent microservices architecture to ensure
easier maintenance, compatibility with external
systems, and no downtimes.
As 2020 closed, the REN Ecosystem continues
to power our business by providing payments
solutions to customers across the globe. Because
its features, benefits, and architecture align with
market demands, we expect continued adoption
and more ground-breaking projects moving
forward.
The REN Foundation
modernizes banks’ payment
systems in on-premise data
centers and cloud installations
without ripping and replacing
legacy applications.
Nearly a decade ago, we invested in the
development of the REN Ecosystem to provide
a common technology base to drive our EFT,
epay, and Money Transfer business segments.
Our goal was to “future proof” our approach
to payments processing.
Fast forward to today
The REN Ecosystem manages billions of
transactions annually within our worldwide data
centers while also providing valuable payments
solutions for customers at financial institutions,
governmental central banks, retailers, leading
brands, and other businesses.
Part of REN’s wide appeal is flexibility. REN
payments technologies are provided as a collection
of platforms delivered as the REN Foundation to
customers who manage their own solutions in on-
premise data centers or privately managed clouds.
Or, we host platforms in our REV Payments Cloud
and provide access to custom payments solutions
and extend features to platforms through APIs
and SaaS-delivered applications.
The REV Payments Cloud
provides fintechs, banks,
and retailers with API-access
to Euronet’s payments
technologies, networks,
and ATMs.
In 2020, we advanced the functionality of
the REN Ecosystem to address the growing
expectations among customers and businesses
for real-time payments. This faster way to
pay requires specialized features that combine
PROJECT SPOTLIGHT
SIMO (Mozambique)
Despite working remotely the entire year, we launched our REN™
Foundation modernization solution for Mozambique’s national
payment network. Delivered through Sociedade Interbancária de
Moçambique (SIMO) for Banco de Moçambique, the solution is tailored
to meet SIMO’s needs and supports transaction processing services,
connections to major card associations, ATM or POS device driving,
and card issuing. The REN™ Foundation provides member banks
with an extensive collection of services, including mobile top-up, bill
payments, and digital wallets using traditional payment methods,
as well as new, emerging alternative payment technologies.
6
BUSINESS SEGMENTS
Electronic Funds Transfer (EFT)
reorients to business unusual
and services by leveraging our REN and REV
technologies. These included pass-through
DCC deals with China Construction Bank
(80,000 ATMs), Punjab National Bank in India
(10,000 ATMs), and Techcombank in Vietnam
(1,000 ATMs).
We were also active in many
communities, whether it’s our ATMs in
the Community program (see Project
Spotlight below) or our partnership
with AMBER Alerts Europe, which
features missing person photos on our
ATM screens. In 2020 alone, it led to the
recovery of eight missing people.
With our refined ATM fleet and momentum from
partnerships and products, we’re well positioned
for 2021 when vaccinations increase, borders
open, and travel levels climb back.
Our EFT business segment
that manages our ATMs also
provides electronic payment
solutions, including card
issuing and merchant acquiring
services.
PROJECT SPOTLIGHT
ATMs in the Community (Europe)
This year, we established our ATMs in the
Community program with the goal of providing
access to cash for people who live far from
urban centers. The need for ATMs in these areas
has steadily increased the last 10 years across
Europe. During this time, financial institutions
reduced their commercial networks by 40%
and closed remote bank branches. As an
independent ATM provider, we decided to serve rural areas left
behind by traditional banks, ensuring citizens and businesses in
these communities can safely access cash.
We manage our own branded
ATM network in Europe, Asia
Pacific, Africa, and other parts
of the world.
Despite double-digit growth in January
and February 2020, travel restrictions and
government-imposed lockdowns eventually
reduced activities at our ATMs worldwide.
Because of the negative effects the pandemic
had on tourism, our EFT segment was notably
affected. Even so, EFT segment transactions
increased 7% (3.28 billion) for the year.
Instead of waiting for the pandemic to end,
we refocused on areas where we could create
an impact immediately and position the EFT
segment to succeed whenever restrictions ended.
Redistributing ATM inventory
Our first task: Quickly deactivate ATMs in
typically high traffic tourism areas that were
vacated by travel restrictions. We also re-
activated ATMs in areas that experienced the
temporary lifting of travel restrictions. Our
refined ATM fleet was critical to our expense
reduction efforts for the year.
Another focus area was expanding our payment
products and ATM outsourcing services. For
example, we partially offset the decrease in high-
value cross-border transactions from the tourism
community through a sizable increase in the
volume of lower value, digitally initiated payment
processing transactions for an Asia Pacific
customer’s bank wallet and ecommerce site.
We acquired the Bank of Ireland’s non-branch
ATMs, launched our independent ATM network
in Lithuania and Egypt, and signed ATM network
participation agreements with banks in Romania,
Poland, and Spain. Large blocks of ATMs in the
United States were added through outsourcing
agreements.
Leveraging REN and REV for product launches
We signed several contracts for payment
processing, switch and card management, and
pass-through dynamic currency conversion (DCC)
services with banks and fintech companies in
Europe and Asia. We launched these products
7
BUSINESS SEGMENTS
Nearly 10% growth for epay
with record 4th quarter
Our epay segment experienced tremendous
growth in 2020 capped by a record fourth quarter
that saw double-digit increases from the same
quarter in 2019.
For 2020 overall, epay grew
transactions more than 50%
resulting in record operating
income and adjusted EBITDA.
Our 2020 success was fueled
by continued growth in digital
media distribution and mobile
transactions in certain markets.
Through strategic relationships
with digital wallets, retailers, and
mobile operators, our epay team
expanded its digital channel distribution
epay enables merchants to
accept alternative payments
from digital wallets during
the checkout process.
in areas such as Asia and South America
where there is a concentration of high-volume
transactions. We also continued to add new
streaming and content providers to our brand
offerings as well as introduced our existing
brand partners to new markets.
PROJECT SPOTLIGHT
Microsoft and Telecommunications Retailers (Global)
In one 2020 highlight, epay was selected to provide monthly processing
and settlement services between Microsoft and select telecommunications
retailers for sales of Game Pass Ultimate and Xbox All Access subscriptions
worldwide. Prior to signing, epay managed mobile top-ups at the retailers
and distribution of Xbox gaming content for Microsoft. These connections
helped simplify project implementation, along with our REV® Payments
Cloud. Both customers benefit by providing a new revenue stream for
retailers and enabling Microsoft to expand into the cloud-based mobile
gaming market.
The combination of content and digital distribution
was well suited for a world of mandatory
lockdowns and shelter-in-place orders. It also
has been a proven recurring revenue generator
for our distribution partners. Many of their
customers become “sticky” and often make
multiple purchases.
We gained traction with our physical retailers
as well. Many of these businesses (pharmacies,
groceries, convenience stores, etc.) were declared
essential and remained open. This kept our
gift card, mobile top-ups, and other in-store
transactions trending positively during otherwise
challenging times.
New product pipeline
We continued to focus on our REV Payments
Cloud with new products and delivery.
We invested resources into the development of
a platform for managing subscription renewal
services that eventually gained traction in the third
and fourth quarters. Agreements with Microsoft
and Apple were signed for product purchases at
major retailers and telecommunications stores
in the United States, Europe, Australia, Korea,
and other countries.
We also expanded our processing of alternative
payments from digital wallets and delivered other
digital payments solutions to retailers worldwide.
As we move into 2021, our pipeline of new product
and service launches and partnerships remains
robust and keeps us well positioned to capitalize
on the continued surge of digital distribution and
mobile usage throughout the world.
8
BUSINESS SEGMENTS
Money Transfer was
a money maker in 2020
Four factors drove revenue and market share
growth for Money Transfer in 2020.
A differentiator,
10 years in the making
First, our digital presence increased with the
launch of our app in the U.K., France, Germany,
Italy, Belgium, Austria, Spain, and other European
countries. We now have digital solutions in 21
markets as compared to just four at the beginning
of 2019.
Finally, our industry-leading
account deposit network, which
serves bank deposits and mobile money
accounts across our customer base including our
digital customers, was a significant factor in
the growth of the money transfer segment.
As a result, our digital transactions were up 103%
for the year. We achieved this triple-digit growth
in digital transactions despite entering many of
these markets midway through the year with 70%
of these customers using Ria for the first time.
Growing our physical touchpoints
The second factor is our market-leading position
in the independent channel, which represents
around 60% of all family remittance payments.
The independent channel accounts for Ria’s
strongest overall gains in absolute transaction
numbers and market share. Our independent
agents excelled at helping our customers through
the pandemic because agents understand the
urgent needs to send money to families for
healthcare, rent, food, and other necessities.
Third, our physical payout network of 464,000
locations (a 17% expansion) and its supporting
operations team were the driving force behind the
independent channel growth of 36% during the
fourth quarter and 23% for the year. Moreover,
this growth story contributed to the 20% growth
in principal sent to Mexico last year as compared
to the overall market growth of 11%. In addition,
our team launched new correspondents globally,
including post office locations in Botswana,
Indonesia, Moldova, Romania, Indonesia, Austria,
and Belgium.
Over the past 10 years, our account deposit
volumes grew faster than cash pickup. While
total principal transferred during 2020 grew
at a robust 23%, our account deposit volumes
grew an impressive 36%. We have worked
diligently to surpass our competitors, and it now
has evolved into a critical differentiator for us.
At 2020’s end, our account deposit network offers
the capability to put funds into 3.7 billion bank
accounts in 125 countries, and we can land funds
into 30 wallets held by over 200 million users in
20 countries. Most bank deposits are powered
by direct integrations with banks, enabling us
to optimize the product features such as speed,
account validation, and transaction confirmation.
2020 was a year of significant progress under
difficult circumstances. Money Transfer is
extremely well positioned to continue its
momentum into 2021 and beyond.
Ria’s options include digital
money transfers through its
app as well as app-to-ATM
money transfers and a physical
send-and-receive network
featuring independent agents
and Ria-branded stores.
Xe is a global authority in
currency information and a
provider of online and mobile
payments services to millions
of companies, customers, and
users all over the world.
PROJECT SPOTLIGHT
Kroger (United States)
The expansion of Ria Money Transfer to a wider digital and physical
customer base was a 2020 priority. In addition to app distribution
throughout Europe, Ria added post offices, independent agents, and
physical locations worldwide. Ria also increased its presence in large
retail with Kroger, America’s largest grocery retailer. The agreement
enables Kroger customers to send money to any of Ria’s payout options,
including bank accounts and Ria stores, as well as alternative options
such as ATM pickups, payments to digital wallets, and home delivery.
9
SHAREHOLDER LETTER
Reasons for optimism
(continued from page 4)
One of these areas was in the advancement of
our REN and REV payments technologies. Our
company continued to evolve these platforms
and generate the products the world’s financial
institutions, consumers, retailers, brands, and
other businesses demand, whether it be in new
digital interfaces, contactless retail experiences,
real time payment transactions, or our long-held
expertise in cash.
Speaking of cash, I am also extremely proud
of our company for finding ways to serve our
communities through our ATM network. We
helped find missing people by broadcasting
... the other reason for
excitement is the exceptional
growth of our epay and Money
Transfer business segments.
As you can see from the
details in this report, both
segments are coming off
record-setting fourth quarters
with double-digit growth.
10
AMBER Alerts on our ATM screens. We also
alleviated the problem of what the media refers
to as “cash deserts” by locating ATMs in rural
areas of Europe where bank branches have closed.
As for our own ATM deployments, I am also
pleased with the progress we made during 2020.
Despite a lack of tourists, our team kept busy
strategically installing new machines, signing
new outsourcing deals, and optimizing our overall
operations for when travel resumes.
Aside from these advancements, the other reason
for excitement is the exceptional growth of our
epay and Money Transfer business segments.
As you can see from the details in this report,
both segments are coming off record-setting
fourth quarters with double-digit growth.
So as demonstrated here, there are many reasons
to be optimistic for 2021.
At the time of this writing, COVID-19 vaccines
are beginning to be distributed globally and virus-
related hospitalizations are trending downward
in most areas. As we wait for the medical
community and governments to complete their
job in vaccinating the public, we will continue
to execute on our strategies. Before long, we
are optimistic a more “normal” way of life will
return to the world and Euronet.
So in closing, join me in bidding good-bye to
2020, a year like no other, and jump onto the
momentum Euronet has created for 2021.
We are ready to shine brightly again!
Michael J. Brown
Chairman, President and CEO,
Euronet Worldwide, Inc.
EXECUTIVE SUMMARY
Executive Officers and Management
Michael J. Brown
Chairman, President and Chief Executive Officer
Rick L. Weller
Executive Vice President and Chief Financial Officer
Scott Claassen
General Counsel
Kevin J. Caponecchi
Executive Vice President and Chief Executive Officer,
epay, Software and EFT Asia Pacific Segment
Juan C. Bianchi
Executive Vice President and Chief Executive Officer,
Money Transfer Segment
Nikos Fountas
Executive Vice President and Chief Executive Officer,
EFT Americas, Europe, Middle East and Africa Division
Dr. Martin L. Brückner
Senior Vice President and Chief Technology Officer
Tony Warren
Managing Director, Payments Software
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.
11400 Tomahawk Creek Parkway, Suite 300
Leawood, KS 66211
or send an email to directors@eeft.com.
Investor Information
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, 11400 Tomahawk Creek Parkway,
Suite 300, 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.
Directors
Michael J. Brown
Chairman, President and Chief Executive Officer
Euronet Worldwide, Inc.
Paul S. Althasen
Co-founder
epay
Mark Callegari
Founder and Chief Executive Officer
Callegenix LLC
Michael N. Frumkin
Founder and Leader
Google Accelerated Sciences Team
Thomas A. McDonnell
Retired President and Chief Executive Officer
DST Systems, Inc.
Dr. Andrzej Olechowski
Professor
Vistula University, Warsaw, Poland
Andrew B. Schmitt
Retired Chairman and Chief Executive Officer
Layne Christensen Company
M. Jeannine Strandjord
Retired Senior Vice President
Sprint Corporation
Transfer Agent
Computershare Investor Services
P.O. Box 43078
Providence, RI 02940-3078
computershare.com
Corporate Headquarters
Euronet Worldwide, Inc.
11400 Tomahawk Creek Parkway, Suite 300
Leawood, KS 66211 USA
+1.913.327.4200
Stock Listing
U.S. NASDAQ: EEFT
11
10K REPORT
10K
12
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, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-31648
EURONET WORLDWIDE, INC.
(Exact name of Registrant as specified in its charter)
________________________
Delaware
74-2806888
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
11400 Tomahawk Creek Parkway, Suite 300
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
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock
1.375% Senior Notes due 2026
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 ☑ No ☐
13
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 ☑
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 ☑ No ☐
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 ☑ 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
Non-accelerated filer
☑
☐
Accelerated filer
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. (cid:0)
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15
U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
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 30, 2020, the aggregate market value of the voting and non-voting common equity held by non-affiliates
of the registrant was approximately $4.8 billion. The aggregate market value was determined based on the closing
price of the Common Stock on June 30, 2020.
As of February 19, 2021, the registrant had 52,752,851 shares of Common Stock outstanding.
Documents Incorporated By Reference
Portions of the registrant's Proxy Statement for its 2021 Annual Meeting of Stockholders, which will be filed with the
Securities and Exchange Commission no later than 120 days after December 31, 2020, are incorporated by reference
into Part III of this Annual Report on Form 10-K.
14
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……………………………………………………………………………………. 16
32
RISK FACTORS……………………………………….…………………..………….………
45
UNRESOLVED STAFF COMMENTS……….…………….………..……………………….
45
PROPERTIES…………………………………………………………………………………
45
LEGAL PROCEEDINGS……………………….………..……………………………………
45
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………………………………………
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES………………………………
SIGNATURES…………………………………………………………………………………
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49
50
71
73
117
117
118
118
118
118
118
118
119
123
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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 processing provider. We offer payment and transaction processing and
distribution solutions to financial institutions, agents, retailers, merchants, content 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 electronic payment products; foreign exchange services and international payment
services.
Core Business Segments
We operate in the following three segments as of December 31, 2020:
The Electronic Fund Transfer ("EFT") Processing Segment processes transactions for a network of 37,729 ATMs and
approximately 340,000 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, 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 ("DCC"), 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 2020, the EFT Processing Segment accounted for approximately 19% 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 748,000 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 2020, the epay Segment accounted for approximately 33% of Euronet's consolidated revenues.
in North America, Europe and Malaysia) and our websites
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
(riamoneytransfer.com and
(primarily
online.imeremit.com), disbursing money
that
includes approximately 464,000 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 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 2020, the Money Transfer Segment accounted
for approximately 48% of Euronet's consolidated revenues.
through a worldwide correspondent network
transfers
16
Historical Perspective
• 1994 - Euronet was established as Euronet Bank Access Kft., a Hungarian limited liability company.
• 1997 - 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.
• 1998 - 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.
• 2001 - We changed our name from Euronet Services, Inc. to Euronet Worldwide, Inc. in August 2001.
• 2003 - We added a complementary business line through the acquisition of epay Limited (“epay”), which
had offices in the U.K. and Australia.
• 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.
• 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. We also added a complementary business
line through the acquisition of xe Corporation ("xe"), which provides currency-related data and international
payment services.
• 2019 – REN Ecosystem goes live and the migration of legacy software to the REN Ecosystem begins.
• Current - Euronet conducts business globally, serving customers in approximately 175 countries. As of
December 31, 2020, 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 43 countries. Our corporate offices
are located in Leawood, Kansas, USA.
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 17, 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 DCC, 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.
SOURCES OF REVENUES
The primary sources of revenues generated by our ATM network are recurring monthly management fees, transaction-
based fees, surcharges and margins earned on DCC 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
across Europe, the Middle East, Asia Pacific, and the United States. As of December 31, 2020, we operated
37,729 ATMs compared to 46,070 at December 31, 2019. The decrease was largely due to temporary closures of
ATMs in response to the COVID-19 pandemic.
17
We monitor the number of transactions made by cardholders on our network. These include cash withdrawals, balance
inquiries, deposits, prepaid mobile airtime recharge purchases, DCC 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 11.7% as indicated in the following
table:
(in millions)
EFT Processing Segment transactions per year
2016
1,885
2017
2,352
2018
2,721
2019
3,052
2020
3,275
The increase in transactions for 2020 is the result of a significant increase in the volume of lower value, digitally-
initiated payment processing transactions for an Asia Pacific customer's bank wallet and e-commerce site.
Our processing centers for the EFT Processing Segment are located in Germany, Hungary, India, China, and Pakistan.
Our processing centers run two types of proprietary transaction switching software: our legacy ITM software, which
we have used and sold to financial institutions since 1998 through our Software Solutions unit, an innovative switching
software package named "REN", which is hosted in Germany and India, that was released in 2017. The processing
centers operate 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,
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 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.
18
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 entities. 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 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, or DCC, over our IAD networks, ATM networks that we operate on an
outsourced basis for financial institutions, and over financial institutions' 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
the transactions are 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.
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 financial institutions, or
where we offer DCC as a stand-alone service to financial institutions 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 additional 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.
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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 financial institutions 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. REN is now operated for both internal resources and
external customers with the launch of the REN Foundation for Mozambique's National Payments Network in 2020.
REN is scalable and will allow us to offer payment and digital solutions to more 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, and is
currently utilized within the epay and Money Transfer Segments.
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.
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.
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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 seasonally deactivating ATMs in tourist locations that
experience significantly higher traffic during the summer. Seasonally deactivating involves shutting down the ATMs
during the slower 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 seasonally
deactivating has increased, because we continue to bear the expense of seasonally deactivated ATMs even though
they do not generate transactions during the slower 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 and we provide software services to financial institutions partially owned by
government-owned banks. In Austria, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Germany, Hungary, Ireland,
Italy, Malta, Poland, Portugal, Romania, Slovakia, Spain, and the United Kingdom, 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. In China and Greece, we have contracts with
clients and financial institutions that are partially owned by the government.
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.
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 748,000 POS terminals across
approximately 338,000 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 the U.K., Germany, Italy, and the U.S.
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 2020, approximately
65% of total revenues and approximately 71% of gross profit for the epay Segment 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:
(1) directly online from the content provider using an online payment method, or (2) through physical retail stores,
21
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: (1) through "postpaid" accounts, where
usage is billed at the end of each billing period, or (2) 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 purchased amount of the mobile airtime. 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.
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 multi-year
agreements with the retailers. 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 international POS network 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.
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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.
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 networks has increased over the last five years at a compound
annual growth rate ("CAGR") of approximately 13.1% as indicated in the following table:
(in millions)
epay processing transactions per year
2016
1,294
2017
1,186
2018
1,149
2019
1,542
2020
2,395
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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 2020.
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, 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 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 processing 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, AFEX, and xe. Ria and IME
provide consumer-to-consumer money transfer services through a global network of more than 464,000 locations and
our websites riamoneytransfer.com and online.imeremit.com. Most of our money transfers are originated through
sending agents in approximately 43 countries, with money transfer delivery completed in 159 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 7.2% as indicated in the
following table:
(in millions)
Money transfer transactions per year
2016
82.3
2017
92.2
2018
107.6
2019
114.5
2020
116.5
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 the U.S., the U.K., New Zealand, and Malaysia.
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 2020.
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 PRODUCTS AND SERVICES
Money transfer products and services are sold primarily through three channels: at agent locations, Company-owned
stores and on
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.
internet enabled devices at
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.
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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 is effective until April 2023. 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 7,000 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.
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.
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, Austria,
Bangladesh, Belarus, Belgium, Benin, Bhutan, Bolivia, Bosnia-Herzegovina, Botswana, Burkina Faso, Burundi,
Cameroon, Cape Verde, Chad, China, Costa Rica, Cote d'Ivoire, Cuba, Djibouti, Dominican Republic, Ecuador,
Egypt, El Salvador, Eritrea, Ethiopia, Fiji, Gabon, Gambia, Georgia, Ghana, Guatemala, Guinea, Guinea - Bissau,
Honduras, India, Indonesia, Italy, Jordan, Kenya, Kyrgyzstan, Laos, Liberia, Madagascar, Malaysia, Mali, Mauritania,
Mauritius, Mexico, Moldova, Morocco, Myanmar, Niger, Nigeria, Pakistan, Philippines, Poland, Romania, Rwanda,
Saudi Arabia, Serbia, Senegal, Sri Lanka, Suriname, Tanzania, Thailand, Togo, Tunisia, Turkey, Uganda, Ukraine,
Uzbekistan, Vietnam, Yemen, Zambia, and Zimbabwe.
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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
leading competitor with
includes The Western Union Company,
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, web-
based services and digital currencies. Our continued growth also depends upon our ability to compete effectively with
these alternative technologies.
the
EMPLOYEES
We had approximately 8,100, 7,700 and 7,100 employees as of December 31, 2020, 2019, and 2018, 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 2020 and we
consider relations with our employees to be good.
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 and sanctions 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 payment services requiring a license under the Second Payment Services
Directive, or PSD2, which replaced the Payment Services Directive, or PSD, effective January 13, 2018. Key changes
made by PSD2 include: creation of two new payment service types, 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 and the notification of incidents,
increased obligations relating to complaints handling and additional requirements regarding payment security. PSD2
as implemented in some member states also resulted in some of our European licensed institutions needing to go
through a re-authorisation process.
PSD2 requires a license to perform certain defined "payment services" in a European Economic Area (“EEA”)
Member State and such license may be extended throughout other Member States of the EEA through passporting of
the license (either on a freedom of service or freedom of establishment basis). 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. Traditionally, we passported our U.K., German and Spanish payment services authorizations to
several Member States. As a result of Brexit, our U.K, payment institution is no longer capable of passporting its
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license in to the EEA and the relevant EEA business was transferred to our other licenses prior to the end of the Brexit
transition period. Additionally, in the U.K., we have obtained an e-money license. 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. Prior to the end of the Brexit transition period, our e-money license was passported
into over twenty-five EEA Member States. As a result of Brexit, we have restructured the regulated services provided
by our U.K. e-money institution in the EEA Member States and transitioned them to our other payment service licenses
that can still operate in the EEA. The e-money institution will continue to operate in the U.K. unchanged.
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 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 July 2020, the European Court of Justice invalidated the
EU-US Privacy Shield as a lawful mechanism for transferring personal data to the US as a result of concerns related
to surveillance by law enforcement agencies and a lack of judicial redress by individuals in the EU (known as the
"Schrems II" decision). Despite the July 2020 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.
SANCTIONS COMPLIANCE
In addition to anti-money laundering laws and regulations, our products and services are subject to economic and trade
sanctions laws and regulations promulgated by OFAC and other jurisdictions in which our products and services are
offered. The sanctions laws and regulations prohibit or restrict transactions to or from (or dealings with or involving)
certain countries, regions, governments, and in certain circumstances, specified foreign nationals, as well as with
certain individuals and entities such as narcotics traffickers, terrorists, and terrorist organizations. These sanctions
laws and regulations require screening of transactions against government watch-lists, including but not limited to,
the watch-lists maintained by OFAC, and include transactional and other reporting to government agencies.
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 and
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 and DCC
services.
With respect to our epay Segment, we maintain registered trademarks for the "epay" brand and logo in the U.S., U.K.,
E.U. (through a Community Trademark application, which provides enforceability of the epay trademark in all
member states of the European Union), Brazil, Australia and New Zealand. We have filed trademark applications for
the “epay” brand in India and Singapore. The trademark applications in both countries are still pending.
Additionally, we have filed a trademark application for the “epay” brand with the Madrid Protocol, which, if granted,
will simplify the process to extending the international protection of the epay trademark. 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;
however, before entering new markets, we conduct searches to understand our usage rights. We have filed patent
applications for certain POS top-up and other 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 difficult 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 19, 2021 are as
follows:
Name
Michael J. Brown
Age
64
Served Since
Position Held
July 1994
Chairman, Chief Executive Officer and President
Rick L. Weller
63 November 2002 Executive Vice President - Chief Financial Officer
Scott D. Claassen
Kevin J. Caponecchi
54
54
May 2020
July 2007
Juan C. Bianchi
50
April 2007
General Counsel and Secretary
Executive Vice President - Chief Executive Officer, epay,
Software and EFT Asia Pacific Division
Executive Vice President - Chief Executive Officer, Money
Transfer Segment
Nikos Fountas
57 September 2009 Executive Vice President - Chief Executive Officer, EFT
Europe, Middle East and Africa Division
Martin L. Bruckner
45
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.
SCOTT D. CLAASSEN, General Counsel and Secretary. Mr. Claassen has been General Counsel and Secretary
of Euronet since joining the Company in May 2020. Prior to this, he practiced corporate law with Stinson LLP and
Shook, Hardy and Bacon LLP. He is a member of the Missouri bar. He received a B.S. in Agriculture from Kansas
State University, an MBA from the University of Kansas and a law degree from Harvard Law School.
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 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.
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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 INFORMATION
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
"Corporate Governance / Documents 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.
GOVERNMENT AND REGULATION
Because we are a multinational company conducting a complex business in many markets worldwide, we are
subject to legal and operational risks related to 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 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, anti-money laundering, sanctions, employment, transfer pricing and other
32
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.
For our epay Segment, 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 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.
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.
Additionally, 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 went 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.
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.
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, 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.
33
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 products and services.
Additionally, 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. 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 and
services.
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.
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
34
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, sanctions, 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.
SUPPLY CHAIN AND THIRD PARTIES
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 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.
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
35
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
issuer fails to settle transactions in accordance with those rules, we are dependent upon cooperation from such
associations or switching networks to enforce our right of settlement against such 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.
We could incur substantial losses if one of the third party depository institutions or financial 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.
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.
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, 2020, the amount of cash used in our ATM networks under these supply agreements was
approximately $616.3 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.
36
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 commit significant financial resources to the supply of cash to our ATM networks,
which could adversely impact our results of operations.
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.
CORPORATE GROWTH STRATEGIES
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 effected 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. 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
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Operations - Opportunities and Challenges. If any of such factors impede our ability to expand our businesses, our
results of operations and financial condition could be materially and adversely affected.
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:
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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.
If consumer confidence in our business or brands declines, our business may be adversely affected.
Our business relies on customer confidence in our brands and our ability to provide efficient and reliable products and
services across each of our segments. For our Money Transfer division, 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.
CAPITAL MARKETS AND ECONOMIC CONDITIONS
The outbreak of COVID-19 (coronavirus) has negatively impacted and could continue to negatively impact the
global economy. In addition, the COVID-19 pandemic could disrupt or otherwise negatively impact global
credit markets and our operations, including the demand for our products and services.
The significant outbreak of COVID-19 has resulted in a widespread health crisis, which has negatively impacted and
could continue to negatively impact the global economy. In addition, the global and regional impact of the outbreak,
including official or unofficial quarantines and governmental restrictions on activities taken in response to such event,
has had, and could continue to have a negative impact on our operations, reduced consumer demand for our products
and services due to reduced consumer traffic in, or closure of, retail and other locations where our products and
services are offered, including voluntary or mandatory temporary closures of our facilities or those of our agents
or customers; interruptions in our supply chain, which could impact the cost or availability of equipment; disruptions
or restrictions on our ability to travel or to market and distribute our products and services; and labor shortages.
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For example, the COVID-19 pandemic has resulted in travel restrictions within and between countries, including
mandatory quarantine requirements for travelers from certain locations, and varying degrees of “sheltering in-place”
and other social distancing orders in most of the countries where we do business. Among other things, these orders
restrict which businesses are allowed to be open and the conditions under which they are allowed to operate. Although
the majority of these orders went into effect at the end of February 2020 and throughout various times in March 2020,
new orders continue to be implemented, or reinstated, as the pandemic spreads around the global and new hot spots
flare up. These travel restrictions and orders, as well as increased unemployment and general economic uncertainty
caused by the pandemic, have negatively impacted our financial results. The EFT operating segment has experienced
declines in DCC and surcharge transaction volumes as the factors noted above have reduced these high-margin
transactions on our network of ATMs. For the epay and Money Transfer operating segments, the disruption in business
of the retailers and agents that offer our services and products may adversely affect their ability to remain in business
and/or timely remit payments owed to us. All of these factors, in turn, may not only impact our operations, financial
condition and demand for our products and services but our overall ability to react timely to mitigate the impact of
this event.
The COVID-19 outbreak could disrupt or otherwise negatively impact credit markets, which could adversely affect
the availability and cost of capital. Such impacts could limit our ability to fund our operations and satisfy our
obligations.
The extent and potential impact of the COVID-19 outbreak on our operational and financial performance will depend
on future developments, including the duration, severity and spread of the virus, the speed and effectiveness of rollouts
for vaccines and treatments, actions that may be taken by governmental authorities and the impact on our supply chain,
customers, operations, workforce and the financial markets, all of which are highly uncertain and cannot be predicted.
These and other potential impacts of an epidemic, pandemic or other health crisis, such as COVID-19, could therefore
materially and adversely affect our business, financial condition and results of operations.
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.
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.
Economic cycles may lead us 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 $787.7 million, or 16% 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. For example, during
2020, we incurred goodwill and acquired intangible asset impairment charges of $106.6 million. 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-
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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.
We have a substantial 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, 2020, total liabilities were $3,480.8 million, of which $1,437.6 million represents long-term debt
obligations, and total assets were $4,926.7 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:
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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.
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.
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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.
CYBER, PHYSICAL ASSET, AND DATA SECURITY
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 July 2020, the European Court of Justice invalidated the EU-US Privacy Shield as a lawful mechanism for
transferring personal data to the US as a result of concerns related to surveillance by law enforcement agencies and a
lack of judicial redress by individuals in the EU (known as the “Schrems II” decision). Euronet has relied on an
alternate mechanism of personal data transfer, called the Standard Contractual Clauses (“SCCs”), since the
enforcement of GDPR in 2018. In November 2020, the European Data Protection Board issued a series of
recommendations regarding supplementary measures to the SCCs, which Euronet is currently implementing. Our
money transfer business relies on the transfer of personal data of individuals in the EU to the US to enable payment
of money remittance transactions to beneficiaries through our correspondent network. If we are unable to transfer
personal data from the EU to the US or other countries where we operate, then it could affect the manner in which we
provide our services and adversely affect our financial results.
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 computer hardware, security breaches and software errors. Any
operational problem in our processing 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.
Our services and infrastructure are increasingly reliant on the Internet. Computer networks and the Internet are
vulnerable to unauthorized access, computer viruses and other disruptive problems such as denial of service attacks
or other cyber-attacks carried out by cyber criminals or state-sponsored actors. Other potential attacks include attempts
to obtain unauthorized access to confidential information or destroy data, often through the introduction of computer
viruses, ransomware or malware, cyber-attacks and other means, which are constantly evolving and difficult to detect.
Those same parties may also attempt to fraudulently induce employees, customers, vendors, or other users of our
systems through phishing schemes or other methods to disclose sensitive information in order to gain access to our
data or that of our customers or clients. 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
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mitigate it. As previously disclosed in our SEC filings, we have been 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. Under state, federal and foreign laws requiring consumer
notification of security breaches, the costs to remediate security breaches can be substantial. 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 attacks 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.
Failures of third-party service providers we rely upon could lead to financial loss.
We rely on third party service providers to support key portions of our operations. We also rely on third party service
providers to provide part or all of certain services we deliver to customers. While we have selected these third-party
vendors carefully, we do not control their actions. A failure of these services by a third party could have a material
impact upon our delivery of services to customers. Such a failure could lead to damage claims, loss of customers, and
reputational harm, depending on the duration and severity of the failure. Third parties perform significant operational
services on our behalf. These third-party vendors are subject to similar risks as us relating to cybersecurity,
breakdowns or failures of their own systems or employees. One or more of our vendors may experience a cybersecurity
event or operational disruption and, if any such event does occur, it may not be adequately addressed, either
operationally or financially, by the third-party vendor. Certain of our vendors may have limited indemnification
obligations or may not have the financial capacity to satisfy their indemnification obligations. If a critical vendor is
unable to meet our needs in a timely manner or if the services or products provided by such a vendor are terminated
or otherwise delayed and if we are not able to develop alternative sources for these services and products quickly and
cost-effectively, our customers could be negatively impacted and it could have a material adverse effect on our
business.
COMPETITIVE LANDSCAPE
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.
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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.
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.
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.
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GOVERNANCE MATTERS
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:
• 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.
Additionally, 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 8.1 million shares of common stock, representing approximately 15% of the shares outstanding
as of December 31, 2020, 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, 2020, we had 4.1 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, 1.5 million options are vested and exercisable as of December 31, 2020.
Approximately 0.7 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 2.0 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 4.6 million total options and restricted stock awards outstanding, an aggregate of 2.0 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 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
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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.
KEY PERSONNEL
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 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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our executive offices are located in Leawood, Kansas. As of December 31, 2020, 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 Germany, Hungary, India, China, and Pakistan.
Processing centers we operate for the epay Segment are located in the U.K., Germany, Italy, and the U.S. Our
processing centers for the Money Transfer Segment are located in the U.S., the U.K., New Zealand, and 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 19,
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.
45
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. We do not intend to distribute dividends for
the foreseeable future.
HOLDERS
At December 31, 2020, we had 45 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 2020, 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.
46
STOCK PERFORMANCE GRAPH
Set forth below is a graph comparing the total cumulative return on our Common Stock from December 31, 2015
through December 31, 2020 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, 2015.
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 2021. Used with permission. All rights reserved.
47
EQUITY COMPENSATION PLAN INFORMATION
Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 16, Stock Plans, and Part III,
Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters for
information related to our equity compensation plans.
STOCK REPURCHASES
The Company did not repurchase any shares during the quarter ended December 31, 2020.
Period
October 1 - October 31, 2020
November 1 - November 30, 2020
December 1 - December 31, 2020
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)
— $
—
—
— $
—
—
—
—
— $
—
—
—
259,362
259,362
259,362
(1) On March 11, 2019, in connection with the issuance of the Convertible Notes, the Board of Directors authorized
a repurchase program of $120 million in value of Euronet’s common stock through March 11, 2021. Euronet has
repurchased $110.6 million of stock under this program. On February 26, 2020, the Company put a repurchase
program in place to repurchase up to $250 million in value, but not more than 5.0 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.
48
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)
Income statement data:
Year Ended December 31,
2020
2019
2018
2017
2016
Revenues
$ 2,482,700 $ 2,750,109 $ 2,536,629 $ 2,252,422 $ 1,958,615
Operating expenses (1)
2,309,057 2,163,171 2,072,694 1,891,395 1,628,313
Depreciation and amortization
127,021
111,744
106,021
95,030
80,529
Operating income (1)
Other expenses, net
Income from continuing operations
before income taxes
Income tax expense
(Loss) income from continuing
operations
(Loss) earnings per share from
continuing operations:
46,622
475,194
357,914
265,997
249,773
(38,451 )
(41,387 )
(62,998 )
(9,662 )
(16,880 )
8,171
433,807
294,916
256,335
232,893
(11,475 )
(87,112 )
(62,785 )
(99,395 )
(58,795 )
$
(3,304 ) $ 346,695 $ 232,131 $ 156,940 $ 174,098
Basic
Diluted
$
$
(0.06 ) $
6.49 $
4.52 $
2.99 $
(0.06 ) $
6.31 $
4.26 $
2.85 $
3.34
3.23
Balance sheet data (at period end):
Assets
$ 4,926,711 $ 4,657,666 $ 3,321,155 $ 3,140,029 $ 2,712,872
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)
___________________
1,437,589 1,090,939
589,782
404,012
561,663
6,174
8,054
8,199
9,753
6,969
37,729
46,070
40,354
37,133
33,973
3,275
3,052
2,721
2,352
1,885
748,000
728,000
719,000
683,000
661,000
2,395
1,542
1,149
1,186
1,294
116.5
114.5
107.6
92.2
82.3
(1) The results of 2020, 2018 and 2017 include non-cash charges related to impairment of goodwill and acquired
intangible assets of $106.6 million, $7.0 million and $34.1 million, respectively.
49
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 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and
year-to-year comparisons between 2019 and 2018 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, 2019.
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 37,729 ATMs and
approximately 340,000 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 748,000 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, AFEX, 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 464,000 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 71% 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 REVENUES 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.
50
EFT Processing Segment — Revenues in the EFT Processing Segment, which represented approximately 19% of
total consolidated revenues for the year ended December 31, 2020, 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 33% of total consolidated revenues
for the year ended December 31, 2020, 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 65% 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 48% of
total consolidated revenues for the year ended December 31, 2020, 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 2023. 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.
51
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;
• 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 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 financial institutions;
• 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;
• the continued development and implementation of our software products and their ability to interact with
other leading products; and
• the impact of government imposed restrictions on travel into countries where we operate ATMs.
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.
52
epay Segment — The continued expansion and development of the epay Segment business will depend on various
factors, including, but not 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;
• the availability of financing for further expansion; and
• the impact of government imposed restrictions on retailers with whom we partner.
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.
53
Money Transfer Segment — The continued expansion and development of our Money Transfer Segment business
will depend on various factors, including, but not 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;
• our ability to provide additional value-added products under the xe brand; and
• the impact of government imposed restrictions on our network of agents and correspondents.
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.
COVID-19
The outbreak of the COVID-19 (coronavirus) pandemic has resulted in varying degrees of travel restrictions and
shelter-in-place and other social distancing orders in most of the countries where the Company operates during the
year ended December 31, 2020. Although the majority of these orders went into effect in late February 2020 or early
March 2020, new orders continue to be implemented, or reinstated, as the pandemic spreads around the globe and
there is a resurgence of infections. The EFT Segment has experienced declines in certain transaction volumes due to
these restrictions, especially high-margin cross-border transactions. The epay Segment has experienced the impacts
of consumer movement restrictions in certain markets, while other markets have been positively impacted where the
Company has a higher mix of digital distribution or a higher concentration of retailers that are deemed essential and
have remained open during the pandemic.
In response to the COVID-19 pandemic driven impacts, the Company implemented several key measures to offset the
impact across the business, including renegotiating certain third party contracts, reducing travel, decreasing capital
expenditures, and expanding ATM seasonal deactivations (placing them in dormancy status, terminating, or re-
negotiating) in more sites and more markets.
54
SEGMENT REVENUES AND OPERATING INCOME FOR THE YEARS ENDED DECEMBER 31, 2020
AND 2019
(in thousands)
EFT Processing
epay
Money Transfer
Total
Corporate services, eliminations and other
Total
SUMMARY
Revenues
Operating Income (Expense)
2020
2019
2020
2019
$ 468,726 $ 888,712 $ (66,711) $ 296,640
835,517
769,329
96,678
89,204
1,183,849 1,096,226
59,709
134,790
2,488,092 2,754,267
89,676
520,634
(5,392)
(4,158 ) (43,054)
(45,440 )
$ 2,482,700 $ 2,750,109 $ 46,622 $ 475,194
Our annual consolidated revenues decreased by 10% for 2020 compared to 2019. The decrease in revenues for
2020 was primarily due to a decrease in the number of ATMs under management, along with a decrease in demand
for DCC, domestic and international surcharge and other value added services in our EFT Processing
Segment, partially offset by growth in the number of money transfers processed by the core Ria business and the
number of transactions processed by our epay subsidiaries.
The decrease in operating income for 2020 was primarily due to the decrease in ATMs under management, along with
the decrease in demand for DCC, domestic and international surcharge, other value added services and the $106.6
million non-cash impairment of goodwill and acquired intangible assets, partially offset by the increase in the number
of money transfer transactions processed, and the increase in the number of transactions processed for epay.
Net loss attributable to Euronet for 2020 was $3.4 million, or $0.06 per diluted share and net income attributable to
Euronet for 2019 was $346.7 million, or $6.31 per diluted share.
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 2020 consolidated operating income was approximately 7% higher due to changes
in foreign currency exchange rates when compared to 2019. 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 2020 and 2019, 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,
2020
2019
2020 Increase
(Decrease)
Percent
$ 0.6904 $ 0.6954
(1) %
$ 1.2835 $ 1.2771
$ 1.1412 $ 1.1194
$ 0.0033 $ 0.0034
$ 0.0135 $ 0.0142
$ 0.2383 $ 0.2416
$ 0.6504 $ 0.6591
$ 0.2571 $ 0.2606
1 %
2 %
(3) %
(5) %
(1) %
(1) %
(1) %
55
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 -
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, 2020 and 2019:
(dollar amounts in thousands)
Total revenues
Operating expenses:
Direct operating costs
Salaries and benefits
Selling, general and administrative
Year Ended December 31,
2020
2019
Year-over-Year Change
Increase
Increase
(Decrease)
(Decrease)
Percent
Amount
$ 468,726 $ 888,712 $ (419,986)
(47) %
302,637 397,132
(94,495)
(24) %
91,526
87,603
35,388
35,518
3,923
(130)
21,861
4 %
(0) %
n/m
Goodwill and acquired intangible assets impairment
21,861
—
Depreciation and amortization
Total operating expenses
84,025
71,819
12,206
17 %
535,437 592,072
(56,635)
(10) %
Operating (loss) income
$ (66,711) $ 296,640 $ (363,351)
(122) %
Transactions processed (millions)
ATMs in service as of December 31
3,275
3,052
223
7 %
37,729
46,070
(8,341)
(18) %
Average ATMs in service during the year
42,126
44,756
(2,630)
(6) %
____________________
n/m — Not meaningful.
Revenues
EFT Processing Segment total revenues were $468.7 million for 2020, a decrease of $420.0 million or 47% compared
to 2019. Total revenues for 2020 decreased due to the impact of fewer active ATMs and fewer high-margin cross-
border transactions (DCC), related to COVID-19 pandemic-driven government-imposed border and business closures
and shelter-in-place orders. The government imposed border and business closures and shelter-in-place orders were
in effect for the majority of 2020. These closures resulted in a decrease in revenues for 2020 compared to 2019. Foreign
currency movements decreased total revenues by approximately $1.0 million for 2020 compared to 2019.
Average monthly revenues per ATM decreased to $927 for 2020 compared to $1,655 for 2019. Revenues per
transaction decreased to $0.14 for 2020 compared to $0.29 for 2019. The decreases in average monthly revenues per
ATM and revenue per transaction were attributable to the decreases in DCC and surcharge transactions, which earn
higher revenues per transaction than other ATM or card-based services. The decrease in DCC transactions was due to
the decline in tourism throughout Europe driven by the border and business closures during 2020.
Direct operating costs
EFT Processing Segment direct operating costs were $302.6 million for 2020, a decrease of $94.5 million or
24% compared to 2019. Direct operating costs in the EFT Processing Segment consist primarily of site rental fees,
cash delivery costs, cash supply costs, maintenance, insurance, telecommunications, payment scheme processing fees,
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 decrease in direct operating costs was primarily due to the decrease in the number of ATMs under
management, renegotiated and reduced site rental fees, and reduced operating costs for ATM's seasonally deactivated
during COVID-19 pandemic imposed restrictions. Foreign currency movements decreased direct operating costs by
approximately $1.0 million for 2020 compared to 2019.
56
Gross profit
Gross profit, which is calculated as revenues less direct operating costs, was $166.1 million for 2020, a decrease of
$325.5 million or 66% compared to $491.6 million for 2019. Gross profit as a percentage of revenues ("gross margin")
decreased to 35.4% for 2020 compared to 55.3% for 2019. The decrease in gross profit and gross margin was
attributable to decreases in DCC and domestic and international surcharge transactions.
Salaries and benefits
Salaries and benefits expenses were $91.5 million for 2020, an increase $3.9 million or 4% compared to 2019. The
increase in salaries and benefits was primarily attributable to additional headcount to support expansion in the United
States and long-term growth strategy, partially offset by a decrease in bonus expense. The border and business closures
and shelter-in-place orders that took effect in late February 2020 and March 2020 in response to the COVID-19
pandemic reduced transaction volumes and revenues through the end of 2020. High-margin cross-border
transactions and revenues for 2020 decreased compared to 2019 as a result. However, human resources to support
actual and planned growth were added throughout 2019 as well as the early part of 2020 before the COVID-19
pandemic took effect. As a percentage of revenues, these expenses increased to 19.5% for 2020 compared
to 9.9% for 2019. The Company made a decision to retain its employees during the pandemic.
Selling, general and administrative
Selling, general and administrative expenses were $35.4 million for 2020, a decrease of $0.1 million or flat compared
to 2019. As a percentage of revenues these expenses increased to 7.5% for 2020 compared to 4.0% for 2019. The
increase was primarily due to an increase in bad debt expense, partially offset by a decrease in travel related expenses.
Goodwill and acquired intangible assets impairment
Due to the economic impacts of the COVID-19 pandemic, the Company recorded a $21.9 million non-cash goodwill
impairment charge related to two reporting units during the second quarter of 2020. A $14.0 million non-cash goodwill
impairment charge was recorded for Innova as a result of the decline in VAT refund activity directly related to the
decline in international tourism within the European Union, and a $7.9 million non-cash goodwill impairment charge
was recorded for Pure Commerce related to the decline in international tourism in Asia Pacific.
Depreciation and amortization
Depreciation and amortization expenses were $84.0 million for 2020, an increase of $12.2 million or 17% compared
to 2019. The increase was primarily attributable to the deployment of additional ATMs (and subsequent seasonal
deactivation) and software assets. As a percentage of revenues, these expenses increased to 17.9% for 2020 compared
to 8.1% for 2019.
Operating (loss) income
loss
operating
income. Operating
EFT Processing Segment operating loss was $66.7 million for 2020, a decrease of $363.4 million or 122% compared
to 2019
("operating margin")
a
was (14.2%) for 2020 compared to operating income as a percentage of revenues of 33.4% for 2019 and operating
loss per transaction was ($0.02) for 2020 compared to operating income per transaction of $0.10 for 2019. The
decreases in operating income, operating margin, and operating income per transaction were primarily due to the
decrease in revenues for 2020 compared to 2019 and the non-cash goodwill impairment charges. Beginning in late
February 2020 and throughout December 2020, high margin cross-border transactions (DCC) decreased throughout
Europe due to the COVID-19 pandemic driven government imposed border and business closures and shelter-in-place
orders.
percentage
revenues
as
of
57
epay SEGMENT
The following table summarizes the results of operations for our epay Segment for the years ended December 31,
2020 and 2019:
(dollar amounts in thousands)
Total revenues
Operating expenses:
Direct operating costs
Salaries and benefits
Selling, general and administrative
Depreciation and amortization
Total operating expenses
Year Ended December 31,
Year-over-Year Change
2020
2019
Increase
(Decrease)
Amount
Increase
(Decrease)
Percent
$ 835,517 $ 769,329 $ 66,188
9 %
630,391
576,757
53,634
64,769
61,540
35,789
35,054
7,890
6,774
738,839
680,125
3,229
735
1,116
58,714
9 %
5 %
2 %
16 %
9 %
8 %
Operating income
$ 96,678 $ 89,204 $
7,474
Transactions processed (billions)
2.40
1.54
0.86
56 %
Revenues
epay Segment total revenues were $835.5 million for 2020, an increase of $66.2 million or 9% compared to 2019.
Revenue was higher by approximately $10 million related to a temporary increase in available margin provided by a
mobile operator which was entirely passed on to the retailer. The remaining increase in total revenues was primarily
due to an increase in the number of transactions processed driven by continued digital media growth. Foreign currency
movements increased total revenues by approximately $0.5 million for 2020 compared to 2019. The epay segment
was impacted by COVID-19 pandemic-driven government-imposed shelter-in-place orders and business closures,
primarily at retail outlets, which were partially offset by increases in digital media offerings in Asia.
Revenues per transaction decreased to $0.35 for 2020 compared to $0.50 for 2019. 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 $630.4 million for 2020, an increase of $53.6 million or 9% compared to
2019. 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 transaction volumes for the large volume of low-value mobile top-up and digital transactions. Foreign
currency movements decreased direct operating costs by approximately $0.3 million for 2020 compared to 2019.
Gross profit
Gross profit was $205.1 million for 2020, an increase of $12.5 million or 6% compared to $192.6 million for 2019.
Gross margin decreased to 24.6% for 2020 compared to 25.0% for 2019. The increase in gross profit and the decrease
in gross margin is driven by the increase in transaction volumes processed in regions where we generally earn lower
revenues per transaction.
Salaries and benefits
Salaries and benefits expenses were $64.8 million for 2020, an increase of $3.2 million or 5% compared to 2019. The
increase in salaries and benefits was driven by an increase in headcount to support the growth of the business. As a
percentage of revenues, these expenses decreased to 7.8% for 2020 compared to 8.0% for 2019.
58
Selling, general and administrative
Selling, general and administrative expenses were $35.8 million for 2020, an increase of $0.7 million or 2% compared
to 2019. The increase in selling, general and administrative expenses was driven by maintenance costs in hardware
and software to operate the business, partially offset by a decrease in travel related expenses. As a percentage of
revenues, these expenses decreased to 4.3% for 2020 compared to 4.6% for 2019.
Depreciation and amortization
Depreciation and amortization expenses were $7.9 million for 2020, an increase of $1.1 million or 16% compared
to 2019. Depreciation and amortization expenses primarily represent depreciation of POS terminals we install in retail
stores and amortization of acquired intangible assets. The increase is primarily due to the addition of POS terminals
and software assets. As a percentage of revenues, these expenses were flat at 0.9% for both 2020 and 2019.
Operating income
epay Segment operating income was $96.7 million for 2020, an increase of $7.5 million or 8% compared to 2019.
Operating margin was 11.6% for both 2020 and 2019 and operating income per transaction was $0.04 for 2020
compared to $0.06 for 2019. The increase in operating income and consistent operating margin was primarily due to
an increase in the number of higher-margin digital media transactions and the decrease in operating income per
transaction was driven by transactions processed in a region where we generally earn lower revenues per transaction.
MONEY TRANSFER SEGMENT
The following table summarizes the results of operations for our Money Transfer Segment for the years ended
December 31, 2020 and 2019:
Year Ended December 31,
Year-over-Year Change
2020
2019
Increase
(Decrease)
Amount
Increase
(Decrease)
Percent
$ 1,183,849 $ 1,096,226 $
87,623
8 %
(dollar amounts in thousands)
Total revenues
Operating expenses:
Direct operating costs
Salaries and benefits
Selling, general and administrative
649,033
586,730
62,303
213,511
208,792
142,161
133,068
4,719
9,093
84,741
1,848
11 %
2 %
7 %
n/m
6 %
17 %
Goodwill and acquired intangible assets impairment
Depreciation and amortization
84,741
34,694
—
32,846
Total operating expenses
Operating income
1,124,140
961,436
162,704
$ 59,709 $ 134,790 $
(75,081)
(56) %
Transactions processed (millions)
116.5
114.5
2.0
2 %
____________________
n/m — Not meaningful.
Revenues
Money Transfer Segment total revenues were $1,183.8 million for 2020, an increase of $87.6 million or 8% compared
to 2019. The increase in revenue was primarily due to increases in U.S. outbound and international-originated money
transfers, partially offset by a decrease in the U.S. domestic business. Foreign currency movements increased total
revenues by approximately $7.2 million for 2020 compared to 2019.
Revenues per transaction increased to $10.16 for 2020 compared to $9.57 for 2019. The increase in revenues per
transaction was primarily driven by the shift in the proportion of domestic to international transfers. We earn higher
revenue per transaction on international remittances.
59
Direct operating costs
Money Transfer Segment direct operating costs were $649.0 million for 2020, an increase of $62.3 million or
11% compared to 2019. 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 was primarily due the increase in the number of U.S. outbound and international-originated money
transfer transactions, partially offset by the impact of the U.S. dollar strengthening against key foreign
currencies. Foreign currency movements increased direct operating costs by approximately $4.3 million for 2020
compared to 2019.
Gross profit
Gross profit was $534.8 million for 2020, an increase of $25.3 million or 5% compared to $509.5 million for 2019.
Gross margin decreased to 45.2% for 2020 compared to 46.5% for 2019. The increase in gross profit was primarily
due to increases in U.S. outbound and international-originated money transfers.
Salaries and benefits
Salaries and benefits expenses were $213.5 million for 2020, an increase of $4.7 million or 2% compared to 2019.
The increase in salaries and benefits was primarily driven by an increase in headcount to support the growth of the
business, partially offset by a decrease in bonus expense. As a percentage of revenues, these expenses
decreased to 18.0% for 2020 compared to 19.0% for 2019.
Selling, general and administrative
Selling, general and administrative expenses were $142.2 million for 2020, an increase of $9.1 million or 7%
compared to 2019. The increase was primarily due to expenses incurred to support the growth of our money transfer
services, the expansion of new products and services in both the U.S. and foreign markets, and an increase in bad debt
expense, partially offset by a decrease in travel related expenses. As a percentage of revenues, these expenses
decreased to 12.0% for 2020 compared to 12.1% for 2019.
Goodwill and acquired intangible assets impairment
Due to the economic impacts of the COVID-19 pandemic, the Company recorded an $82.7 million non-cash goodwill
impairment charge related to the xe reporting unit during the second quarter of 2020. The non-cash goodwill
impairment charge was recorded for xe as a result of declines in the international payments business stemming from
economic uncertainty. During the second half of 2020, a $2.0 million non-cash acquired intangible asset impairment
charge was recorded for xe on previously acquired customer relationship intangible assets due to the discontinuation
of trading with certain customers during 2020.
Depreciation and amortization
Depreciation and amortization expenses were $34.7 million for 2020, an increase of $1.8 million or 6% compared to
2019. Depreciation and amortization expenses primarily represent amortization of acquired intangible assets and
depreciation of money transfer terminals, computers and software, leasehold improvements and office equipment. The
increase is primarily due to investments made to support the growth in the business. As a percentage of revenues,
these expenses decreased to 2.9% for 2020 compared to 3.0% for 2019.
Operating income
Money Transfer Segment operating income was $59.7 million for 2020, a decrease of $75.1 million or 56% compared
to 2019. Operating margin decreased to 5.0% for 2020 compared to 12.3% for 2019 and operating income per
transaction decreased to $0.51 for 2020 compared to $1.18 for 2019. The decreases in operating income and operating
margin were primarily driven by the non-cash goodwill impairment charge and the increase in selling, general and
administrative expenses incurred to support the expansion of new products and markets, partially offset by increases
in higher margin transactions for U.S. outbound and international-originated money transfers during the third and
fourth quarter of 2020.
60
CORPORATE SERVICES
The following table summarizes the results of operations for Corporate Services for the years ended December 31,
2020 and 2019:
(dollar amounts in thousands)
Salaries and benefits
Selling, general and administrative
Depreciation and amortization
Year Ended December 31,
Year-over-Year Change
2020
2019
Increase
(Decrease)
Amount
Increase
(Decrease)
Percent
$
34,336 $
36,809 $
(2,473)
8,306
412
8,326
305
(20)
107
(7) %
(0) %
35 %
(5) %
Total operating expenses
$
43,054 $
45,440 $
(2,386)
Corporate operating expenses
Total Corporate operating expenses were $43.1 million for 2020, a decrease of $2.4 million or 5% compared to 2019.
The decrease is attributable to a decrease in bonus expense.
OTHER EXPENSE, NET
(dollar amounts in thousands)
Interest income
Interest expense
Other gains, net
Foreign currency exchange (loss) gain, net
Other expense, net
$
Other gains, net
Year Ended December 31,
Year-over-Year Change
2020
2019
Increase
(Decrease) Amount
Increase
(Decrease) Percent
$
1,040 $ 1,969 $
(36,604)
869
(3,756)
(36,237 )
(9,820)
2,701
(38,451) $ (41,387 ) $
(929)
(367)
10,689
(6,457)
2,936
(47) %
1 %
(109) %
(239) %
(7) %
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 of those Restricted Convertible Notes and the redemption of the remaining Retired Convertible Notes,
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 and redemption.
61
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 loss of $3.8 million for 2020 and a net foreign currency exchange gain
of $2.7 million in 2019. These realized and unrealized foreign currency exchange losses and gains reflect the
fluctuation in the value of the U.S. dollar against the currencies of the countries in which we operated during the
respective periods.
INCOME TAX EXPENSE
Our effective income tax rates as reported and as adjusted are calculated below:
(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
Year Ended December 31,
2020
2019
$
8,171 $ 433,807
(11,475)
(87,112 )
$ (3,304) $ 346,695
140.4 %
20.1 %
$
8,171 $ 433,807
(106,602)
—
(9,820)
2,701
$ 117,660 $ 440,926
869
(3,756)
$ (11,475)
$ (87,112 )
Adjust: Income tax benefit (expense) attributable to 2017 U.S. Tax Reform
—
25,728
Adjust: Income tax benefit (expense) attributable to foreign currency exchange (loss)
gain, net
Income tax expense, as adjusted
Effective income tax rate, as adjusted
4,055
10,990
$ (15,530)
$ (123,830 )
13.2 %
28.1 %
We calculate our effective income tax rate by dividing income tax expense by pre-tax book income. Our effective
income tax rates were 140.4% and 20.1% for the years ended December 31, 2020 and 2019, 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 the fourth quarter of 2019 after additional regulatory guidance was issued by applicable taxing
authorities, the Company elected to claim U.S. foreign tax credits, which reduced the net tax expense by $25.7 million.
See Note 14, Income Taxes, to the Consolidated Financial Statements for further information. The effective income
tax rates were also significantly influenced by the impact of the goodwill and acquired intangible asset impairment
and foreign currency exchange gains (losses). Excluding foreign currency exchange gains (losses) and goodwill and
acquired intangible asset impairment items from pre-tax income, as well as the related tax effects for these items, our
adjusted effective income tax rates were 13.2% and 28.1% for the years ended December 31, 2020 and 2019,
respectively.
62
The effective income tax rate, as adjusted, for 2020 was lower than the applicable statutory income tax rate of 21%
primarily because of the release of unrecognized tax benefits for the completion of foreign country tax audits. The
effective income tax rate, as adjusted, for 2019 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.
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, contract 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.
Our total liability for uncertain tax positions under Accounting Standards Codification ("ASC") 740-10-25 and -
30 was $39.8 million as of December 31, 2020. 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.
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
Net income attributable to noncontrolling interests was $0.1 million for 2020 and net loss attributable to
noncontrolling interests was $0.1 million for 2019. 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 Segment - Country
95%
85%
70%
65%
epay - Spain
EFT - China
EFT - Pakistan
EFT - India
NET (LOSS) INCOME ATTRIBUTABLE TO EURONET
Net loss attributable to Euronet was $3.4 million for 2020 compared to the net income attributable to Euronet for 2019,
a decrease of $350.1 million or 101%. The decrease in net income was primarily attributable to the $267.4 million
decrease in revenues, the $161.2 million increase in operating expenses (including the $106.6 million non-cash
goodwill and acquired intangible asset impairment charges), and $6.5 million increase in net foreign currency
exchange losses, partially offset by a $9.8 million decrease in loss on early retirement of debt and a decrease in income
tax expense of $75.6 million.
63
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 gain on translation adjustments of $70.8 million for 2020 and a net loss of $13.9 million for 2019.
During 2020, the U.S. dollar weakened compared to key foreign currencies, resulting in translation gains which were
recorded in comprehensive income. In 2019, 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, 2020, we had working capital of $1,510.5 million, which is calculated as the difference between
total current assets and total current liabilities, compared to working capital of $1,284.8 million as of December 31,
2019. The increase in working capital is primarily driven by an increase in borrowings on our revolving credit facility
of $270.4 million and operating results for 2020, partially offset by $239.8 million of share repurchases during the
first quarter of 2020. This $270.4 million was utilized to facilitate effective cash management for year-end payment
and settlement requirements across many countries and was repaid in January 2021. Our ratio of current assets to
current liabilities was 1.81 and 1.79 as of December 31, 2020 and December 31, 2019, 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, 2020, we had approximately $411.1 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. ATM cash
decreased $254.5 million from $665.6 million as of December 31, 2019 to $411.1 million as of December 31, 2020
as a result of the reduction in number of active ATMs as of December 31, 2020 compared to December 31, 2019.
The Company has $1,420.3 million of unrestricted cash as of December 31, 2020 compared to $786.1 million as of
December 31, 2019. The increase in cash is primarily due to the transfer of ATM cash to unrestricted cash, cash
generated from operations, and additional borrowings on the Credit Facility of $270.4 million, partially offset by
$239.8 million in share repurchases during the first quarter of 2020. Including the $411.1 million of cash in ATMs at
December 31, 2020, the Company has access to $1,831.4 million in available cash, and $668.8 million available under
the credit facility with no significant long-term debt principal payments until October 2023.
We had cash, cash equivalents and restricted cash of $2,099.5 million as of December 31, 2020, of which
$1,394.8 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.
64
The following table identifies cash and cash equivalents provided by/(used in) our operating, investing and financing
activities for the years ended December 31, 2020 and 2019 (in thousands):
Liquidity
Cash and cash equivalents and restricted cash provided by (used in):
Year Ended December 31,
2020
2019
Operating activities
Investing activities
Financing activities
$ 253,505 $ 504,488
(105,531)
35,398
(229,027 )
416,298
Effect of foreign currency exchange rate changes on cash and cash equivalents and
restricted cash
Increase in cash and cash equivalents and restricted cash
98,757
(5,332 )
$ 282,129 $ 686,427
Operating cash flow
Cash flows provided by operating activities were $253.5 million for 2020 compared to $504.5 million for 2019. The
decrease in operating cash flows was primarily due to the decrease in net income, partially 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 $105.5 million for 2020 compared to $229.0 million for 2019. The
decrease is primarily the result of a $93.1 million decrease in acquisitions during 2020 compared to 2019. We
used $97.6 million for purchases of property and equipment in 2020 compared to $131.3 million in 2019. The
decrease in purchases of property and equipment is primarily driven by the COVID-19 pandemic related impacts to
the EFT segment. Cash used for software development and other investing activities totaled $7.8 million in 2020
compared to $7.3 million in 2019. Other investing activities consists mainly of proceeds from the sale of property and
equipment of $1.0 million for 2020 and $3.7 million for 2019.
Financing activity cash flow
Cash flows provided financing activities were $35.4 million for 2020 compared to $416.3 million for 2019. The net
borrowings on debt obligations were $265.2 million for 2020 compared to $500.2 million in 2019. The decrease in
net borrowings was the result of the issuance of $1,194.9 million of Convertible Notes and Senior Notes during 2019
which were used to fund the operating cash of our IAD networks, repay revolving credit facility borrowings and
repurchase a portion of existing convertible notes, partially offset by $270.4 million outstanding on the Credit Facility
as of December 31, 2020. We repurchased $241.5 million and $74.5 million of our common stock during
2020 and 2019, respectively. Of the $241.5 million repurchased shares, $239.8 million of Euronet common stock was
repurchased under our repurchase program. We received proceeds of $18.1 million and $15.0 million during
2020 and 2019, 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 $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, euro, Hungarian forints, Japanese yen, New Zealand
dollars, Norwegian krone, Polish zlotys, Swedish krona, Swiss francs, and U.S. dollars. The 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, 2020, fees and interest on borrowings are based upon the Company's corporate credit rating (as
defined in the Credit Facility) 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).
65
As of December 31, 2020, we had $270.4 million of borrowings and $60.8 million of stand-by letters of credit
outstanding under the Credit Facility. The remaining $668.8 million under the Credit Facility was available for
borrowing. As of December 31, 2020, the weighted average interest rate under the Credit Facility was 1.2%, 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”). As of December 31, 2020 the carrying value of the Convertible Notes
was $452.2 million. 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 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, we recorded $12.8 million in debt
issuance costs, which are being amortized through March 1, 2025.
For the Retired Convertible Notes, in accordance with ASC 470, the Company recognized a loss of $9.8 million on
the conversion and redemption of the debt in 2019, 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.
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, 2020, the Company has outstanding €600 million ($732.8 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 $0.9 million and $6.2 million
outstanding under
these other obligation arrangements as of December 31, 2020 and December 31,
2019, respectively.
Other uses of capital
Capital expenditures and needs — Total capital expenditures for 2020 were $96.2 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 2021 are
currently estimated to be approximately $135 million to $140 million. The Company reduced capital expenditures for
2020 due to the COVID-19 pandemic.
Contractual lease obligations — The Company has entered into contractually binding operating and finance lease
commitments to operate the business. Operating lease expenses were $83.1 million for the year ended December 31,
2020 and $130.5 million for the year ended December 31, 2019. Finance lease expenses were not material for 2020
or 2019. For additional information on operating and finance lease obligations, see Note 13, Leases, to the
Consolidated Financial Statements.
At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on
hand and amounts available under our Credit Facility and other existing and potential future financings 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.
66
Share repurchase plan
The Company's Board of Directors had authorized a stock repurchase program allowing Euronet to repurchase up to
$375 million in value or 10.0 million shares of stock through March 31, 2020. The Company repurchased all $375
million of stock under this 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 the Company's
common stock through March 11, 2021. The Company has repurchased $110.6 million of stock under this program.
On February 26, 2020, the Company put a repurchase program in place to repurchase up to $250 million in value, but
not more than 5.0 million shares of common stock through February 28, 2022. For the year ended December 31, 2020,
the Company repurchased 2.1 million shares under the repurchase programs at a weighted average purchase price
of $114.41 for a total value of $239.8 million. Repurchases under either of the current programs 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.
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.
OFF BALANCE SHEET ARRANGEMENTS
We have certain significant off balance sheet items described below, in the following section, “Contractual
Obligations” and in Note 20, 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, 2020.
CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations as of December 31, 2020:
Payments due by period
(in millions)
Long-term debt obligations, including interest
Obligations under operating leases (undiscounted)
Total
Less than
1 year
1-3 years 3-5 years
Total
$ 1,608.4 $ 17.3 $ 304.5 $ 549.9 $ 736.7
27.1
$ 1,772.2 $ 65.9 $ 365.3 $ 577.2 $ 763.8
163.8
60.8
27.3
48.6
More
than
5 years
The computation of interest for debt obligations with variable interest rates reflects interest rates in effect
at December 31, 2020 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 11, Debt Obligations, to the Consolidated
Financial Statements.
For additional information on operating lease obligations, see Note 13, Leases, to the Consolidated Financial
Statements.
Our total liability for uncertain tax positions under Accounting Standards Codification ("ASC") 740-10-25 and -30
was $39.8 million as of December 31, 2020. 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.
67
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 intangible 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 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 14, Income Taxes, to the Consolidated
Financial Statements, gross deferred tax assets were $274.2 million as of December 31, 2020, partially offset by a
valuation allowance of $77.6 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, 2020. 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.
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.
68
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. Our annual impairment tests are performed during the fourth quarter and
are performed at the reporting unit level. Our annual process for evaluating goodwill allows us to perform a qualitative
assessment for all reporting units, and then perform a quantitative goodwill impairment test for those reporting units
in which it is deemed necessary. 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 is determined using discounted projected
future cash flows and market multiple of earnings. If the carrying amount of the reporting unit exceeds the fair value
of the reporting unit, a goodwill 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.
The COVID-19 pandemic and subsequent mitigation efforts, which included global business shutdowns, the closing
of borders and the implementation of mandatory social distancing requirements, created an unprecedented disruption
to our business beginning in the first half of 2020. These mitigation efforts coupled with the negative economic impacts
to the tourism industry caused some of our reporting units to either have a temporary or sustained decline in revenues
and earnings and necessitated changes to our forecasted outlook. We determined the totality of these events
constituted a triggering event that required us to perform an interim goodwill impairment assessment as of June 1,
2020. We concluded a triggering event had occurred for six reporting units, resulting in quantitative impairment tests.
Three reporting units are within the EFT segment, two reporting units are within the Money Transfer segment, and
one reporting unit is within the epay segment.
The fair value of these reporting units were determined using weighted results from the discounted cash flow model
("DCF model") and guideline public company method ("Market Approach model"). A number of significant
assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including
forecasted revenue, forecasted EBITDA margin, and discount rate. Significant assumptions and inputs in the Market
Approach model are EBITDA, EBITDA market multiple, and the estimated control premium. The DCF Model and
Market Approach Model utilize Level 3 inputs in the fair value hierarchy as they include unobservable inputs that
require significant management assumptions.
The results of the June 1, 2020 quantitative test were that three of the six reporting units’ fair value exceeded their
respective carrying amounts. For the remaining three reporting units, the quantitative test indicated that the fair value
of each of the reporting units was less than the respective carrying amounts. As a result, we recorded a non-cash
goodwill impairment charge of $104.6 million with respect to the xe, Innova and Pure Commerce reporting units. A
total of $21.9 million of the impairment charge was included within the EFT Segment, and $82.7 million of the
impairment charge was included in the Money Transfer Segment.
Subsequent to June 1, 2020 and through year-end, including the fourth quarter annual impairment test, management
monitored whether there were events or changes in circumstances that had occurred, at a reporting unit level,
to indicate that goodwill was impaired or further impaired. There were no indications of impairment and no additional
non-cash goodwill impairment charges were recorded.
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
69
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 its 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, 2020, the Consolidated Balance Sheet includes goodwill of $665.8 million and acquired intangible
assets, net of accumulated amortization, of $121.9 million. The Company recorded $104.6 million of non-cash
goodwill impairment charges and $2.0 million of acquired intangible asset impairment charges for the year ended
December 31, 2020. For more detail on the Company's impairment charges, see Note 9, Goodwill and Acquired
Intangible Assets, Net, to the accompanying Consolidated Financial Statements.
Recently Issued Accounting Pronouncements
See Item 8 of Part II, "Financial Statements and Supplementary Data - Note 3 - Summary of Significant Accounting
Policies and Practices.
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;
• the impact of the COVID-19 pandemic on our results of operations and financial position;
• 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 impacts from the COVID-19 pandemic; the speed and effectiveness of rollouts for vaccines and treatments
for COVID-19; 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,
sanctions, 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
70
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; 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate risk
As of December 31, 2020, our total debt outstanding, excluding unamortized debt issuance costs, was $1,456.3
million. Of this amount, $452.2 million, net of debt discounts, or 31% of our total debt obligations, relates to our
contingent Convertible Notes that have a fixed coupon rate. Our $525.0 million outstanding principal amount of
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, 2020, the fair value of our fixed rate Convertible Notes was $667.4 million, compared to
a carrying value of $452.2 million. Interest expense for the Convertible 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,
2020, we had $270.4 million outstanding under our Credit Facility, or 19% of our total debt obligations.
Additionally, $732.8 million, or 50% 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, 2020, the fair value of our fixed rate Senior Notes
was $728.7 million, compared to a carrying value of $732.8 million. The remaining $0.9 million, or 0.1% 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, 2020, we had approximately $12.6 million of finance leases with fixed payment
and interest terms that expire between the years of 2021 and 2025.
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, 2020 and 2019, 71% and 74% 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, 2020, 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 $80 million to $85 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 $98 million to
$103 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
71
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 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, 2020, we had foreign currency derivative contracts
outstanding with a notional value of $246 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, 2020, we held foreign currency derivative contracts outstanding with a notional value of $1.3 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, 2020,
the Company had foreign currency forward contracts outstanding with a notional value of $454 million, primarily in
euros.
See Note 12, Derivative Instruments and Hedging Activities to our Consolidated Financial Statements for additional
information.
72
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
74
Report of Independent Registered Public Accounting Firm…...………………………………………………...
77
Consolidated Financial Statements…...………………………………………………………………………….
77
Consolidated Balance Sheets…………………………………………………………………………………….
78
Consolidated Statements of Operations……………………………………………………………………….....
79
Consolidated Statements of Comprehensive Income…………………………………………………………….
80
Consolidated Statements of Changes in Equity………………………………………………………………….
82
Consolidated Statements of Cash Flows…………………………………………………………………………
84
Notes to Consolidated Financial Statements……………………………………………………………………..
84
(1) Organization……………………………………………………………………………………………...
84
(2) Basis of Preparation………………………………………………………………………………………
84
(3) Summary of Significant Accounting Policies and Practices……………………………………………..
90
(4) Settlement Assets and Obligations……………………………………………………………………….
91
(5) Stockholders' Equity……………………………………………………………………………………...
92
(6) Acquisitions………………………………………………………………………………………………
93
(7) Restricted Cash…………………………………………………………………………………………...
93
(8) Property and Equipment, Net…………………………………………………………………………….
94
(9) Goodwill and Acquired Intangible Assets, Net…………………………………………………………..
95
(10) Accrued Expenses and Other Current Liabilities……………………………………………………….
95
(11) Debt Obligations………………………………………………………………………………………...
98
(12) Derivative Instruments and Hedging Activities………………………………………………………...
(13) Leases…………………………………………………………………………………………………...
100
(14) Income Taxes…………………………………………………………………………………………… 102
106
(15) Valuation and Qualifying Accounts…………………………………………………………………….
106
(16) Stock Plans……………………………………………………………………………………………...
109
(17) Business Segment Information………………………………………………………………………….
(18) Financial Instruments and Fair Value Measurements…………………………………………………..
113
114
(19) Litigation and Contingencies……………………………………………………………………………
(20) Commitments…………………………………………………………………………………………… 115
116
(21) Related Party Transactions……………………………………………………………………………...
116
(22) Selected Quarterly Data (Unaudited)…………………………………………………………………...
73
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, 2020 and 2019, the related consolidated statements of operations, comprehensive
income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2020,
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, 2020, 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, 2020 and 2019, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2020, 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, 2020 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 13 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.
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 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.
74
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.
Sufficiency of audit evidence over revenue
As discussed in Note 3 to the consolidated financial statements, the Company earned $2.48 billion of revenue
in 2020. 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 approximately 175 countries through 66 different business offices in
43 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 following are the primary procedures we performed to address this critical audit matter. We applied
auditor judgment to determine the nature and extent of procedures to be performed over revenue, including
the determination of locations at which those procedures were to be performed. At each Company location
selected, we:
• evaluated the design and tested the operating effectiveness of certain internal controls related to the
Company’s revenue process, including controls over the accurate recording of revenue amounts
• assessed the training and experience of the auditors on our audit team that were in countries other
than the United States
• tested a sample of individual revenue transactions by comparing amounts recognized by the
Company to relevant contracts and or payment and transaction support.
We evaluated the sufficiency of audit evidence obtained over revenue by assessing the results of procedures
performed, including the appropriateness of such evidence.
Goodwill impairment analysis for one reporting unit in the Money Transfer segment
As discussed in Note 3 and 9 to the consolidated financial statements, the Company performs goodwill
impairment testing on an annual basis and whenever events or changes in circumstances indicate that it is
75
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, 2020 was $665.8 million. During the year ended December 31,
2020, the Company recognized an impairment charge of $104.6 million, including a charge of $82.7 million
for one reporting unit in the Money Transfer segment. The fair value of this one reporting unit in the Money
Transfer segment was determined using a weighting of a discounted cash flow model and market multiples
valuation technique.
We identified the evaluation of the goodwill impairment analysis for this one reporting unit in the Money
Transfer segment as a critical audit matter. Subjective auditor judgment was required in evaluating certain
assumptions used to estimate the fair value of the reporting unit, including assumptions related to (1)
forecasted revenue growth rates, (2) forecasted operating expense excluding depreciation, amortization, and
impairment, (3) discount rate, and (4) earnings before interest, taxes, depreciation, and amortization
(EBITDA) market multiple. Changes to these assumptions could have a significant effect on the fair value
determination and assessment of the carrying value of the goodwill. Specialized skills and knowledge were
required in the assessment of the discount rate and EBITDA market multiple.
The following are the primary procedures we performed to address this critical audit matter. We evaluated
the design and tested the operating effectiveness of certain internal controls related to the Company’s
goodwill impairment assessment process, including controls related to the development of the significant
assumptions. We evaluated the Company’s forecasted revenue growth rates and forecasted operating expense
excluding depreciation, amortization and impairment 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 developed using publicly available third-party market data for comparable entities.
We have served as the Company's auditor since 2003.
/s/ KPMG LLP
Kansas City, Missouri
February 19, 2021
76
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 of credit loss allowance of $5,926 and $3,892
Prepaid expenses and other current assets
Total current assets
Operating right of use lease assets
Property and equipment, net of accumulated depreciation of $490,429 and $410,243
Goodwill
Acquired intangible assets, net of accumulated amortization of $175,210 and $204,853
Other assets, net of accumulated amortization of $55,710 and $46,788
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:
December 31,
2020
2019
$ 1,420,255 $ 786,081
665,641
411,054
3,334
34,301
1,140,875 1,013,067
201,935
117,517
272,900
217,707
3,365,935 2,918,732
377,543
162,074
378,441
359,980
665,821
743,823
121,883
141,847
232,557
115,741
$ 4,926,711 $ 4,657,666
$ 1,140,875 $ 1,013,067
147,593
81,743
404,021
294,557
52,436
127,353
797
36,359
73,360
6,089
52,583
58,588
1,855,441 1,633,980
1,437,589 1,090,939
106,502
241,977
37,875
43,401
56,067
55,361
3,480,808 3,078,324
Preferred Stock, $0.02 par value. 10,000,000 shares authorized; none issued
Common Stock, $0.02 par value. 90,000,000 shares authorized; shares issued 63,366,010 and 62,775,762
—
1,267
—
1,256
Additional paid-in capital
Treasury stock, at cost, shares issued 10,631,961 and 8,554,908
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.
77
(463,704 )
1,228,446 1,190,058
(703,032)
1,013,155 1,016,554
(94,214)
1,445,622 1,579,274
(164,890 )
281
68
1,445,903 1,579,342
$ 4,926,711 $ 4,657,666
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Revenues
Operating expenses:
Direct operating costs
Salaries and benefits
Selling, general and administrative
Year Ended December 31,
2020
2019
2018
$ 2,482,700 $ 2,750,109 $ 2,536,629
1,576,699 1,556,483 1,488,406
404,142
394,744
360,432
221,614
211,944
216,807
Goodwill and acquired intangible assets impairment
106,602
—
7,049
Depreciation and amortization
Total operating expenses
Operating income
Other income (expense):
Interest income
Interest expense
Loss from unconsolidated affiliates
Foreign currency exchange (loss) gain, net
Other gains (losses), net
Other expense, net
Income before income taxes
Income tax expense
Net (loss) income
127,021
111,744
106,021
2,436,078 2,274,915 2,178,715
46,622
475,194
357,914
1,040
1,969
1,320
(36,604)
—
(3,756)
869
(38,451)
8,171
(11,475)
(3,304)
(36,237 )
—
2,701
(9,820 )
(37,573 )
(117 )
(26,655 )
27
(41,387 )
(62,998 )
433,807
294,916
(87,112 )
(62,785 )
346,695
232,131
Less: Net (income) loss attributable to noncontrolling interests
(95)
54
720
Net (loss) income attributable to Euronet Worldwide, Inc.
$
(3,399) $ 346,749 $ 232,851
(Loss) earnings per share attributable to Euronet Worldwide, Inc.
stockholders:
Basic
Diluted
$
$
(0.06) $
6.49 $
(0.06) $
6.31 $
4.52
4.26
Weighted average shares outstanding:
Basic
Diluted
52,659,551 53,449,834 51,487,557
52,659,551 54,913,887 54,627,747
See accompanying notes to the Consolidated Financial Statements.
78
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net (loss) income
$
(3,304) $ 346,695 $ 232,131
Year Ended December 31,
2020
2019
2018
Other comprehensive income (loss), net of tax:
Translation adjustment
Comprehensive income
70,794
67,490 332,801 175,475
(13,894 )
(56,656 )
Comprehensive (income) loss attributable to noncontrolling
interests
(213)
101
791
Comprehensive income attributable to Euronet Worldwide, Inc.
$
67,277 $ 332,902 $ 176,266
See accompanying notes to the Consolidated Financial Statements.
79
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except share data)
Number of
Shares
Outstanding
(Common and
Treasury)
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
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
1,039,480
20
15,634
610
Share-based compensation
Repurchase of shares
Other
Balance as of December 31, 2018
Net income (loss)
Other comprehensive loss
16,764
(2,032,599 )
4,959
51,819,998
(139)
1,198 1,104,264
(175,000 )
(391,551 )
Stock issued under employee stock plans
405,617
8
13,216
(1,277 )
Share-based compensation
Issuance of convertible notes, net of tax
Repurchase of shares
21,439
71,659
(493,010 )
(70,876 )
Redemptions and conversions of convertible notes, net of
tax
2,488,249
50
(20,517 )
Other
(3 )
Balance as of December 31, 2019
54,220,854
1,256 1,190,058
(463,704 )
Net (loss) income
Other comprehensive income
Stock issued under employee stock plans
608,878
11
16,437
435
Share-based compensation
Repurchase of shares
Balance as of December 31, 2020
21,951
(2,095,683)
52,734,049 $
(239,763)
1,267 $ 1,228,446 $ (703,032)
See accompanying notes to the Consolidated Financial Statements.
80
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
(in thousands)
Balance as of December 31, 2017
$
436,954 $
(94,458 ) $
960 $ 1,199,478
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interests
Total
Net income (loss)
Other comprehensive loss
Stock issued under employee stock plans
Share-based compensation
Repurchase of shares
Other
232,851
(56,585 )
(720 )
(71 )
232,131
(56,656 )
16,264
16,764
(175,000 )
(139 )
Balance as of December 31, 2018
669,805
(151,043 )
169
1,232,842
Net income (loss)
Other comprehensive loss
346,749
(13,847 )
(54 )
(47 )
346,695
(13,894 )
11,947
21,439
71,659
(70,876 )
(20,467 )
(3 )
1,579,342
(3,304)
70,794
16,883
68
95
118
21,951
(239,763)
281 $ 1,445,903
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
Balance as of December 31, 2019
1,016,554
(164,890 )
Net (loss) income
Other comprehensive income
Stock issued under employee stock plans
Share-based compensation
Repurchase of shares
(3,399)
70,676
Balance as of December 31, 2020
$ 1,013,155 $
(94,214)
See accompanying notes to the Consolidated Financial Statements.
81
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Accretion of convertible debt discount and amortization of debt issuance costs
18,924
17,088
Net (loss) income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Share-based compensation
Unrealized foreign exchange loss (gain), net
Non-cash impairment of goodwill and acquired intangible assets
Deferred income taxes
Loss on early retirement of debt
Loss from unconsolidated affiliates
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
Net (repayments) borrowing from short-term debt obligations
Proceeds from long-term debt obligations
Debt issuance costs
Other, net
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents and restricted cash
Increase in cash and cash equivalents and restricted cash
Year Ended December 31,
2020
2019
2018
$
(3,304) $ 346,695 $ 232,131
127,021
111,744
21,951
3,756
106,602
21,439
(2,701 )
—
(23,946)
17,113
—
—
9,831
—
(16,823)
63,629
(168,256)
88,687
13,177
(87,882 )
(68,945 )
53,550
10,945
132
118,618
(94,299)
253,505
98,459
(25,212 )
504,488
(1,100)
(97,628)
(7,770)
967
(94,187 )
(131,287 )
(7,274 )
3,721
(105,531)
(229,027 )
106,021
16,764
26,655
7,049
2,425
—
117
14,121
(13,317 )
26,497
(29,066 )
45,562
9,349
(37,595 )
(9,480 )
397,233
(12,854 )
(112,484 )
(8,528 )
1,583
(132,283 )
18,101
14,979
—
(5,157)
18,608
(177,855 )
(241,518)
(74,456 )
3,113,800 2,498,298 5,773,294
(2,843,400) (2,714,203 ) (5,560,089 )
(52,199 )
(446,702 )
9,472
—
(3,071 )
(6,136)
2,024
(36,540 )
—
(6,428)
35,398
(6,480 )
416,298
— 1,194,900
(32,091 )
(17,947 )
(5,332 )
98,757
282,129
686,427
230,434
900,518
Cash and cash equivalents and restricted cash at beginning of period
1,817,379 1,130,952
Cash and cash equivalents and restricted cash at end of period
$ 2,099,508 $ 1,817,379 $ 1,130,952
82
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(in thousands)
Supplemental Cash Flow Disclosures:
2020
2019
2018
Interest paid during the period
Income taxes paid during the period
$
$
17,319 $
13,125 $
23,554
60,170 $
74,086 $
84,382
Year Ended December 31,
See accompanying notes to the Consolidated Financial Statements.
83
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
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 ATM, POS, card outsourcing, card issuing and merchant acquiring services,
electronic distribution of prepaid mobile airtime and other electronic payment products, and international payment
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 has no 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 normally experiences its heaviest demand for DCC services during the third
quarter of the fiscal year, normally coinciding with the tourism season. Additionally, the EFT Processing and epay
Segments are normally 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.
(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.
84
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. See Note 4, Settlement Assets and Obligations, to the Consolidated
Financial Statements for further discussion on settlement assets and obligations.
Property and equipment
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
Goodwill - 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"). In accordance with the requirements of ASC 350 the Company tests for impairment on an annual basis
in the fourth quarter 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.
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 indicators 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, 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
85
fair value, an impairment loss equal to such excess would be recognized. The DCF Model and Market Approach
Model utilize Level 3 inputs in the fair value hierarchy as they include unobservable inputs that require significant
management assumptions.
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.
See Note 9, 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 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, 2020 and 2019, we had $143.5 million and $43.7 million, respectively, of deferred contract costs. For
the years ended December 31, 2020, 2019 and 2018, we had $17.2 million, $6.9 million and $6.3 million of
amortization related to these costs, respectively.
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.
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 14, Income Taxes, to the Consolidated Financial Statements for further discussion regarding these
provisions.
86
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 18, Financial Instruments and
Fair Value Measurements, to the Consolidated Financial Statements for the required fair value disclosures.
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 12, 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 16, Stock Plans, for further disclosure.
87
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 receive 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.
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, which is recorded as deferred revenue upon receipt.
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. 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 - 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
Deferred Revenues - The Company records deferred revenues when cash payments are received or due in advance of
its performance. The increase in the deferred revenue balance for the year ended December 31, 2020 is primarily
driven by $56.4 million of cash payments received in the current year for which the Company has not yet satisfied the
performance obligations, partially offset by $41.6 million of revenues recognized that were included in the deferred
revenue balance as of December 31, 2019.
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 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.
88
(in thousands)
Europe
North America
Asia Pacific
Other
Eliminations
Total
(in thousands)
Europe
North America
Asia Pacific
Other
Eliminations
Total
(in thousands)
Europe
North America
Asia Pacific
Other
Eliminations
Total
For the Year Ended December 31, 2020
EFT
Processing
epay
Money
Transfer Total
$ 313,953 $ 561,514 $ 449,299 $ 1,324,766
56,447 144,613
577,845
778,905
98,313 100,917
124,413
323,643
13
28,473
32,292
60,778
—
(5,392)
$ 468,726 $ 835,517 $ 1,183,849 $ 2,482,700
—
—
For the Year Ended December 31, 2019
EFT
Processing
epay
Money
Transfer
Total
$ 724,163 $ 524,907 $ 373,302 $ 1,622,372
35,461 151,016
573,016
759,493
129,060
76,491
124,934
330,485
28
—
16,915
24,974
41,917
—
—
(4,158 )
$ 888,712 $ 769,329 $ 1,096,226 $ 2,750,109
For the Year Ended December 31, 2018
EFT
Processing
epay
Money
Transfer
Total
$ 608,993 $ 491,282 $ 328,592 $ 1,428,867
32,306 165,930
569,005
767,241
112,294
71,242
127,057
310,593
58
15,330
18,308
33,696
—
—
—
(3,768 )
$ 753,651 $ 743,784 $ 1,042,962 $ 2,536,629
Recently issued accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's
Own Equity" which simplifies the accounting for convertible instruments by eliminating certain accounting models
when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and
Hedging, or that do not result in substantial premiums accounted for as paid-in-capital. Under this ASU, certain debt
instruments with embedded conversion features will be accounted for as a single liability measured at its amortized
cost. Additionally, this ASU eliminates the treasury stock method to calculate diluted earnings per share for
convertible instruments. The new guidance is effective for annual periods beginning after December 15, 2021,
including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating
the impact the adoption of ASU 2020-06 will have on the Consolidated Financial Statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional
expedients and exceptions for contracts, hedging relationships, and other transactions affected by reference rate reform
due to the anticipated cessation of LIBOR on or before December 31, 2021. This guidance is effective from March
12, 2020 through December 31, 2022 and could impact the accounting for LIBOR provisions in the Company’s
unsecured credit agreement. The Company does not expect that the adoption of this guidance will have a significant
impact on its Consolidated Financial Statements.
89
The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), as of January 1, 2020, 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 replaced the existing incurred loss
model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. The
adoption of this standard did not have a significant impact on the Company's Consolidated Financial Statements and
related disclosures.
(4) 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, accounts receivable and
prepaid expenses and other current assets. Cash received by Euronet agents and merchants generally becomes
available to the Company within two weeks after initial receipt by the business partner. Receivables from business
partners represent funds collected by such business partners that are in transit to the Company.
Settlement obligations consist of money transfers and accounts payable to agents and content providers. Money
transfer accounts payable represent amounts to be paid to transferees when they request funds. Most agents typically
settle with transferees first and then obtain reimbursement from the Company. Money order accounts payable
represent amounts not yet presented for payment. Due to the agent funding and settlement process, accounts payable
to agents represent amounts due to agents for money transfers that have not been settled with transferees.
(in thousands)
Settlement assets:
Settlement cash and cash equivalents
Settlement restricted cash
As
of December
31, 2020
As
of December
31, 2019
$
188,191 $
282,188
76,674
49,168
Account receivables, net of credit loss allowance of $35,800 and $24,046
641,955
574,410
Prepaid expenses and other current assets
Total settlement assets
Settlement obligations:
Trade account payables
Accrued expenses and other current liabilities
Total settlement obligations
234,055
107,301
$ 1,140,875 $ 1,013,067
$
571,175 $
569,700
504,667
508,400
$ 1,140,875 $ 1,013,067
The table below reconciles cash and cash equivalents, restricted cash, ATM cash, settlement cash and cash equivalents,
and settlement restricted cash as presented within "Cash and cash equivalents and restricted cash" in the Consolidated
Statement of Cash Flows.
(in thousands)
Cash and cash equivalents
Restricted cash
ATM cash
Settlement cash and cash equivalents
Settlement restricted cash
As of
December 31,
2020
December 31,
2019
December 31,
2018
$ 1,420,255 $
786,081 $
385,031
3,334
411,054
188,191
76,674
34,301
665,641
282,188
49,168
31,237
395,378
273,948
45,358
Cash and cash equivalents and restricted cash at end of period
$ 2,099,508 $ 1,817,379 $ 1,130,952
90
(5) STOCKHOLDERS' 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,
2020
2019
2018
Computation of diluted weighted average shares outstanding:
Basic weighted average shares outstanding
52,659,551 53,449,834 51,487,557
Incremental shares from assumed exercise of stock options and
vesting of restricted stock
Incremental shares from assumed conversion of convertible
debentures
—
1,464,053 1,499,713
—
— 1,640,477
Diluted weighted average shares outstanding
52,659,551 54,913,887 54,627,747
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, 2020, 2019 and 2018 of approximately 2,073,000, 380,000 and 458,000, respectively.
The Company issued 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 year ended December 31, 2018 as the $102.38 market price per share of Common
Stock as of December 13, 2018 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, 2020 and December 31, 2019, whereas the dilutive effect was
1,640,477 shares for the year ended December 31, 2018. See Note 11, Debt Obligations, to the Consolidated Financial
Statements for more information about the Convertible Notes and Retired Convertible Notes.
Share repurchases
The Company's Board of Directors had authorized a stock repurchase program allowing Euronet to repurchase up to
$375 million in value or 10.0 million shares of common 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
5.0 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 years ended December 31, 2020, 2019 and 2018 the Company repurchased $239.8
million, $70.9 million, and $175.0 million, respectively, in value of Euronet common stock under the repurchase
programs.
91
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, 2020 and 2019, accumulated other comprehensive loss consists entirely of foreign currency
translation adjustments. The Company recorded a foreign currency translation gain of $70.8 million, a loss of $13.9
million and a loss of $56.7 million for the years ended December 31, 2020, 2019, and 2018, respectively. There were
no reclassifications of foreign currency translation into the Consolidated Statements of Income for the years ended
December 31, 2020, 2019, and 2018.
Dividends
No dividends were paid on any class of the Company's stock during 2020, 2019, and 2018.
(6) 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. The purchase price was 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 pre-acquisition periods.
The following table summarizes the 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
92
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 fair value of $39.0 million, which are being
amortized on a straight-line basis over 20 years.
Goodwill, with a 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 additional acquisitions in 2019 for immaterial amounts.
(7) RESTRICTED CASH
The restricted cash balances as of December 31, 2020 and 2019 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
As of December 31,
2020
2019
$
$
3,334 $ 34,301
3,334 $ 34,301
$
64,489 $ 44,366
12,185
4,802
$
76,674 $ 49,168
Total Restricted Cash
$
80,008 $ 83,469
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.
(8) PROPERTY AND EQUIPMENT, NET
The components of property and equipment, net of accumulated depreciation and amortization as of December 31,
2020 and 2019 are as follows:
(in thousands)
ATMs
POS terminals
Vehicles and office equipment
Computers and software
Land and buildings
Less accumulated depreciation
Total
93
As of December 31,
2020
2019
$ 554,508 $ 474,611
33,258
38,235
75,936
64,970
203,883
191,172
1,285
1,235
868,870
770,223
(490,429)
(410,243 )
$ 378,441 $ 359,980
Depreciation and amortization expense related to property and equipment, including property and equipment recorded
under finance leases, for the years ended December 31, 2020, 2019 and 2018 was $96.1 million, $83.5 million and
$75.1 million, respectively.
(9) GOODWILL AND ACQUIRED INTANGIBLE ASSETS, NET
The following table summarizes intangible assets as of December 31, 2020 and 2019:
As of December 31, 2020 As of December 31, 2019
(in thousands)
Customer relationships
Trademarks and trade names
Software
Non-compete agreements
Total
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
$ 186,749 $
(99,131)
$ 240,027 $ (139,319)
46,762
(31,327)
45,347
(28,123)
61,602
(42,772)
59,244
(35,362)
1,980
(1,980)
2,082
(2,049)
$ 297,093 $ (175,210)
$ 346,700 $ (204,853)
The following table summarizes the goodwill and amortizable intangible assets activity for the years ended December
31, 2020 and 2019:
(in thousands)
Balance as of January 1, 2019
Increases (decreases):
Acquisitions (see footnote 6)
Impairment
Amortization
Other (primarily changes in foreign currency exchange
rates)
Balance as of December 31, 2019
Increases (decreases):
Acquisitions
Impairment
Amortization
Other (primarily changes in foreign currency exchange
rates)
Acquired
Intangible Assets Goodwill
Total Intangible
Assets
$
114,485 $ 704,197 $
818,682
46,246
35,305
81,551
—
(20,374)
—
—
—
(20,374)
1,490
4,321
5,811
141,847 743,823
885,670
1,575
(265)
1,310
(2,048) (104,554)
(106,602)
(22,867)
—
(22,867)
3,376
26,817
30,193
Balance as of December 31, 2020
$
121,883 $ 665,821 $
787,704
Impairment Charges
The COVID-19 pandemic and subsequent mitigation efforts, which include global business shutdowns, the closing of
borders and the implementation of mandatory social distancing requirements, has created an unprecedented disruption
to our business beginning in the first half of 2020. These mitigation efforts coupled with the negative economic impacts
to the tourism industry caused a decline in revenues, earnings, and necessitated changes to our forecasted outlook. The
Company determined the totality of these events constituted a triggering event that required us to perform an interim
goodwill impairment assessment as of June 1, 2020. The Company concluded a triggering event had occurred
for six reporting units, resulting in quantitative impairment tests. Three reporting units were within the EFT
segment, two reporting units were within the Money Transfer segment, and one reporting unit was within the epay
segment. As a result, the Company recorded a non-cash goodwill impairment charge of $104.6 million with respect
to the xe, Innova and Pure Commerce reporting units. $21.9 million of the impairment charge was included within the
EFT Segment, and $82.7 million of the impairment charge was included in the Money Transfer Segment.
94
During the second half of 2020, the Company recorded a $2.0 million non-cash impairment charge for acquired
intangible assets, specifically related to customer lists in the xe reporting unit.
During 2018, the Company recorded a non-cash acquired intangible asset impairment charge of $7.0 million related
to certain trade names as a result of combining HiFX into xe in order to operate the business under one brand name,
xe.
Of the total goodwill balance of $665.8 million as of December 31, 2020, $403.7 million relates to the Money Transfer
Segment, $136.5 million relates to the epay Segment and the remaining $125.6 million relates to the EFT Processing
Segment. Amortization expense for intangible assets with finite lives was $22.9 million, $20.4 million and $22.6
million for the years ended December 31, 2020, 2019 and 2018, respectively. Estimated annual amortization expense,
before income taxes, on intangible assets with finite lives as of December 31, 2020, is expected to total $22.9 million
for 2021, $21.8 million for 2022, $16.8 million for 2023, $9.9 million for 2024, and $6.5 million for 2025.
(10) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
The balances as of December 31, 2020 and 2019 were as follows:
(in thousands)
Accrued expenses
Derivative liabilities
Current portion of finance lease obligations
Deferred income taxes
Total
(11) DEBT OBLIGATIONS
Debt obligations consist of the following as of December 31, 2020 and 2019:
(in thousands)
Credit Facility:
Revolving credit agreement
Convertible Debt:
As of December 31,
2020
2019
$
331,713 $ 246,699
65,905 41,935
6,403
5,919
—
4
$
404,021 $ 294,557
As of December 31,
2020
2019
$ 270,400 $
—
0.75% convertible notes, unsecured, due 2049
452,228
436,965
1.375% Senior Notes, due 2026
Other obligations
Total debt obligations
Unamortized debt issuance costs
Carrying value of debt
Short-term debt obligations and current maturities of long-term debt obligations
Long-term debt obligations
732,840
673,440
850
6,215
$ 1,456,318 $ 1,116,620
(17,932)
(19,592 )
$ 1,438,386 $ 1,097,028
(797)
(6,089 )
$ 1,437,589 $ 1,090,939
As of December 31, 2020, aggregate annual maturities of long-term debt are $0.8 million in 2021, $0.1 million due in
2022, $270.4 million due in 2023, no maturities in 2024, and $1.2 billion thereafter. This maturity schedule reflects
the revolving credit facility maturing in 2023 and 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 ($732.8 million) due in 2026.
95
Credit Facility
On October 17, 2018, the Company entered into an unsecured revolving credit agreement (the "Credit Facility") 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 Credit Facility allows
for borrowings in Australian dollars, British pounds sterling, Canadian dollars, Czech koruna, Danish krone, euro,
Hungarian forints, Japanese yen, New Zealand dollars, Norwegian krone, Polish zlotys, Swedish krona, Swiss francs,
and U.S. dollars. The 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 weighted average interest rate of the Company's borrowings under the Credit Facility was 1.2% as of December
31, 2020.
As of December 31, 2020 and 2019, the Company had stand-by letters of credit/bank guarantees outstanding under
the Credit Facility of $60.8 million and $53.0 million, respectively. Stand-by letters of credit/bank guarantees reduce
the Company's borrowing capacity under the Credit Facility and are generally used to secure trade credit and
performance obligations. As of December 31, 2020 and 2019, the stand-by letters of credit interest charges were each
1.1% per annum, respectively. Borrowing capacity under the Credit Facility as of December 31, 2020 was $668.8
million.
The Credit Facility 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 to 1.0; (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 to 1.0; 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 to
1.0 for fiscal quarters ended on March 31, September 30 and December 31 and not greater than 4.5 to 1.0 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. On September 17, 2020, the Company and certain of its subsidiaries entered into an amendment
(the "Amendment") to the Credit Facility. Under the Amendment, the Consolidated Total Leverage Ratio, as defined
in the Credit Facility, was modified to reduce the amount of consolidated funded debt by the amount of cash and cash
equivalents on the Company's consolidated balance sheet and the Consolidated Interest Coverage Ratio now includes
a one-time option to reduce the ratio to 3.5 to 1.0 from 4.0 to 1.0 for a period of up to three consecutive quarters. The
Company was in compliance with all debt covenants as of December 31, 2020.
Uncommitted Line of Credit
On September 4, 2019, the Company entered into an Uncommitted Loan Agreement with Bank of America which
provided Euronet up to $100.0 million under an uncommitted line of credit. Interest on borrowings was equal
to LIBOR plus 0.65% and the agreement was set to expire September 4, 2020. During the three months ended June
30, 2020, the Company and Bank of America mutually agreed to terminate the Uncommitted Loan Agreement
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.
96
The Company may not redeem the Convertible 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) 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, 2020 the
conversion threshold was not met.
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 Convertible Notes to repurchase $49.0
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 $1.5 million for the year ended December 31, 2019
and accretion expense was $4.6 million for the year ended December 31, 2019.
Contractual interest expense for the Convertible Notes was $3.9 million and $3.1 million for the years ended December
31, 2020 and 2019, respectively. Accretion expense was $15.3 million and $11.6 million for the years ended December
31, 2020 and 2019, respectively. The effective interest rate was 4.4% for the year ended December 31, 2020. As of
December 31, 2020, the unamortized discount was $72.8 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 mature 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, 2020, the Company has outstanding €600 million ($732.8 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. As of December 31, 2020, the Company had $6.6 million of unamortized debt
issuance costs related to the Senior Notes.
97
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, 2020 and
2019, borrowings under these arrangements were $0.9 million and $6.2 million, respectively. As of December 31,
2020, there was $0.8 million due in 2021 under these other obligation arrangements.
(12) 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 being 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, 2020 and 2019, the Company had foreign currency forward contracts outstanding
in the U.S. with a notional value of $246.0 million and $159.0 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, 2020 and 2019, the Company had foreign currency forward contracts outstanding
with a notional value of $454.3 million and $42.9 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 $68.2 million, $71.1 million and
$69.2 million for the years ended December 31, 2020, 2019 and 2018, 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 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, 2020 and 2019, was approximately $1.3 billion and $1.2 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.
98
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:
Asset Derivatives
Liability Derivatives
Fair Value
Fair Value
Balance
Sheet
Location
December
31, 2020
December
31, 2019
Balance
Sheet
Location
December
31, 2020
December
31, 2019
(in thousands)
Derivatives not designated as
hedging instruments
Foreign currency exchange
contracts
Other
current
assets
$
80,879 $
Other
current
liabilities $ (65,905) $ (41,935 )
54,765
The following tables summarize the gross and net fair value of derivative assets and liabilities as of December 31,
2020 and 2019 (in thousands):
Offsetting of Derivative Assets
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
As of December
31, 2020
Financial
Instruments
Cash
Collateral
Received
Net
Amounts
Derivatives
subject to a master
netting
arrangement or
similar agreement $
As of December
31, 2019
Derivatives
subject to a master
netting
arrangement or
similar agreement $
80,879 $
— $
80,879 $
(44,893) $
(2,778) $ 33,208
54,765 $
— $
54,765 $
(34,935 ) $
(7,362 ) $ 12,468
99
Offsetting of Derivative Liabilities
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
As of December
31, 2020
Financial
Instruments
Cash
Collateral
Paid
Net
Amounts
Derivatives
subject to a
master netting
arrangement or
similar agreement $
As of December
31, 2019
Derivatives
subject to a
master netting
arrangement or
similar agreement $
(65,905) $
— $
(65,905) $
44,893 $ 12,272 $ (8,740)
(41,935 ) $
— $
(41,935 ) $
34,935 $
827 $
(6,173 )
Income Statement Presentation
The following tables summarize the location and amount of gains on derivatives in the Consolidated Statements of
Income for the years ended December 31, 2020, 2019 and 2018:
(in thousands)
Location of (Loss) Gain
Recognized in Income on
Derivative Contracts
Amount of (Loss) Gain Recognized in
Income on Derivative Contracts (a)
Year Ended December 31,
2020
2019
2018
Foreign currency exchange
contracts - Ria Operations
Foreign currency exchange (loss)
gain, net
$
(1,499) $
62 $
173
(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 18, Financial Instruments and Fair Value Measurements, for the determination of the fair values of
derivatives.
(13) LEASES
The Company adopted ASC 842, Leases on January 1, 2019. 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. 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
100
leases. The Company evaluated the likelihood of exercising the renewal and termination options beginning with the
adoption of the new accounting lease standard on January 1, 2019, concluding: the options were not reasonably certain
to be exercised and thus were not considered in determining the lease terms, and associated payment impacts were
excluded from lease payments; and termination options were reasonably certain not to be exercised and therefore the
stated lease payment schedule of the lease was used to determine the lease term.
During the second quarter of 2020, the impact of the COVID-19 pandemic was a significant event that caused a
significant change in circumstances and business plans to manage our portfolio of ATM leases. Specifically, the
Company downsized through the exercise of termination clauses and the reduction of monthly costs by renegotiating
payment terms of its ATM leases. The Company's execution of the business plan to renegotiate terms and downsize
the portfolio of ATM leases constituted a reassessment event during the second quarter of 2020. The reassessment
event required the Company to reevaluate the accounting for the portfolio of ATM leases, including lease terms. Due
to the recent increased frequency of ATM site lease terminations, modifications, and greater unpredictability whether
or not future lease terminations will be exercised, the Company is no longer able to conclude that termination options
are reasonably certain not to be exercised. This reassessment conclusion impacts the lease term evaluation, instead of
determining the lease term based on the stated lease payment schedule of the lease, now the lease term will be
evaluated when the Company has the contractual ability to terminate the lease (most leases allow for a termination
upon advance notice of between 30 and 90 days). As a result of the lease term reassessment, $211.9 million of right
of use assets and $211.9 million lease liabilities were reassessed to have a term shorter than 12 months, thus were
subject to the short-term lease exemption and removed from the balance sheet beginning June 30, 2020. New,
amended, and modified ATM site leases with termination options exercisable within 12 months will be excluded from
the right of use lease asset and lease liability balances.
Payments for ATM site leases with termination options subject to the short-term lease exemption are expensed in the
period incurred. The short-term lease expense for 2020 reasonably reflects the Company’s short-term lease
commitments. 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 (with initial lease terms in excess of one year) as of
December 31, 2020 are:
Maturity of Lease Liabilities (in thousands)
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: imputed interest
As of
December
31, 2020
Operating
Leases (1)
$
48,622
35,640
25,182
16,801
10,531
26,976
163,752
(4,814)
Present value of lease liabilities
$ 158,938
(1) Operating lease payments reflect the Company's current fixed obligations under the operating lease agreements.
Certain ATM site leases contain termination options that grant the Company the option to terminate the lease prior to
the stated term of the agreement. The Company includes the future minimum lease payments for these ATM site leases
only to the extent that the termination option is not reasonably certain to be exercised.
101
Lease expense recognized in the Consolidated Statements of Income is summarized as follows:
Lease Expense (in thousands)
Operating lease expense
Short-term and 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
Year ended
December 31,
2020
Year ended
December
31, 2019
$
$
83,102 $ 130,487
69,711
43,907
152,813 $ 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
Weighted- average remaining lease term (years)
Weighted- average discount rate
As of
December
31, 2020
5.1
2.2 %
The following table presents supplemental cash flow and non-cash information related to leases:
Other Information (in thousands)
Year ended
December 31,
2020
Year ended
December 31,
2019
Cash paid for amounts included in the measurement of lease liabilities (a)
$
79,447 $
129,609
Supplemental non-cash information on lease liabilities arising from
obtaining ROU assets:
ROU assets obtained in exchange for new operating lease liabilities
$
77,728 $
229,107
(a) Included in Net cash provided by operating activities on the Company's Consolidated Statements of Cash Flows.
(14) INCOME TAXES
The sources of income before income taxes for the years ended December 31, 2020, 2019 and 2018 are presented as
follows:
(in thousands)
Income before taxes:
United States
Foreign
Total income before income taxes
Year Ended December 31,
2020
2019
2018
$ 40,323 $
44,290 $
35,467
(32,152)
389,517
259,449
$
8,171 $ 433,807 $ 294,916
102
The Company's income tax expense for the years ended December 31, 2020, 2019 and 2018 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,
2020
2019
2018
$
2,605 $
39,270
(4,885 ) $ (8,711)
83,792
70,244
41,875
78,907
61,533
(16,100)
(14,300)
(8,424)
16,629
8,205
6,871
(5,619 )
(30,400)
1,252
$ 11,475 $ 87,112 $ 62,785
The following is a reconciliation of the federal statutory income tax rates of 21% to the effective income tax rate for
the years ended December 31, 2020, 2019 and 2018:
(dollar amounts in thousands)
Year Ended December 31,
2020
2019
2018
U.S. federal income tax expense at applicable statutory rate
$
1,716
$ 91,099 $ 61,932
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
347
1,887
(6,446)
3,828
7,002
(6,491)
(4,238)
22,053
5,101
2,896
1,680
3,457
(2,875 )
(13,750 )
(864 )
12,281
3,565
2,144
—
(6,141 )
9,843
3,737
3,075
83
—
6,471
14,111
—
(3,518)
(4,665)
$ 11,475
(25,728 )
(12,262 )
(4,500 )
—
(2,478 )
(2,980 )
$ 87,112 $ 62,785
140.4 %
20.1%
21.3%
We calculate our provision for federal, state and international income taxes based on current tax law. 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. foreign tax credits, which reduced the net tax expense by $25.7
million.
103
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
Foreign exchange
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
Foreign exchange
Other
Total deferred tax liabilities
Net deferred tax liabilities
As of December 31,
2020
2019
$
45,609 $
34,357
6,771
7,366
22,243
19,048
10,835
7,614
7,689
8,602
8,143
5,591
34,663
24,721
65,388
65,063
39,962
89,965
19,160
3,394
14,230
12,371
274,164
278,621
(77,563)
196,601
(83,184 )
195,437
(8,733 )
(29,084 )
(20,806 )
(16,379 )
(12,854)
(24,763)
(43,971)
(10,396)
(30,932)
(6,352)
(18,295)
(1,829)
(4,727 )
(39,962) (89,965 )
(10,880)
(27,902 )
(15,467 )
(6,048 )
(4,156)
(6,826)
(207,060)
(10,459) $
(6,606 )
(229,873 )
(34,436 )
$
Subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31,
2020 are expected to be allocated to income taxes in the Consolidated Statements of Income.
As of December 31, 2020, and 2019, the Company's foreign tax loss carryforwards were $197.4 million and $119.1
million, respectively, and U.S. state tax loss carryforwards were $95.8 million and $97.6 million, respectively. As of
December 31, 2020, the Company had U.S. foreign tax credit carryforwards of $61.3 million 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
104
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 realize the benefits of these deductible differences,
net of the existing valuation allowances, as of December 31, 2020.
As of December 31, 2020, the Company had foreign tax net operating loss carryforwards of $197.4 million, which
will expire as follows:
(in thousands)
Year ending December 31,
2021
2022
2023
2024
2025
Thereafter
Unlimited
Total
Gross
Tax
Effected
$
3,538 $
3,590
5,031
6,060
19,948
26,197
859
827
1,350
1,434
4,588
6,860
133,004
30,895
$ 197,368 $ 46,813
In addition, the Company's state tax net operating loss carryforwards of $95.8 million will expire periodically from
2021 through 2040, U.S. foreign tax credit carryforwards of $61.3 million that will expire periodically from 2021
through 2028 and U.S. federal research and expenditure credit carryforwards of $3.3 million that will expire
periodically from 2034 through 2038.
While U.S. tax expense has been recognized as a result of the transition tax and 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 $1,710.1 million as of December 31, 2020.
Accounting for uncertainty in income taxes
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31,
2020 and 2019 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,
2020
2019
$
44,535 $ 30,915
7,331
15,569
—
(1,349)
(10,127)
6
(1,703 )
—
(252 )
(605)
39,785 $ 44,535
$
As of December 31, 2020 and 2019, approximately $31.8 million and $42.7 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 $6.2 million and $5.2
105
million as of December 31, 2020 and 2019, respectively. The following income tax years remain open in the
Company's major jurisdictions as of December 31, 2020:
Jurisdictions
U.S. (Federal)
Germany
Greece
Spain
U.K.
Periods
2014 through 2020
2016 through 2020
2014 through 2020
2015 through 2020
2018 through 2020
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.
(15) VALUATION AND QUALIFYING ACCOUNTS
Trade accounts receivable and accounts receivable balances included within the settlement assets are stated net of
credit losses. Historically, the Company has not experienced significant write-offs. The Company records credit losses
when it is probable that the accounts receivable balance will not be collected.
The following table provides a summary of the credit loss balances and activity for the years ended December 31,
2020, 2019 and 2018:
(in thousands)
Beginning balance-credit losses
Additions-charged to expense
Amounts written off
Other (primarily changes in foreign currency exchange rates)
Year Ended December 31,
2020
2019
2018
$ 27,938 $ 24,287 $ 20,958
19,469
10,095
8,653
(7,842)
2,162
(6,179 )
(4,079 )
(265 )
(1,245)
Ending balance-credit losses
$ 41,727 $ 27,938 $ 24,287
(16) STOCK PLANS
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. Stock
options 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, 2020, the Company
has approximately 0.5 million in total shares remaining available for issuance under the SCP.
Share-based compensation expense was $22.0 million, $21.4 million and $16.8 million for the years ended December
31, 2020, 2019 and 2018, respectively, and was recorded in salaries and benefits expense in the accompanying
Consolidated Statements of Operations. The Company recorded a tax benefit of $2.1 million, $4.9 million and $2.7
million during the years ended December 31, 2020, 2019 and 2018, respectively, for the portion of this expense that
relates to foreign tax jurisdictions in which an income tax benefit is expected to be derived.
106
Stock options
Summary stock options activity is presented in the table below:
Balance at December 31, 2019 (1,653,340 shares
exercisable)
Granted
Exercised
Forfeited/Canceled
Expired
Balance at December 31, 2020
Weighted
Average
Exercise
Price
Number
of Shares
Weighted
Average
Remaining
Contractual
Term
(years)
Aggregate
Intrinsic
Value
(thousands)
3,015,775 $
81.29
1,574,228 $
103.30
(460,688) $
(37,966) $
(56) $
4,091,293 $
34.35
105.87
17.05
94.88
7.4 $ 207,507
Exercisable at December 31, 2020
1,497,567 $
61.32
4.3 $ 125,859
Vested and expected to vest at December 31, 2020
2,075,569 $
78.63
5.4 $ 140,063
Options outstanding that are expected to vest are net of estimated future forfeitures. The Company received cash of
$15.8 million, $13.1 million and $17.1 million in connection with stock options exercised in the years ended December
31, 2020, 2019 and 2018, respectively. The intrinsic value of these options exercised was $41.1 million, $30.6 million
and $73.0 million in the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020,
unrecognized compensation expense related to nonvested stock options that are expected to vest totaled $21.4 million
and will be recognized over the next 5 years, with an overall weighted-average period of 2.8 years. The following
table provides the fair value of options granted under the SCP during 2020, 2019 and 2018, 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
Year ended December 31,
2020 (b)
2019
2018
35.6 %
29.3 %
0.6 %
2.1 %
0.31% to
1.17 %
— %
8.0 %
(a)
— %
8.0 %
29.8 %
2.8 %
(a)
— %
8.0 %
7.1 years
5.2 years 5.6 years
Weighted-average fair value (per share)
$
48.21
$
43.96 $
37.16
(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.
(b) During 2020, the Company granted 1,350,000 options that were valued using a Monte Carlo simulation (not
included in the table above). The Monte Carlo simulation calculated a fair value per option of $26.90 using the
following assumptions: volatility of 37.0%, risk-free interest rate of 0.33%, and a term of 5.0 years.
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.
107
Summary restricted stock activity is presented in the table below:
Nonvested at December 31, 2019
Granted
Vested
Forfeited
Nonvested at December 31, 2020
Number of
Shares
Weighted Average
Grant Date Fair
Value Per Share
493,948 $
129,127 $
(126,903) $
(10,662) $
485,510 $
118.20
117.97
87.08
105.14
126.62
The fair value of shares vested in the years ended December 31, 2020, 2019 and 2018 was $15.4 million, $16.6 million
and $14.2 million, respectively. As of December 31, 2020, there was $18.3 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 3.0 years. As of December 31, 2020, there was $9.5 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 1.6 years. The weighted average grant date fair value of restricted stock granted
during the years ended December 31, 2020, 2019 and 2018 was $117.97, $145.93 and $107.88 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, 2020, 2019 and 2018, the Company issued 32,267, 16,713 and
21,872 rights, respectively, to purchase shares of Common Stock at a weighted average price per share of $71.63,
$110.37 and $71.08, 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 $0.6 million, $0.4 million, and $0.4 million for the
years ended December 31, 2020, 2019 and 2018, respectively. The following table provides the weighted-average fair
value of the ESPP stock purchase rights during the years ended December 31, 2020, 2019 and 2018 and the
assumptions used to calculate the fair value using the Black-Scholes-Merton option-pricing model:
Volatility - weighted average
Volatility - range
Year Ended December 31,
2020
2019
2018
60.9 %
24.3 %
30.1 %
37.2% to 81.1 % 20.3% to 28.1 % 23.5% to 36.7 %
Risk-free interest rate - weighted average
0.12 %
2.07 %
2.01 %
Risk-free interest rate - range
0.09% to 0.16 % 1.55% to 2.44 % 1.73% to 2.45 %
Dividend yield
Expected lives
— %
— %
— %
3 months
3 months
3 months
Weighted-average fair value (per share)
$
20.11
$
25.87
$
17.22
108
(17) 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) Through the EFT Processing Segment, the Company processes transactions for a network of ATMs and POS
terminals across Europe, the Middle East, Asia Pacific and the United States. 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 surcharges 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.
2) 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.
3) Through the Money Transfer Segment, the Company provides global money transfer services under the brand
names Ria, AFEX, 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.
109
The following tables present the Company's reportable segment results for the years ended December 31, 2020, 2019
and 2018:
For the Year Ended December 31, 2020
EFT
Processing
epay
Money
Transfer
Corporate
Services,
Eliminations
and Other
Consolidated
$ 468,726 $ 835,517 $ 1,183,849 $
(5,392) $ 2,482,700
302,637
630,391
649,033
91,526
64,769
213,511
(5,362)
34,336
1,576,699
404,142
35,388
35,789
142,161
8,276
221,614
(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
84,025
7,890
34,694
21,861
—
84,741
—
412
106,602
127,021
Total operating expenses
535,437
738,839 1,124,140
37,662
2,436,078
Operating income (expense)
$ (66,711) $ 96,678 $ 59,709 $
(43,054) $
46,622
Other income (expense)
Interest income
Interest expense
Foreign currency exchange loss,
net
Other gains, net
Total other expense, net
Income before income taxes
$
1,040
(36,604)
(3,756)
869
(38,451)
8,171
Segment assets as of December 31,
2020
$ 1,541,610 $ 1,135,204 $ 1,755,651 $
494,246 $ 4,926,711
110
(in thousands)
Total revenues
Operating expenses:
Direct operating costs
Salaries and benefits
For the Year Ended December 31, 2019
EFT
Processing epay
Money
Transfer
Corporate
Services,
Eliminations
and Other
Consolidated
$ 888,712 $ 769,329 $ 1,096,226 $
(4,158 ) $ 2,750,109
397,132 576,757
586,730
(4,136 )
1,556,483
87,603 61,540
208,792
36,809
394,744
211,944
111,744
Selling, general and administrative
35,518 35,054
133,068
Depreciation and amortization
71,819
6,774
32,846
8,304
305
Total operating expenses
592,072 680,125
961,436
41,282
2,274,915
Operating income (expense)
$ 296,640 $ 89,204 $ 134,790 $
(45,440 ) $
475,194
Other income (expense)
Interest income
Interest expense
Foreign currency exchange gain,
net
Other gains, net
Total other expense, net
Income before income taxes
Segment assets as of December 31,
2019
1,969
(36,237 )
2,701
(9,820)
(41,387 )
$
433,807
$ 1,914,144 $ 962,671 $ 1,560,136 $
220,715 $ 4,657,666
111
(in thousands)
Total revenues
Operating expenses:
Direct operating costs
Salaries and benefits
For the Year Ended December 31, 2018
EFT
Processing epay
Money
Transfer
and Other Consolidated
Corporate
Services,
Eliminations
$ 753,651 $ 743,784 $ 1,042,962 $
(3,768 ) $ 2,536,629
366,977 564,252
560,930
(3,753 )
1,488,406
75,791 57,748
194,808
32,085
360,432
216,807
7,049
106,021
Selling, general and administrative
46,925 35,749
125,647
8,486
Goodwill impairment
—
—
7,049
Depreciation and amortization
66,713
7,038
32,002
—
268
Total operating expenses
556,406 664,787
920,436
37,086
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 loss,
net
Other gains, net
Total other expense, net
1,320
(37,573 )
(117)
(26,655)
27
(62,998 )
Income before income taxes
$
294,916
Segment assets as of December 31,
2018
$ 1,220,141 $ 780,220 $ 1,310,775 $
10,019 $ 3,321,155
112
Total revenues for the years ended December 31, 2020, 2019 and 2018, and property and equipment and total assets
as of December 31, 2020 and 2019, summarized by geographic location, were as follows:
Revenues
Property and
Equipment, net
For the year ended December 31,
as of December 31,
Total Assets
as of December 31,
(in thousands)
2020
2019
2018
2020
2019
2020
2019
United States
$ 725,135 $ 716,576 $ 721,977 $ 55,573 $ 49,904 $ 1,255,983 $ 717,894
Germany
Spain
533,999
518,146
476,122
38,808
35,824
797,627
660,730
118,934
189,104
155,619
61,563
55,240
291,254
371,882
United Kingdom
118,024
135,006
133,132
20,150
22,420
402,587
520,549
Italy
Poland
India
France
Greece
Malaysia
Australia
92,006
130,929
103,691
21,225
20,663
231,548
210,910
89,688
130,104
126,513
33,087
42,916
206,016
222,582
123,343
113,146
92,468
26,126
27,281
182,073
163,125
119,265
94,352
75,466
2,731
1,508
112,335
96,636
39,705
79,716
71,007
13,252
11,753
78,439
111,339
73,541
74,948
76,380
2,319
2,629
115,448
114,796
46,062
51,686
58,039
1,575
1,992
68,577
62,844
New Zealand
47,368
47,611
48,881
3,772
3,137
254,580
237,076
Other
355,630
468,785
397,334
98,260
84,713
930,244 1,167,303
Total foreign
1,757,565 2,033,533 1,814,652
322,868
310,076 3,670,728 3,939,772
Total
$ 2,482,700 $ 2,750,109 $ 2,536,629 $ 378,441 $ 359,980 $ 4,926,711 $ 4,657,666
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.
(18) 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
15, 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.
113
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)
Assets
Balance Sheet
Classification
Level 1
Level 2
Level 3
Total
As of December 31, 2020
Foreign currency exchange contracts Other current assets $
— $ 80,879 $
— $ 80,879
Liabilities
Foreign currency exchange contracts
Other current
liabilities
$
— $ (65,905) $
— $ (65,905)
(in thousands)
Assets
Balance Sheet
Classification
Level 1
Level 2
Level 3
Total
As of December 31, 2019
Foreign currency exchange contracts Other current assets $
— $ 54,765 $
— $ 54,765
Liabilities
Foreign currency exchange contracts
Other current
liabilities
$
— $ (41,935 ) $
— $ (41,935 )
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 and Senior Notes using quoted prices
in inactive markets for identical liabilities (Level 2). As of December 31, 2020 , the fair values of the Convertible
Notes and Senior Notes were $667.4 million and $728.7 million, respectively, with carrying values of $452.2 million
and $732.8 million, respectively.
(19) 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.
114
(20) COMMITMENTS
As of December 31, 2020, the Company had $86.9 million of stand-by letters of credit/bank guarantees issued on its
behalf, of which $3.9 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, 2020, the Company granted off balance sheet guarantees for cash in various ATM networks amounting to $13.1
million over the terms of the cash supply agreements and performance guarantees amounting to approximately $48.3
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, 2020, the balance of such cash used in the
Company's ATM networks for which the Company was responsible was approximately $616.3 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
• 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, 2020 or
2019.
115
(21) 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 $0.1 million, $0.3
million and $0.3 million during the years ended December 31, 2020, 2019 and 2018, respectively, for the use of this
airplane.
(22) SELECTED QUARTERLY DATA (UNAUDITED)
(in thousands, except per share data)
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
For the Year Ended December 31, 2020
Revenues
Operating income (loss)
Net income (loss)
Net income (loss) attributable to Euronet Worldwide,
Inc.
Earnings (loss) per common share:
Basic
Diluted
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$ 577,509 $ 691,867 $ 786,986 $ 693,747
$
$
$
$
$
56,094 $ 117,897 $ 193,990 $ 107,213
34,579 $
68,005 $ 137,541 $ 106,570
34,543 $
68,153 $ 137,607 $ 106,446
0.67 $
0.62 $
1.28 $
1.25 $
2.53 $
2.46 $
1.96
1.91
$ 583,907 $ 527,803 $ 664,351 $ 706,639
$
$
31,602 $ (101,271) $
66,072 $
50,219
1,720 $ (115,733) $
40,315 $
70,394
$
1,921 $ (115,804) $
40,249 $
70,235
$
$
0.04 $
(2.22) $
0.04 $
(2.22) $
0.77 $
0.76 $
1.34
1.31
116
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, 2020. 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 2020 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, 2020. 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, 2020, 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, 2020, 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 19, 2021
117
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information under “Election of Directors,” “Delinquent Section 16(a) Reports” and “Meetings and Committees
of the Board of Directors” in the Proxy Statement for the 2021 Annual Meeting of Stockholders, which will be filed
with the SEC no later than 120 days after December 31, 2020, 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,”
“Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” in the Proxy
Statement for the 2021 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days
after December 31, 2020, 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 shares issuable under
approved plans in the Proxy Statement for the 2021 Annual Meeting of Stockholders, which will be filed with the
SEC no later than 120 days after December 31, 2020, 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 2021 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days
after December 31, 2020, is incorporated herein by reference.
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 2021 Annual Meeting of Stockholders, which will be
filed with the SEC no later than 120 days after December 31, 2020, is incorporated herein by reference.
118
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.
Exhibit Index
Exhibit
EXHIBITS
Description
3.1
3.2
3.3
3.4
4.1
4.2
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)
4.3
Form of 1.375% Senior Note due 2026 (included as Exhibit A to Exhibit 4.1 above).
119
4.4
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)
4.5
Form of 0.75% Convertible Senior Note due 2049 (included as Exhibit A to Exhibit 4.4 above)
4.6
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Description of Securities (filed as Exhibit 4.6 to the Company’s Annual Report on Form 10-K filed
on March 3, 2020 and incorporated herein by reference.
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)
10.10
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)
120
10.11.1
10.11.2
10.12
10.13
10.14
10.15
10.16
10.17
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)
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)
10.18
Letter Amendment No. 2 dated as of September 17, 2020 to the Credit Agreement dated as of
October 17, 2018, as amended by Letter Amendment No. 1 dated as of August 26, 2019 (filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 18, 2020 and
incorporated by reference herein)
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)
121
101
The following materials from Euronet Worldwide, Inc.’s Annual Report on Form 10-K for the year
ended December 31, 2020, formatted inline XBRL (eXtensible Business Reporting Language):
(i) Consolidated Balance Sheets at December 31, 2020 and 2019, (ii) Consolidated Statements of
Income for the years ended December 31, 2020, 2019 and 2018, (iii) Consolidated Statements of
Comprehensive Income for the years ended December 31, 2020, 2019 and 2018, (iv) Consolidated
Statements of Changes in Equity for the years ended December 31, 2020, 2019 and 2018, (v)
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018, and
(vi) Notes to the Consolidated Financial Statements.
104
___________________________
Cover Page Interactive Data File (contained in Exhibit 101)
Filed herewith.
(1)
(2) Management contracts and compensatory plans and arrangements required to be filed as Exhibits pursuant to
Item 15(a) of this report.
(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.
122
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 19, 2021
/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 19, 2021
/s/ Rick L. Weller
Rick L. Weller
February 19, 2021
/s/ Paul S. Althasen
Paul S. Althasen
February 19, 2021
/s/ Andrzej Olechowski
Andrzej Olechowski
February 19, 2021
/s/ Michael N. Frumkin
Michael N. Frumkin
February 19, 2021
/s/ Thomas A. McDonnell
Thomas A. McDonnell
February 19, 2021
/s/ Andrew B. Schmitt
Andrew B. Schmitt
February 19, 2021
/s/ M. Jeannine Strandjord
M. Jeannine Strandjord
February 19, 2021
/s/ Mark R. Callegari
Mark R. Callegari
February 19, 2021
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
123
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124
RECONCILIATION TABLE
Reconciliation of Adjusted Earnings Per Share
(unaudited — in millions, except per share data)
2016
2017
2018
2019
2020
Net income (loss) attributable to Euronet Worldwide, Inc.
$ 174.4
$ 156.9
$ 232.8
$ 346.8
$
(3.4)
Foreign exchange loss (gain)
Acquired intangible asset amortization
Share-based compensation
Expenses incurred for proposed acquisition of MoneyGram
Post-acquisition adjustment
Goodwill and acquired 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 expense (benefit)
Adjusted earnings1
Adjusted earnings per share — diluted1
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
3.8
22.9
22.0
–
–
106.6
–
15.3
(7.2)
–
–
(8.3)
$ 218.1
$ 253.8
$ 303.3
$ 393.0
$
151.7
$ 4.02
$ 4.58
$ 5.53
$
7.01
$ 2.82
Diluted weighted average shares outstanding
54.0
55.1
54.6
Effect of anti-dilutive shares not included in GAAP calculation
Effect of conversion of convertible debentures
Effect of unrecognized share-based compensation on diluted shares outstanding
Adjusted diluted weighted average shares outstanding
–
–
0.3
54.3
–
–
0.3
55.4
–
–
0.3
54.9
54.9
–
0.9
0.3
56.1
52.7
0.9
–
0.2
53.8
Reconciliation of Net Income to Operating Income,
Adjusted Operating Income and Adjusted EBITDA
(unaudited — in millions)
Net income (loss)
Add: Income tax expense
Add: Total other expense, net
Operating income
Add: Goodwill and acquired intangible asset 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, goodwill and acquired intangible
asset impairment charges and other non-operating and non-recurring items
(Adjusted EBITDA)
2016
2017
2018
2019
2020
$ 174.0
$ 157.0
$ 232.0
$ 346.7
$
(3.3)
58.8
17.0
99.5
9.5
62.8
63.2
87.2
41.3
11.5
38.4
$ 249.8
$ 266.0
$ 358.0
$ 475.2
$ 46.6
–
–
–
34.1
–
4.5
7.0
6.6
–
–
(1.3)
–
106.6
–
–
$ 249.8
$ 304.6
$ 371.6
$ 473.9
$ 153.2
80.5
14.9
95.0
15.6
106.1
16.7
111.7
21.5
127.0
22.0
$ 345.2
$ 415.2
$ 494.4
$ 607.1
$ 302.2
125
(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.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. LOOKING FORWARD
AROUND THE GLOBE
Annual Meeting
Euronet’s 2020 Annual Meeting of Stockholders will be held on
Tuesday, May 18, 2021, at Euronet’s Corporate Headquarters in
Leawood, Kansas. If regulations require a virtual format, access
information will be provided at ir.euronetworldwide.com.
Website
www.euronetworldwide.com
Forward-Looking Statements
Statements contained in this annual report that concern Euronet’s or
its management’s intentions, expectations, or predictions of future
performance, are forward-looking statements. Euronet’s actual results
may vary materially from those anticipated in such forward-looking
statements as a result of a number of factors, including: conditions
in world financial markets and general economic conditions, including
impacts from the COVID-19 pandemic; 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 Privacy Regulation and Second Payment Service
Directive requirements; changes in laws and regulations affecting our
business, including tax and immigration laws and any laws regulating
payments, including dynamic currency conversion 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; and renewal of sources
of funding as they expire and the availability of replacement funding.
These risks and other risks are described in the Company’s filings with
the Securities and Exchange Commission, including our Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K. Copies of these filings may be obtained via the SEC’s Edgar website
or by contacting the Company. Any forward-looking statements made
in this report speak only as of the date of this report. Except as may
be required by law, Euronet does not intend to update these forward-
looking statements and undertakes no duty to any person to provide
any such update under any circumstances. The Company regularly posts
important information to the investor relations section of its website.
126
Euronet’s business interests span continents
and oceans. In 2020, we did business in over
175 countries worldwide.
OFFICE LOCATION
Amsterdam, the Netherlands
Athens, Greece
Auckland, New Zealand
Beijing, China
Belgrade, Serbia
Berlin, Germany
Billericay, United Kingdom
Bracknell, United Kingdom
Bratislava, Slovakia
Brussels, Belgium
Bucharest, Romania
Budapest, Hungary
Buena Park, California
Cairo, Egypt
Copenhagen, Denmark
Dakar, Senegal
Denver, Colorado
Dubai, United Arab Emirates
Dublin, Ireland
Geneva, Swtizerland
Hamburg, Germany
Houston, Texas
Istanbul, Turkey
Jakrata, Indonesia
Karachi, Pakistan
Kiev, Ukraine
Kracow, Poland
Kuala Lumpur, Malaysia
Leawood, Kansas
Lisbon, Portugal
Little Rock, Arkansas
London, United Kingdom
Madrid, Spain
Makati City, Philippines
Manama, Bahrain
Martinsreid, Germany
Mexico City, Mexico
Milan, Italy
Milton Keynes, United Kingdom
Montreal, Canada
Moscow, Russian Federation
Mumbai, India
Munich, Germany
Newmarket, Canada
Paris, France
Prague, Czech Republic
Pune, India
Rome, Italy
San Salvador, El Salvador
Santiago, Chile
Sao Paulo, Brazil
Shanghai, China
Singapore
Sofia, Bulgaria
Stockholm, Sweden
Sydney, Australia
Toronto, Canada
Vienna, Austria
Warsaw, Poland
Zagreb, Croatia
LOCAL CURRENCY
euro
euro
New Zealand dollar
yuan
dinar
euro
British pound
British pound
euro
euro
new leu
forint
U.S. dollar
Egyptian pound
krone
West African CFA franc
U.S. dollar
dirham
euro
Swiss franc
euro
U.S. dollar
lira
rupiah
Pakistan rupee
hryvnia
zloty
ringgit
U.S. dollar
euro
U.S. dollar
British pound
euro
Philippine peso
dinar
euro
Mexican peso
euro
British pound
Canadian dollar
ruble
Indian rupee
euro
Canadian dollar
euro
koruna
Indian rupee
euro
U.S. dollar
Chilean peso
real
yuan
Singapore dollar
lev
krona
Australian dollar
Canadian dollar
euro
zloty
kuna
“We enter 2021 with a solid
balance sheet, a dedicated and
motivated workforce, innovative
new technologies, and historically
reliable growth drivers. 2020
was a year nobody expected.
We responded with optimism,
ingenuity, and character. We
also generated $100 million in
profits despite the obstacles
encountered. It was amazing to
witness and be a part of. I believe
2021 holds as much promise as
any in our history.”
— Michael J. Brown Chairman, President and CEO, Euronet Worldwide, Inc.
127
Bright spots in a challenging year
Our resilience shined through
all over the world in 2020.
Euronet Worldwide, Inc.
Leawood, Kansas, USA
euronetworldwide.com
128