Docoh
Loading...

EEFT Euronet Worldwide

Filed: 4 May 21, 8:00pm
 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
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
66211
(Address of principal executive offices)(Zip Code)
(913) 327-4200
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockEEFT
Nasdaq Global Select Market
1.375% Senior Notes due 2026
EEFT26
Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
þ
Accelerated filer 
o
Non-accelerated filer 
o
Smaller reporting company


Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No þ
On May 3, 2021, Euronet Worldwide, Inc. had 52,797,354 shares of common stock outstanding.
 


EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(In thousands, except share and per share data)
 As of
 March 31,
2021
 December 31,
2020
 (unaudited)  
ASSETS   
Current assets:   
Cash and cash equivalents$
1,145,406

 
$1,420,255
ATM cash339,883
 411,054
Restricted cash2,897
 3,334
Settlement assets960,313
 1,140,875
Trade accounts receivable, net of credit losses of $4,717 and $5,926111,384
 117,517
Prepaid expenses and other current assets253,308
 272,900
Total current assets2,813,191
 3,365,935
Operating right of use lease assets171,852
 162,074
Property and equipment, net of accumulated depreciation of $485,467 and $490,429357,272
 378,441
Goodwill653,128
 665,821
Acquired intangible assets, net of accumulated amortization of $178,219 and $175,210114,768
 121,883
Other assets, net of accumulated amortization of $57,118 and $55,710240,623
 232,557
Total assets$4,350,834
 $4,926,711
LIABILITIES AND EQUITY   
Current liabilities:   
Settlement obligations$960,313
 $1,140,875
Trade accounts payable125,007
 147,593
Accrued expenses and other current liabilities361,139
 404,021
Current portion of operating lease liabilities51,461
 52,436
Short-term debt obligations and current maturities of long-term debt obligations743
 797
Income taxes payable29,323
 36,359
Deferred revenue74,737
 73,360
Total current liabilities1,602,723
 1,855,441
Debt obligations, net of current portion1,143,026
 1,437,589
Operating lease obligations, net of current portion120,260
 106,502
Deferred income taxes39,708
 37,875
Other long-term liabilities39,390
 43,401
Total liabilities2,945,107
 3,480,808
Equity:   
Euronet Worldwide, Inc. stockholders’ equity:   
Preferred Stock, $0.02 par value. 10,000,000 shares authorized; NaN issued0—
 0—
Common Stock, $0.02 par value. 90,000,000 shares authorized;  shares issued 63,429,190 and 63,366,0101,268
 1,267
Additional paid-in-capital1,240,273
 1,228,446
Treasury stock, at cost, shares issued 10,632,705 and 10,631,961(703,514) (703,032)
Retained earnings1,004,490
 1,013,155
Accumulated other comprehensive loss(137,059) (94,214)
Total Euronet Worldwide, Inc. stockholders’ equity1,405,458
 1,445,622
Noncontrolling interests269 281
Total equity1,405,727
 1,445,903
Total liabilities and equity$4,350,834
 $4,926,711
See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(Unaudited, in thousands, except share and per share data)

 
Three Months Ended
March 31,

 2021 2020
Revenues $652,670
 $583,907

Operating expenses:   
Direct operating costs434,516
 359,456

Salaries and benefits115,668
 101,240

Selling, general and administrative58,776
 60,793

Depreciation and amortization33,261
 30,816

Total operating expenses642,221
 552,305

Operating income10,449
 31,602

Other income (expense):   
Interest income182
 567

Interest expense(9,189) (9,233)
Foreign currency exchange loss, net(4,032) (18,806)
Other gains, net31
 31
Other expense, net(13,008) (27,441)
(Loss) income before income taxes(2,559) 4,161

Income tax expense(6,062) (2,441)
Net (loss) income(8,621) 1,720

Net (income) loss attributable to noncontrolling interests(44) 201
Net (loss) income attributable to Euronet Worldwide, Inc.$(8,665) $1,921

    
(Loss) earnings per share attributable to Euronet Worldwide, Inc. stockholders:   
Basic$
(0.16
) $0.04

Diluted$(0.16) $0.04

    
Weighted average shares outstanding:   
Basic52,762,845
 53,607,104

Diluted52,762,845
 54,779,321


See accompanying notes to the unaudited consolidated financial statements.


EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(Unaudited, in thousands)

 
Three Months Ended
March 31,

 
2021
 
2020

Net (loss) income$(8,621) $1,720

Translation adjustment(42,901) (59,818)
Comprehensive loss(51,522) (58,098)
Comprehensive loss attributable to noncontrolling interests12 242

Comprehensive loss attributable to Euronet Worldwide, Inc.$(51,510) $(57,856)
See accompanying notes to the unaudited consolidated financial statements.


EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(Unaudited, in thousands, except share data)

  
Number of
Shares Outstanding
 
Common
Stock
 
Additional
Paid-in Capital
 
Treasury
Stock
Balance as of December 31, 2019
 54,220,854
 $1,256
 $1,190,058
 $(463,704)
Net income (loss)  
 
 
  

  

Other comprehensive loss  
 
 
  

  

Stock issued under employee stock plans 80,519
 
1
 1,701
 
(249
)
Share-based compensation  
 
 
 
6,338
  

Repurchase of shares (2,095,683) 
 
 


  (239,763)
Balance as of March 31, 2020
 52,205,690
 
1,257
 
1,198,097
 
(703,716)

  
Number of
Shares Outstanding
 
Common
Stock
 
Additional
Paid-in Capital
 
Treasury
Stock
Balance as of December 31, 2020
 52,734,049
 $1,267
 $1,228,446
 $(703,032)
Net (loss) income  
  

  

  

Other comprehensive loss  
  

  

  

Stock issued under employee stock plans 62,436
 
1
 
3,335
 
(482)
Share-based compensation  
  

 
8,492
  

Balance as of March 31, 2021
 52,796,485
 
1,268
 
1,240,273
 
(703,514)

See accompanying notes to the unaudited consolidated financial statements.


EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
(Unaudited, in thousands)

   Retained Earnings 
Accumulated Other
Comprehensive Loss
 
Noncontrolling
Interests
 Total
Balance as of December 31, 2019 $1,016,554
 $(164,890) $68
 $1,579,342
Net income (loss) 
1,921
  

 
(201) 
1,720
Other comprehensive loss  

 
(59,777
) 
(41
) 
(59,818
)
Stock issued under employee stock plans  

  

  

 
1,453
Share-based compensation  

  

  

 
6,338
Repurchase of shares  

  

  

 
(239,763)
 Balance as of March 31, 2020
 
1,018,475
 
(224,667) 
(174) 
1,289,272

   Retained Earnings 
Accumulated Other
Comprehensive Loss
 
Noncontrolling
Interests
 Total
Balance as of December 31, 2020 $1,013,155
 $(94,214) $281
 $1,445,903
Net (loss) income 
(8,665)  

 
44 (8,621)
Other comprehensive loss  

 
(42,845) 
(56) (42,901)
Stock issued under employee stock plans  

  

  

 2,854
Share-based compensation  

  

  

 8,492
 Balance as of March 31, 2021
 
1,004,490
 
(137,059) 
269 
1,405,727

See accompanying notes to the unaudited consolidated financial statements.


EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(Unaudited, in thousands)
 Three Months Ended
March 31,
 2021 2020
Net (loss) income
$(8,621) $1,720
Adjustments to reconcile net (loss) income to net cash provided by operating activities:   
Depreciation and amortization33,261
 30,816
Share-based compensation8,492
 6,338
Unrealized foreign exchange loss, net4,032
 18,806
Deferred income taxes2,374 (2,043)
Accretion of convertible debt discount and amortization of debt issuance costs4,979
 4,616
Changes in working capital, net of amounts acquired:
 
Income taxes payable, net(5,534) (10,454)
Trade accounts receivable148,697
 300,063
Prepaid expenses and other current assets29,551 (119,648)
Trade accounts payable(220,439) (126,242)
Deferred revenue3,738 4,119
Accrued expenses and other current liabilities11,234
 14,811
Changes in noncurrent assets and liabilities(14,409) (17,018)
Net cash (used in) provided by operating activities(2,645) 105,884
Cash flows from investing activities:  
Acquisitions, net of cash acquired0— 475
Purchases of property and equipment(16,393) (30,392)
Purchases of other long-term assets(2,212) (2,046)
Other, net380
 357
Net cash used in investing activities(18,225) (31,606)
Cash flows from financing activities:   
Proceeds from issuance of shares3,670
 1,700
Repurchase of shares(808) (240,530)
Borrowings from revolving credit agreements707,100
 805,500
Repayments of revolving credit agreements(977,500) (805,500)
Net repayments from short-term debt obligations(32) (2,163)
Other, net(1,641) (1,651)
Net cash used in financing activities(269,211) (242,644)
Effect of exchange rate changes on cash and cash equivalents and restricted cash(53,188) (59,260)
Decrease in cash and cash equivalents and restricted cash(343,269) (227,626)
Cash and cash equivalents and restricted cash at beginning of period2,099,508
 1,817,379
    
Cash and cash equivalents and restricted cash at end of period$1,756,239
 $1,589,753
    
Supplemental disclosure of cash flow information:   
Interest paid during the period$2,703
 $3,678
Income taxes paid during the period$11,160
 $16,064
See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

(1) GENERAL


Organization

Euronet Worldwide, Inc. (the “Company” or “Euronet”) was established as a Delaware corporation on December 13, 1997 and succeeded Euronet Holding N.V. as the group holding company, which was founded and established in 1994. Euronet is a leading electronic payments provider. Euronet offers payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. Euronet's primary product offerings include comprehensive automated teller machine (“ATM”), point-of-sale (“POS”), card outsourcing, card issuing and merchant acquiring services, electronic distribution of prepaid mobile airtime and other electronic payment products, and global money transfer services.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared from the records of the Company, in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, such unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly present the consolidated financial position and the results of operations, comprehensive income, changes in equity and cash flows for the interim periods. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2020, including the notes thereto, set forth in the Company’s 2020 Annual Report on Form 10-K.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include computing income taxes, 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. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 2021.

Seasonality

Euronet’s Electronic Funds Transfer ("EFT") Processing Segment normally experiences its heaviest demand for dynamic currency conversion ("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.

7



(2) RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS

In August 2020, the Financial Accounting Standards Board ("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.

(3) PENDING ACQUISITION


In March 2021, the Company entered into an agreement to purchase the Piraeus Bank Merchant Acquiring business of Piraeus Bank for €300 million, or approximately $360 million. The proposed arrangement will include separate commercial agreements for a long-term strategic partnership with Piraeus Bank for collaborative product distribution, processing and customer referrals. The acquisition will expand the Company’s omnichannel payments strategy and position the Company in Greece’s growing market for merchant acquiring services. The closing is targeted for late 2021 and is subject to regulatory approvals, finalization of the commercial agreements, and customary closing conditions. The Company expects to finance the purchase price using cash on hand.


(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 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.

 
As of
(in thousands)
March 31,
2021

December 31,
2020
Settlement assets:
 
 
Settlement cash and cash equivalents
$209,853

$188,191
Settlement restricted cash
58,200

76,674
Accounts receivable, net of credit allowance of $33,980 and $35,800
478,209

641,955
Prepaid expenses and other current assets
214,051

234,055
Total settlement assets
$960,313

$1,140,875
Settlement obligations:
 
 
Trade account payables
$356,612

$571,175
Accrued expenses and other current liabilities
603,701

569,700
Total settlement obligations
$960,313

$1,140,875


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.

  As of
(in thousands) 
March 31,
2021
 
December 31,
2020
 
March 31,
2020
 
December 31,
2019
Cash and cash equivalents $1,145,406
 $1,420,255
 $709,521
 $786,081
Restricted cash 2,897
 3,334
 28,953
 34,301
ATM cash 339,883
 411,054
 558,580
 665,641
Settlement cash and cash equivalents 209,853
 188,191
 256,456
 282,188
Settlement restricted cash 58,200
 76,674
 36,243
 49,168
Cash and cash equivalents and restricted cash at end of period $1,756,239
 $2,099,508
 $1,589,753
 $1,817,379

(5) STOCKHOLDERS' EQUITY

(Loss) Earnings Per Share

Basic (loss) earnings per share has been computed by dividing (loss) earnings available to common stockholders by the weighted average number of common shares outstanding during the respective period. Diluted (loss) earnings per share has been computed by dividing (loss) 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, if such conversion would be dilutive.

The following table provides the computation of diluted weighted average number of common shares outstanding:


Three Months Ended
March 31,

 2021

2020
Computation of diluted weighted average shares outstanding:




Basic weighted average shares outstanding52,762,845

53,607,104
Incremental shares from assumed exercise of stock options and vesting of restricted stock0—

1,172,217
Diluted weighted average shares outstanding52,762,845

54,779,321

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 (loss) earnings per share excludes stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding of approximately 2,437,000 and 886,000 for the three months ended March 31, 2021 and 2020, respectively.

The Company issued Convertible Senior Notes ("Convertible Notes") due March 2049 on March 18, 2019. The Company's Convertible Notes currently have 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 were included in the calculation of diluted (loss) earnings per share if their inclusion was dilutive. The dilutive effect increases the more the market price exceeds the conversion price. 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. The market price per share of common stock was $138.30 on March 31, 2021 and $85.72 on March 31, 2020, therefore, according to ASC Topic 260, Earnings per Share (“ASC 260”), there was no dilutive effect of the assumed conversion of the debentures for the three months ended March 31, 2021 and 2020. See Note 9, Debt Obligations, to the consolidated financial statements for more information about the Convertible Notes. 


9


Share repurchases

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 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. For the three months ended March 31, 2021, there were 0 repurchases of stock under the repurchase programs. Repurchases under the current 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.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists entirely of foreign currency translation adjustments. The Company recorded foreign currency translation losses of $42.9 million and $59.8 million for the three months ended March 31, 2021 and 2020, respectively. There were no reclassifications of foreign currency translation into the consolidated statements of income for the three months ended March 31, 2021 and 2020.

(6) GOODWILL AND ACQUIRED INTANGIBLE ASSETS, NET

A summary of acquired intangible assets and goodwill activity for the three months ended March 31, 2021 is presented below:
(in thousands) 
Acquired
Intangible
Assets
 Goodwill 
Total
Intangible
Assets
Balance as of December 31, 2020 $121,883
 $665,821
 $787,704
Decreases:      
Acquisition 0—
 0— 0—
Amortization (5,789) 0—
 (5,789)
Foreign currency exchange rate changes (1,326) (12,693) (14,019)
Balance as of March 31, 2021 $114,768
 $653,128
 $767,896

Of the total goodwill balance of $653.1 million as of March 31, 2021, $398.0 million relates to the Money Transfer Segment, $132.3 million relates to the epay Segment and the remaining $122.8 million relates to the EFT Processing Segment. Estimated amortization expense on acquired intangible assets with finite lives as of March 31, 2021, is expected to total $17.0 million for the remainder of 2021, $21.5 million for 2022, $16.6 million for 2023, $9.8 million for 2024, $6.4 million for 2025 and $6.2 million for 2026.


(7) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:
  As of
(in thousands) March 31, 2021 December 31, 2020
Accrued expenses  $314,103
 $331,713
Derivative liabilities 41,219
 65,905
Current portion of finance lease obligations 5,817
 6,403
Total $361,139
 $404,021

(8) UNEARNED 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 three months ended March 31, 2021 is primarily driven by $22.9 million of cash payments received in the current year for which the Company has not yet satisfied the performance obligations, offset by $21.6 million of revenues recognized that were included in the deferred revenue balance as of December 31, 2020.

10



(9) DEBT OBLIGATIONS


Debt obligations consist of the following: 

  As of
(in thousands) March 31, 2021 December 31, 2020
Credit Facility:    
Revolving credit agreement $0—
 $270,400
Convertible Debt:    
0.75% convertible notes, unsecured, due 2049 456,159
 452,228
     
1.375% Senior Notes, due 2026 703,680
 732,840
     
Other obligations 813
 850
     
Total debt obligations 1,160,652
 1,456,318
Unamortized debt issuance costs (16,883) (17,932)
Carrying value of debt 1,143,769
 1,438,386
Short-term debt obligations and current maturities of long-term debt obligations (743) (797)
Long-term debt obligations $1,143,026
 $1,437,589

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 Credit Facility contains customary affirmative and negative covenants, events of default and financial covenants. The Company was in compliance with all debt covenants as of March 31, 2021.

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 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.

Contractual interest expense for the Convertible Notes was $1.0 million for the three months ended March 31, 2021 and 2020. Accretion expense for the Convertible Notes was $3.9 million and $3.7 million for the three months ended March 31, 2021 and 2020, respectively. The effective interest rate was 4.4% for the three months ended March 31, 2021. As of March 31, 2021, the unamortized discount was $68.8 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 expire in 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 March 31, 2021, the Company has outstanding €600 million ($703.7 million) principal amount of the Senior Notes. In addition, the Company may redeem some or all of these notes on or after February 22, 2026 at their principal amount plus any accrued and unpaid interest.

Other obligations

Certain of the Company's subsidiaries have available lines of credit and overdraft credit facilities that generally provide for short-term borrowings that are used from time to time for working capital purposes. As of March 31, 2021 and December 31, 2020, borrowings under these arrangements were $0.8 million and $0.9 million, respectively.

(10) 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 815primarily due to either the relatively short duration of the contract term or the effects of fluctuations in currency exchange rates are reflected concurrently in earnings for both the derivative instrument and the transaction and have an offsetting effect. 

Foreign currency exchange contracts - Ria Operations and Corporate

In the United States, the Company uses short-duration foreign currency forward contracts, generally with maturities up to 14 days, to offset the fluctuation in foreign currency exchange rates on the collection of money transfer funds between initiation of a transaction and its settlement. Due to the short duration of these contracts and the Company’s credit profile, the Company is generally not required to post collateral with respect to these foreign currency forward contracts. Most derivative contracts executed with counterparties in the U.S. are governed by an International Swaps and Derivatives Association agreement that includes standard netting arrangements; therefore, asset and liability positions from forward contracts and all other foreign exchange transactions with the same counterparty are net settled upon maturity. The Company had foreign currency forward contracts outstanding in the U.S. with a notional value of $120 million and $246 million as of March 31, 2021 and December 31, 2020, respectively. The foreign currency forward contracts consist primarily in Australian dollars, Canadian dollars, British pounds sterling, euro and Mexican pesos.

12



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. The Company had foreign currency forward contracts outstanding with a notional value of $593 million and $454 million as of March 31, 2021 and December 31, 2020, respectively, primarily in euro.

Foreign currency exchange contracts - xe Operations

xe writes derivative instruments, primarily foreign currency forward contracts and cross-currency swaps, mostly with counterparties comprised of individuals and small-to-medium size businesses and derives a currency margin from this activity as part of its operations. xe aggregates its foreign currency exposures arising from customer contracts and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties. Foreign exchange revenues from xe's total portfolio of positions were $18.5 million and $18.1 million for the three months ended March 31, 2021 and 2020, respectively. All of the derivative contracts used in the Company' s xe operations are economic hedges and are not designated as hedges under ASC 815The 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 amount of foreign currency derivative customer contracts held by the Company in its xe operations as of March 31, 2021 and December 31, 2020 was approximately $1.4 billion and $1.3 billion, respectively. The significant majority of customer contracts are written in major currencies such as the euro, U.S. dollar, British pounds sterling, Australian dollar and New Zealand dollar.

Balance Sheet Presentation

The following table summarizes the fair value of the derivative instruments as recorded in the Consolidated Balance Sheets as of the dates below:

  Asset Derivatives Liability Derivatives
    Fair Value   Fair Value
(in thousands) Balance Sheet Location March 31, 2021 December 31, 2020 Balance Sheet Location March 31, 2021 December 31, 2020
Derivatives not designated as hedging instruments            
Foreign currency exchange contracts Other current assets $49,390
 $80,879
 Other current liabilities $(41,219) $(65,905)

The following tables summarize the gross and net fair value of derivative assets and liabilities as of March 31, 2021 and December 31, 2020 (in thousands):

Offsetting of Derivative Assets
        Gross Amounts Not Offset in the Consolidated Balance Sheet  
As of March 31, 2021 Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Balance Sheet Net Amounts Presented in the Consolidated Balance Sheet Financial Instruments Cash Collateral Received Net Amounts
Derivatives subject to a master netting arrangement or similar agreement $49,390
 $0—
 $49,390
 $(26,069) $(4,243) $19,078
             
As of December 31, 2020            
Derivatives subject to a master netting arrangement or similar agreement $80,879
 $0—
 $80,879
 $(44,893) $(2,778) $33,208

13



Offsetting of Derivative Liabilities

        Gross Amounts Not Offset in the Consolidated Balance Sheet  
As of March 31, 2021 Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheet Net Amounts Presented in the Consolidated Balance Sheet Financial Instruments Cash Collateral Paid Net Amounts
Derivatives subject to a master netting arrangement or similar agreement $(41,219) $0—
 $(41,219) $26,069
 $2,307
 $(12,843)
             
As of December 31, 2020            
Derivatives subject to a master netting arrangement or similar agreement $(65,905) $0—
 $(65,905) $44,893
 $12,272
 $(8,740)

See Note 11, Fair Value Measurements, for the determination of the fair values of derivatives.

Income Statement Presentation

The following table summarizes the location and amount of gains and losses on derivatives in the Consolidated Statements of Income for the three months ended March 31, 2021 and 2020:

    Amount of (Loss) Gain Recognized in Income on Derivative Contracts (a)
  Location of (Loss) Gain Recognized in Income on Derivative Contracts 
Three Months Ended
March 31,
(in thousands)  2021 2020
Foreign currency exchange contracts - Ria Operations Foreign currency exchange (loss) gain, net $(2,468) $1,019
(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 11, Fair Value Measurements, for the determination of the fair values of derivatives. 

(11) FAIR VALUE MEASUREMENTS


Fair value measurements used in the unaudited 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.
14



The following table details financial assets and liabilities measured and recorded at fair value on a recurring basis:
    As of March 31, 2021
(in thousands) Balance Sheet Classification Level 1 Level 2 Level 3 Total
Assets          
Foreign currency exchange contracts Other current assets $0—
 $49,390
 $0—
 $49,390
Liabilities          
Foreign currency exchange contracts Other current liabilities $0—
 $(41,219) $0—
 $(41,219)
    As of December 31, 2020
(in thousands) Balance Sheet Classification Level 1 Level 2 Level 3 Total
Assets          
Foreign currency exchange contracts Other current assets $0—
 $80,879
 $0—
 $80,879
Liabilities          
Foreign currency exchange contracts Other current liabilities $0—
 $(65,905) $0—
 $(65,905)

Other Fair Value Disclosures

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 March 31, 2021, the fair values of the Convertible Notes and Senior Notes were $631.4 million and $712.0 million, respectively, with carrying values of $456.2 million and $703.7 million, respectively.

(12) 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 3 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, the United States and Africa. 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. 
15



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.

The following tables present the Company’s reportable segment results for the three months ended March 31, 2021 and 2020:
  For the Three Months Ended March 31, 2021
(in thousands) 
EFT
Processing
 epay 
Money
Transfer
 
Corporate Services,
Eliminations
and Other
 Consolidated
Total revenues $87,076
 $242,303
 $324,900
 $(1,609) $652,670
Operating expenses:          
Direct operating costs 69,612
 182,633
 183,878
 (1,607) 434,516
Salaries and benefits 23,571
 19,369
 60,540
 12,188
 115,668
Selling, general and administrative 11,962
 9,020
 36,116
 1,678
 58,776
Depreciation and amortization 22,027
 2,124
 8,963
 147
 33,261
Total operating expenses 127,172
 213,146
 289,497
 12,406
 642,221
Operating (loss) income $(40,096) $29,157
 $35,403
 $(14,015) $10,449

  For the Three Months Ended March 31, 2020
(in thousands) 
EFT
Processing
 epay 
Money
Transfer
 
Corporate Services,
Eliminations
and Other
 Consolidated
Total revenues $145,825
 $172,911
 $266,234
 $(1,063) $583,907
Operating expenses:          
Direct operating costs 87,536
 130,074
 142,909
 (1,063) 359,456
Salaries and benefits 22,091
 15,697
 53,864
 9,588
 101,240
Selling, general and administrative 10,941
 8,838
 38,582
 2,432
 60,793
Depreciation and amortization 20,322
 1,844
 8,571
 79
 30,816
Total operating expenses 140,890
 156,453
 243,926
 11,036
 552,305
Operating income (expense) $4,935
 $16,458
 $22,308
 $(12,099) $31,602

16



The following table presents the Company’s total assets by reportable segment:
 Total Assets as of
(in thousands)March 31, 2021 December 31, 2020
EFT Processing$1,400,396
 $1,541,610
epay915,875
 1,135,204
Money Transfer1,764,127
 1,755,651
Corporate Services, Eliminations and Other270,436
 494,246
   Total  $4,350,834
 $4,926,711

The following table presents the Company's revenues disaggregated by segment and region. Sales and usage-based taxes are excluded from revenues. 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. 
















  
For the Three Months Ended March 31, 2021

For the Three Months Ended March 31, 2020
(in thousands) 
EFT
Processing
 epay 
Money
Transfer
 Total

EFT
Processing



epay


Money
Transfer



Total
Europe $46,862
 $164,908
 $132,839
 $344,609

$99,474

$115,277

$91,058

$305,809
North America 14,466
 33,841
 152,302
 200,609


15,019


33,852


137,895


186,766
Asia Pacific 25,694
 34,318
 28,469
 88,481


31,328


19,274


30,848


81,450
Other 54
 9,236
 11,290
 20,580


4


4,508


6,433


10,945
Eliminations 0—
 0—
 0—
 (1,609)

0—


0—


0—


(1,063)
Total $87,076
 $242,303
 $324,900
 $652,670

$145,825

$172,911

$266,234

$583,907

(13) INCOME TAXES


The Company's effective income tax rate was (236.9%) and 58.7% for the three months ended March 31, 2021 and 2020, respectively. The Company's effective income tax rate for the three months ended March 31, 2021 was lower than the applicable statutory income tax rate of 21% as a result of the non-recognition of tax benefits from losses in certain foreign countries where we have a limited history of profitable earnings, certain foreign earnings of the Company being subject to higher local statutory tax rates, and the Company’s U.S. deferred tax activity on foreign exchange positions. The Company's effective income tax rate for the three months ended March 31, 2020 was higher than the applicable statutory income tax rate of 21% primarily as a result of certain foreign earnings of the Company being subject to higher local statutory income tax rates.

(14) COMMITMENTS


As of March 31, 2021, the Company had $87.4 million of stand-by letters of credit/bank guarantees issued on its behalf, of which $58.9 million are outstanding under the Credit Facility. The remaining stand-by letters of credit/bank guarantees are collateralized by $3.8 million of cash deposits held by the respective issuing banks.
Under certain circumstances, Euronet grants guarantees in support of obligations of subsidiaries. As of March 31, 2021, the Company had granted off balance sheet guarantees for cash in various ATM networks amounting to $11.2 million over the terms of the cash supply agreements and performance guarantees amounting to approximately $45.4 million over the terms of 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. As of March 31, 2021, the balance of such cash used in the Company's ATM networks for which the Company was responsible was approximately $486 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 March 31, 2021 or December 31, 2020.

(15) LITIGATION AND CONTINGENCIES


From time to time, the Company is a party to legal or 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 on the Company's consolidated financial condition or results of operations. 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. 


(16) LEASES

 

The Company enters into operating leases for ATM sites, office spaces, retail stores and equipment. The Company's finance leases are immaterial. Right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease terms. 

The present value of lease payments is determined using the incremental borrowing rate based on information available at the lease commencement date. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Most leases include an option to renew, with renewal terms that can extend the lease terms. The exercise of lease renewal options is at the Company’s sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease terms. The Company also has a unilateral termination right for most of the ATM site leases. Since the Company is not reasonably certain not to exercise termination options, payments for ATM site leases with termination options subject to the short-term lease exemption are expensed in the period incurred and corresponding leases are excluded from the right of use lease asset and lease liability balances. 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 non-cancelable operating leases (with initial lease terms in excess of one year) as of March 31, 2021 are:
 As of March 31, 2021
Maturity of Lease Liabilities (in thousands)
Operating Leases (1)
Remainder of 2021
$35,443
2022
40,777
2023
30,483
2024
21,829
2025
15,220
Thereafter33,594
Total lease payments$177,346
Less: imputed interest(5,625)
Present value of lease liabilities$171,721

(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.

Lease expense recognized in the Consolidated Statements of Income is summarized as follows: 
Lease Expense 
(in thousands)
Income Statement Classification
Three Months Ended
March 31, 2021

Three Months Ended
March 31, 2020
Operating lease expenseSelling, general and administrative and Direct operating costs
$
13,858
$33,188
Short-term and variable lease expense Selling, general and administrative and Direct operating costs
 22,549

8,680
Total lease expense 
$
36,407
$41,868

Other information about lease amounts recognized in the consolidated financial statements is summarized as follows: 
Lease Term and Discount Rate of Operating Leases As of March 31, 2021
Weighted- average remaining lease term (years) 5.3
Weighted- average discount rate 2.2%


The following table presents supplemental cash flow and non-cash information related to leases.



Other Information (in thousands)
 
Three Months Ended
March 31, 2021

Three Months Ended
March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities (a)
 $13,669

$32,792
Supplemental non-cash information on lease liabilities arising from obtaining ROU assets:  


ROU assets obtained in exchange for new operating lease liabilities $28,188

$50,525
(a) Included in Net cash provided by operating activities on the Company's Consolidated Statements of Cash Flows.


The terms "Euronet," the "Company," "we" and "us" as used herein refer to Euronet Worldwide, Inc. and its subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report 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 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 of our Annual Report on Form 10-K for the year ended December 31, 2020. Our Annual Report on Form 10-K is available on the SEC's EDGAR website at www.sec.gov, and copies may also be obtained by contacting the Company. Any forward-looking statements made in this Form 10-Q 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.
OVERVIEW

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 Automated Teller Machine ("ATM"), point-of-sale ("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 36,777 active ATMs and approximately 349,000 POS terminals across Europe, the Middle East, Asia Pacific, the United States and Africa. 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, dynamic currency conversion ("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 736,000 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, AFEX, IME and xe and global account-to-account money transfer services under the brand name xe. We offer services under the brand names Ria, AFEX 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 475,000 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 72% 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 in our Annual Report on Form 10-K for the year ended December 31, 2020).

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.

EFT Processing Segment — Revenues in the EFT Processing Segment, which represented approximately 13% of total consolidated revenues for the first quarter of 2021are 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 37% of total consolidated revenues for the first quarter of 2021, 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 compared with other electronic products has decreased over time, and digital media content now produces approximately 69% 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 mobile wallets, 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 50% of total consolidated revenues for the first quarter of 2021, 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, IME 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.

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 necessarily limited to, the following:

  • the impact of competition by banks and other ATM operators and service providers in our current target markets;
  • the demand for our ATM outsourcing services in our current target markets;
  • our ability to develop products or services, including value added services, to drive increases in transactions and revenues;
  • the expansion of our various business lines in markets where we operate and in new markets;
  • our entry into additional card acceptance and ATM management agreements with 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.
epay Segment — The continued expansion and development of the epay Segment business will depend on various factors, including, but not necessarily limited to, the following:
  • our ability to maintain and renew existing agreements, and to negotiate new agreements in additional markets with mobile operators, digital content providers, agent financial institutions and retailers;
  • our ability to use existing expertise and relationships with mobile operators, digital content providers and retailers to our advantage;
  • the continued use of third-party providers such as ourselves to supply electronic processing solutions for existing and additional digital content;
  • the 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.


Money Transfer Segment — The continued expansion and development of our Money Transfer Segment business will depend on various factors, including, but not necessarily limited to, the following:

  • the continued growth in worker migration and employment opportunities;
  • the mitigation of economic and political factors that have had an adverse impact on money transfer volumes, such as changes in the economic sectors in which immigrants work and the developments in immigration policies in the countries in which we operate;
  • the continuation of the trend of increased use of electronic money transfer and bill payment services among high-income individuals, immigrant workers and the unbanked population in our markets;
  • our ability to maintain our agent and correspondent networks;
  • our ability to offer our products and services or develop new products and services at competitive prices to drive increases in transactions;
  • the development of new technologies that may compete with our money transfer network, and our ability to acquire, develop and implement new technologies;
  • the expansion of our services in markets where we operate and in new markets;
  • our ability to strengthen our brands;
  • our ability to fund working capital requirements;
  • our ability to recover from agents funds collected from customers and our ability to recover advances made to correspondents;
  • our ability to maintain compliance with the regulatory requirements of the jurisdictions in which we operate or plan to operate;
  • our ability to take advantage of cross-selling opportunities with our epay Segment, including providing prepaid services through our stores and agents worldwide;
  • our ability to leverage our banking and merchant/retailer relationships to expand money transfer corridors to Europe, Asia and Africa, including high growth corridors to Central and Eastern European countries;
  • the availability of financing for further expansion;
  • the ability to maintain banking relationships necessary for us to service our customers;
  • our ability to successfully expand our agent network in Europe using our payment institution licenses under the Second Payment Services Directive ("PSD2") and using our various licenses in the United States;
  • 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.

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 border and business closures, travel restrictions and other social distancing orders in most of the countries where we operate during the first quarter of 2021. These types of orders were first put into effect in late February 2020 or early March 2020.  As the number and rate of new cases has fluctuated in various locations around the global, the closures, restrictions and other social distancing orders have been modified, rescinded and/or re-imposed.  Some version of these orders remains in almost every location in which we operate.  Although vaccines for COVID-19 are becoming widely available in the U.S. and parts of Europe, their availability is still limited in many parts of the world where we operate.  In addition, the rate of acceptance and long term effectiveness of the vaccines, especially against new variants, are still unknown. 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 we have a higher mix of digital distribution or a higher concentration of retailers that are deemed essential and have remained open during the pandemic. The Money Transfer Segment continues to be impacted by the pandemic related restrictions in certain markets hat limit customers' ability to access our network of company owned stores and agents. 

 

In response to the COVID-19 pandemic driven impacts, we 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.

SEGMENT SUMMARY RESULTS OF OPERATIONS

Revenues and operating income by segment for the three months ended March 31, 2021 and 2020 are summarized in the tables below:

  
Revenues for the Three Months Ended March 31,
 Year-over-Year Change
(dollar amounts in thousands) 
2021
 
2020
 
Increase
(Decrease)
Amount
 
Increase
(Decrease)
Percent
EFT Processing $
87,076

 $
145,825

 $
(58,749
) 
(40)
%
epay 
242,303

 
172,911

 
69,392
 
40
%
Money Transfer  
324,900

 
266,234

 
58,666

 
22
%
Total 
654,279

 
584,970

 
69,309

 
12
%
Corporate services, eliminations and other 
(1,609
) 
(1,063
) 
(546
) 
51
%
Total $
652,670

 $
583,907

 $
68,763

 
12
%

  
Operating Income (Loss) for the Three Months Ended March 31,
 Year-over-Year Change
(dollar amounts in thousands) 
2021
 
2020
 
Increase
(Decrease)
Amount
 
Increase
(Decrease)
Percent
EFT Processing $
(40,096
) $
4,935

 $
(45,031
) 
(912)
%
epay 
29,157

 
16,458

 
12,699
 
77
%
Money Transfer  
35,403

 
22,308

 
13,095

 
59
%
Total 
24,464

 
43,701

 
(19,237
) 
(44)
%
Corporate services, eliminations and other 
(14,015
) 
(12,099
) 
(1,916
) 
16
%
Total $
10,449

 $
31,602

 $
(21,153
) 
(67)
%

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. 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 of the currencies of the countries in which we have our most significant operations:
  
Average Translation Rate
Three Months Ended March 31,
 

Currency (dollars per foreign currency) 2021 2020 
Increase
Percent
Australian dollar $0.7725
 $0.6144
 26%
British pounds sterling $1.3790
 $1.2405
 11%
euro $1.2052
 $1.1026
 9%
Hungarian forint $0.0033
 $0.0031
 6%
Indian rupee $0.0137
 $0.0133
 3%
Malaysian ringgit $0.2461
 $0.2319
 6%
New Zealand dollar $0.7188
 $0.5966
 20%
Polish zloty $0.2655
 $0.2418
 10%

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

EFT PROCESSING SEGMENT

The following table summarizes the results of operations for our EFT Processing Segment for the three months ended March 31, 2021 and 2020:

  
Three Months Ended
March 31,
 Year-over-Year Change
(dollar amounts in thousands) 
2021
 
2020
 Increase (Decrease) Amount 
Increase
(Decrease) Percent
Total revenues $
87,076

 $
145,825

 $
(58,749
) 
(40)
%
Operating expenses:        
Direct operating costs 
69,612

 
87,536

 
(17,924
) 
(20)
%
Salaries and benefits 
23,571

 
22,091

 
1,480

 
7
%
Selling, general and administrative 
11,962

 
10,941

 
1,021

 
9
%
Depreciation and amortization 
22,027

 
20,322

 
1,705

 
8
%
Total operating expenses 
127,172

 
140,890

 
(13,718
) 
(10)
%
Operating (loss) income $
(40,096
) $
4,935

 $
(45,031
) 
(912)
%
Transactions processed (millions) 
925

 
785

 
140

 
18
%
ATMs as of March 31, 
36,777

 
42,176

 
(5,399
) 
(13)
%
Average Active ATMs 
36,624

 
44,813

 
(8,189
) 
(18)
%

Revenues

EFT Processing Segment total revenues were $87.1 million for the three months ended March 31, 2021, a decrease of $58.7 million or 40% compared to the same period in 2020. The decrease in revenues was primarily 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, travel restrictions and lockdowns. The government imposed border and business closures, travel restrictions and lockdowns were in effect to varying degrees for all of the first quarter of 2021 compared to similar restrictions that were primarily limited to the month of March in 2020. These closures, restrictions and other orders resulted in a significant decline in tourism throughout Europe which led to a decrease in DCC and surcharge revenues for the three months ended March 31, 2021 compared to the same period in 2020. Foreign currency movements increased revenues by approximately $3.2 million for the three months ended March 31, 2021 compared to the same period in 2020.

Average monthly revenues per ATM decreased to $793 for the three months ended March 31, 2021 compared to $1,085 for the same period in 2020. Revenues per transaction decreased to $0.09 for the three months ended March 31, 2021 compared to $0.19 for the same period in 2020. The decreases in average monthly revenues per ATM and revenues per transaction were attributable to a shift in the mix in our transaction volume as COVID-19 restrictions significantly reduced the volume of higher revenue transactions (DCC and surcharge) throughout Europe while we experienced a significant increase in the volume of lower revenue transactions (processing bank wallet transactions and payments for e-commerce sites) primarily in our Asia Pacific region.

Direct operating costs

EFT Processing Segment direct operating costs were $69.6 million for the three months ended March 31, 2021, a decrease of $17.9 million or 20% compared to the same period in 2020. Direct operating costs primarily consist 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 increased direct operating costs by approximately $3.2 million for the three months ended March 31, 2021 compared to the same period in 2020.

Gross profit

Gross profit, which is calculated as revenues less direct operating costs, was $17.5 million for the three months ended March 31, 2021, a decrease of $40.8 million or 70% compared to $58.3 million for the same period in 2020. Gross profit as a percentage of revenues (“gross margin”) decreased to 20.1% for the three months ended March 31, 2021, compared to 40.0% for the same period in 2020. The decrease in gross profit and gross margin was attributable to the decrease in DCC transactions and domestic and international surcharges.

Salaries and benefits

Salaries and benefits expenses were $23.6 million for the three months ended March 31, 2021, an increase of $1.5 million or 7% compared to the same period in 2020. Foreign currency movements in the countries we employ our workforce increased these expenses by $1.3 million for the three months ended March 31, 2021 compared to the same period in 2020. As a percentage of revenues, these expenses increased to 27.1% for the three months ended March 31, 2021, compared to 15.1% for the same period in 2020. We made a decision to retain our employees during the pandemic.

Selling, general and administrative

Selling, general and administrative expenses were $12.0 million for the three months ended March 31, 2021, an increase of $1.0 million or 9% compared to the same period in 2020Foreign currency movements increased these expenses by $1.2 million for the three months ended March 31, 2021 compared to the same period in 2020, which were partially offset by decreases in travel related expenses and bad debt expense. As a percentage of revenues, these expenses increased to 13.7% for the three months ended March 31, 2021, compared to 7.5% for the same period in 2020.

Depreciation and amortization

Depreciation and amortization expenses were $22.0 million for the three months ended March 31, 2021, an increase of $1.7 million or 8% compared to the same period in 2020. Foreign currency movements increased these expenses by $1.2 million for the three months ended March 31, 2021 compared to the same period in 2020, with the remainder of the increase driven by the acquisition of additional ATMs and software assets. As a percentage of revenues, these expenses increased to 25.3% for three months ended March 31, 2021, compared to 13.9% for the same period in 2020.

Operating (loss) income

EFT Processing Segment had an operating loss of ($40.1 million) for the three months ended March 31, 2021, a decrease of $45.0 million or (912%) compared to the operating income for the same period in 2020. Operating (loss) income as a percentage of revenues (“operating margin”) decreased to (46.0%) for the three months ended March 31, 2021, compared to 3.4% for the same period in 2020. Operating (loss) income per transaction was ($0.04) for the three months ended March 31, 2021, compared to $0.01 for the same period in 2020. The decreases in operating income, operating margin and operating income per transaction were primarily driven by the decrease in travel throughout Europe that led to the significant decrease in DCC and surcharge revenues compared to the same period in 2020. 


EPAY SEGMENT
The following table presents the results of operations for the three months ended March 31, 2021 and 2020 for our epay Segment:
  
Three Months Ended
March 31,
 Year-over-Year Change
(dollar amounts in thousands) 
2021
 
2020
 Increase (Decrease) Amount 
Increase
(Decrease) Percent
Total revenues $
242,303

 $
172,911

 $
69,392

 
40
%
Operating expenses:        
Direct operating costs 
182,633

 
130,074

 
52,559

 
40
%
Salaries and benefits 
19,369

 
15,697

 
3,672

 
23
%
Selling, general and administrative 
9,020

 
8,838

 
182

 
2
%
Depreciation and amortization 
2,124

 
1,844

 
280

 
15
%
Total operating expenses 
213,146

 
156,453

 
56,693

 
36
%
Operating income $
29,157

 $
16,458

 $
12,699
 
77
%
Transactions processed (millions) 
667

 
447

 
220

 
49
%

Revenues

epay Segment total revenues were $242.3 million for the three months ended March 31, 2021, an increase of $69.4 million or 40% compared to the same period in 2020. The increase in revenues was primarily due to an increase in the number of transactions processed driven by continued digital media growth and the U.S. dollar weakening against key foreign currencies during the first quarter of 2021. Foreign currency movements increased revenues by approximately $12.9 million for the three months ended March 31, 2021 compared to the same period in 2020. The epay segment was impacted by COVID-19 pandemic-driven government imposed lockdowns and business closures, primarily at retail outlets, which were offset by increases in digital media offerings in Asia and revenues derived from businesses that were classified as essential and remained open during the pandemic.

Revenues per transaction decreased to $0.36 for the three months ended March 31, 2021, compared to $0.39 for the same period in 2020. 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 $182.6 million for the three months ended March 31, 2021, an increase of $52.6 million or 40% compared to the same period in 2020. Direct operating costs primarily consist of the commissions paid 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 of low-value mobile top-up transactions and by the U.S. dollar weakening against key foreign currencies in the first quarter of 2021. Foreign currency movements increased direct operating costs by approximately $9.4 million for the three months ended March 31, 2021 compared to the same period in 2020.

Gross profit

Gross profit was $59.7 million for the three months ended March 31, 2021, an increase of $16.9 million or 39% compared to $42.8 million for the same period in 2020. Gross margin decreased to 24.6% for the three months ended March 31, 2021, compared to 24.8% for the same period in 2020. The increase in gross profit and 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 $19.4 million for the three months ended March 31, 2021, an increase of $3.7 million or 23% compared to the same period in 2020. The increase in salaries and benefits was driven by an increase in headcount to support the growth of the business as well as a $1.2 million increase from foreign currency movements for the three months ended March 31, 2021 compared to the same period in 2020. As a percentage of revenues, these expenses decreased to 8.0% for the three months ended March 31, 2021, compared to 9.1% for the same period in 2020. 

Selling, general and administrative

Selling, general and administrative expenses were $9.0 million for the three months ended March 31, 2021, an increase of $0.2 million or 2% compared to the same period in 2020. As a percentage of revenues, these expenses decreased to 3.7% for the three months ended March 31, 2021, compared to 5.1% for the same period in 2020.

Depreciation and amortization

Depreciation and amortization expenses were $2.1 million for the three months ended March 31, 2021, an increase of $0.3 million or 15% compared to the same period in 2020. Depreciation and amortization expense primarily represents depreciation of POS terminals we install in retail stores and amortization of acquired intangible assets. As a percentage of revenues, these expenses decreased to 0.9% for the three months ended March 31, 2021, compared to 1.1% for same period in 2020.

Operating income

epay Segment operating income was $29.2 million for the three months ended March 31, 2021, an increase of $12.7 million or 77% compared to the same period in 2020. Operating margin increased to 12.0% for the three months ended March 31, 2021, compared to 9.5% for the same period in 2020. Operating income per transaction was $0.04 for both the three months ended March 31, 2021 and 2020. The increases in operating income and operating margin for the three months ended March 31, 2021 compared to the same period in 2020 were primarily due to an increase in the number of higher-margin digital media transactions.

MONEY TRANSFER SEGMENT
The following table presents the results of operations for the three months ended March 31, 2021 and 2020 for the Money Transfer Segment:
  
Three Months Ended
March 31,
 Year-over-Year Change
(dollar amounts in thousands) 
2021
 
2020
 Increase (Decrease) Amount 
Increase
(Decrease) Percent
Total revenues $
324,900

 $
266,234

 $
58,666

 
22
%
Operating expenses:        
Direct operating costs 
183,878

 
142,909

 
40,969

 
29
%
Salaries and benefits 
60,540

 
53,864

 
6,676

 
12
%
Selling, general and administrative 
36,116

 
38,582

 
(2,466
) 
(6)
%
Depreciation and amortization 
8,963

 
8,571

 
392

 5%
Total operating expenses 
289,497

 
243,926

 
45,571

 
19
%
Operating income $
35,403

 $
22,308

 $
13,095
 
59
%
Transactions processed (millions) 
31.2

 
27.4

 
3.8

 
14
%
Revenues

Money Transfer Segment total revenues were $324.9 million for the three months ended March 31, 2021, an increase of $58.7 million or 22% compared to the same period in 2020. The increase in revenues was primarily due to increases in U.S. outbound and international-originated money transfers, partially offset by decreases in the U.S. domestic business. Revenues per transaction increased to $10.41 for the three months ended March 31, 2021, compared to $9.72 for the same period in 2020. Foreign currency movements increased revenues by approximately $14.3 million for the three months ended March 31, 2021 compared to the same period in 2020.

Direct operating costs

Money Transfer Segment direct operating costs were $183.9 million for the three months ended March 31, 2021, an increase of $41.0 million or 29% compared to the same period in 2020. Direct operating costs 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 to the increase in the number of U.S. outbound and international-originated money transfer transactions and the impact of the U.S. dollar weakening against key foreign currencies. Foreign currency movements increased direct operating costs by approximately $7.1 million for the three months ended March 31, 2021 compared to the same period in 2020.

Gross profit

Gross profit was $141.0 million for the three months ended March 31, 2021, an increase of $17.7 million or 14% compared to $123.3 million for the same period in 2020. The increase in gross profit was primarily due to increases in U.S. outbound and international-originated money transfers. Gross margin decreased to 43.4% for the three months ended March 31, 2021, compared to 46.3% for the same period in 2020. The decrease in gross margin is primarily attributable to the increase in direct operating costs driven by increased agent commissions in the first quarter of 2021 compared to the same period in 2020.
Salaries and benefits

Salaries and benefits expenses were $60.5 million for the three months ended March 31, 2021, an increase of $6.7 million or 12% compared to the same period in 2020. The increase in salaries and benefits was primarily driven by an increase in headcount to support the growth of the business, an increase in bonus expense and an increase of $2.6 million from foreign currency movements for the three months ended March 31, 2021 compared to the same period in 2020As a percentage of revenues, these expenses decreased to 18.6% for the three months ended March 31, 2021, compared to 20.2% for the same period in 2020. 

Selling, general and administrative

Selling, general and administrative expenses were $36.1 million for the three months ended March 31, 2021, a decrease of $2.5 million or 6% compared to the same period in 2020. The decrease was primarily due to a $3.7 million decrease in bad debt expense and a $1.6 million decrease in travel related expenses, partially offset by a $2.6 million increase from foreign currency movements for the three months ended March 31, 2021 compared to the same period in 2020. As a percentage of revenues, these expenses decreased to 11.1% for the three months ended March 31, 2021, compared to 14.5% for the same period in 2020.

Depreciation and amortization

Depreciation and amortization expenses were $9.0 million for the three months ended March 31, 2021, an increase of $0.4 million or 5% compared to the same period in 2020. Depreciation and amortization primarily represents amortization of acquired intangible assets and depreciation of money transfer terminals, computers and software, leasehold improvements and office equipment. As a percentage of revenues, these expenses decreased to 2.8% for the three months ended March 31, 2021, compared to 3.2% for the same period in 2020.

Operating income
Money Transfer Segment operating income was $35.4 million for the three months ended March 31, 2021, an increase of $13.1 million or 59% compared to the same period in 2020. Operating margin increased to 10.9% for the three months ended March 31, 2021, compared to 8.4% for the same period in 2020. The increases in operating income and operating margin were primarily driven by the increase in transaction volume, specifically the higher margin transactions for U.S. outbound and international-originated money transfers. Operating income per transaction increased to $1.13 for the three months ended March 31, 2021, compared to $0.81 for the same period in 2020.
CORPORATE SERVICES
The following table presents the operating expenses for the three months ended March 31, 2021 and 2020 for Corporate Services:
  
Three Months Ended
March 31,
 Year-over-Year Change
(dollar amounts in thousands) 
2021
 
2020
 Increase (Decrease) Amount 
Increase
(Decrease) Percent
Salaries and benefits $12,188
 $9,588
 $2,600
 
27
%
Selling, general and administrative 
1,680
 
2,432
 
(752) 
(31)
%
Depreciation and amortization 
147

 
79
 
68
 
86
%
Total operating expenses $
14,015

 $12,099
 $1,916
 
16
%
Corporate operating expenses

Total Corporate operating expenses were $14.0 million for the three months ended March 31, 2021, an increase of $1.9 million or 16% compared to the same period in 2020. The increase is primarily due to a $2.2 million increase in share based compensation. 

OTHER EXPENSE, NET
  
Three Months Ended
March 31,
 Year-over-Year Change
(dollar amounts in thousands) 
2021
 
2020
 Increase (Decrease) Amount 
Increase
(Decrease) Percent
Interest income $182
 $
567

 $(385) 
(68)
%
Interest expense 
(9,189
) 
(9,233
) 
44

 
(0)
%
Foreign currency exchange loss, net 
(4,032
) 
(18,806
) 
14,774

 (79)%
Other gains, net 
31

 
31

 

 0%
Other expense, net $
(13,008
) $
(27,441
) $
14,433
 
(53)
%

Foreign currency exchange loss, 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 composed 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 net foreign currency exchange losses of $4.0 million and $18.8 million for the three months ended March 31, 2021 and 2020, respectively. These realized and unrealized foreign currency exchange losses 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 rate was (236.9%) and 58.7% for the three months ended March 31, 2021 and 2020, respectively. Our effective income tax rate for the three months ended March 31, 2021 was lower than the applicable statutory income tax rate of 21% as a result of the non-recognition of tax benefits from losses in certain foreign countries where we have a limited history of profitable earnings, certain foreign earnings being subject to higher local statutory tax rates, and our U.S. deferred tax activity on foreign exchange positions. Our effective income tax rate for the three months ended March 31, 2020 was higher than the applicable statutory income tax rate of 21% primarily as a result of certain foreign earnings being subject to higher local statutory income tax rates.


NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS

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 Percent Owned Segment - Country
Movilcarga 95% epay - Spain
Euronet China 85% EFT - China
Euronet Pakistan 70% EFT - Pakistan
Euronet Infinitium Solutions 65% EFT - India

NET INCOME (LOSS) ATTRIBUTABLE TO EURONET

Net loss attributable to Euronet was ($8.7 million) for the three months ended March 31, 2021, a decrease of $10.6 million or 551% compared to the net income in the same period in 2020. The decrease in net income was primarily attributable to the $6.3 million decrease in gross profit that was largely driven by the decrease in revenues in the EFT Segment, a $14.4 million increase in salaries and benefits expense and a $3.6 million increase in income tax expense, partially offset by a decrease in net foreign currency exchange losses of $14.8 million. 

LIQUIDITY AND CAPITAL RESOURCES

Working capital

As of March 31, 2021, we had working capital of $1,210.5 million, which is calculated as the difference between total current assets and total current liabilities, compared to working capital of $1,510.5 million as of December 31, 2020. The decrease in working capital was primarily due to the $270.4 million repayment of the outstanding balance on the Credit Facility during the first quarter of 2021. Our ratio of current assets to current liabilities was 1.76 and 1.81  at March 31, 2021 and December 31, 2020, 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, some of which 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 March 31, 2021, we had $339.9 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 $71.2 million from $411.1 million as of December 31, 2020 to $339.9 million as of March 31, 2021 as a result of the reduction in number of active ATMs as of March 31, 2021 compared to December 31, 2020.

The Company has $1,145.4 million of unrestricted cash as of March 31, 2021 compared to $1,420.3 million as of December 31, 2020. The decrease in unrestricted cash was primarily due to the $270.4 million repayment of the outstanding balance on the Credit Facility during the first quarter of 2021. Including the $339.9 million of cash in ATMs at March 31, 2021, the Company has access to $1,485.3 million in available cash, and $941.1 million available under the Credit Facility with no significant long-term debt principal payments until March 2025.

The following table identifies cash and cash equivalents provided by/(used in) our operating, investing and financing activities for the three months ended March 31, 2021 and 2020 (in thousands):
 Three Months Ended
March 31,
Liquidity2021 2020
Cash and cash equivalents and restricted cash provided by (used in):   
Operating activities$(2,645) $105,884
Investing activities(18,225) (31,606)
Financing activities(269,211) (242,644)
Effect of foreign currency exchange rate changes on cash and cash equivalents and restricted cash(53,188) (59,260)
Decrease in cash and cash equivalents and restricted cash$(343,269) $(227,626)

Operating activity cash flow

Cash flows (used in) provided by operating activities were ($2.6 million) for the three months ended March 31, 2021 compared to $105.9 million for the same period in 2020. The decrease in operating cash flows was primarily due to 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, and the decrease in net income.

Investing activity cash flow

Cash flows used in investing activities were $18.2 million for the three months ended March 31, 2021 compared to $31.6 million for the same period in 2020. We used $16.4 million for purchases of property and equipment for the three months ended March 31, 2021 compared to $30.4 million for the same period in 2020. The decrease in purchases of property and equipment is primarily driven by the COVID-19 related impacts to the EFT segment. Cash used for software development and other investing activities totaled $1.8 million and $1.7 million for the three months ended March 31, 2021 and 2020, respectively.

Financing activity cash flow

Cash flows used in financing activities were $269.2 million for the three months ended March 31, 2021 compared to $242.6 million for the same period in 2020. Our borrowing activities for the three months ended March 31, 2021 consisted of cash outflows of $270.4 million compared to no net borrowings for the same period in 2020. The decrease in net borrowings for the three months ended March 31, 2021 compared to the same period in 2020 was the result of the repayment of the outstanding balance on the Credit Facility. We repurchased $0.8 million of common stock during the first quarter of 2021 compared to repurchases of $240.5 million during the first quarter of 2020. We received proceeds of $3.7 million and $1.7 million during the three months ended March 31, 2021 and 2020, 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 March 31, 2021, fees and interest on borrowings are based upon our corporate credit rating (as defined in the credit agreement) and are based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over the London InterBank Offered Rate ("LIBOR") or a margin over the base rate, as selected by us, with the applicable margin ranging from 1.125% to 2.0% (or 0.175% to 1.0% for base rate loans).

As of March 31, 2021, we had no borrowings and $58.9 million of stand-by letters of credit outstanding under the Credit Facility. The remaining $941.1 million under the Credit Facility was available for borrowing.
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”). The Convertible Notes were issued pursuant to an indenture, dated as of March 18, 2019 (the “Indenture”), by and between us 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 us 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.

Senior Notes - On May 22, 2019, we 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 on May 22 of each year, until maturity or earlier redemption. As of March 31, 2021, we have outstanding €600 million ($703.7 million) principal amount of the Senior Notes. In addition, we 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 $0.8 million and $0.9 million outstanding under these other obligation arrangements as of March 31, 2021 and December 31, 2020, respectively.

Other uses of capital

Capital expenditures and needs - Total capital expenditures for the three months ended March 31, 2021 were $16.4 million. These capital expenditures were primarily for 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 range from approximately $105 million to $110 million

At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and amounts available under our Credit Facility and other existing and potential future financing will be sufficient to meet our debt, leasing, and capital expenditure obligations. If our capital resources are not sufficient to meet these obligations, we will seek to refinance our debt and/or issue additional equity under terms acceptable to us. However, we can offer no assurances that we will be able to obtain favorable terms for the refinancing of any of our debt or other obligations or for the issuance of additional equity.
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

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. As of March 31, 2021, there were no material changes from the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2020. 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 March 31, 2021. See also Note 14, Commitments, to the unaudited consolidated financial statements included elsewhere in this report.

CONTRACTUAL OBLIGATIONS

As of March 31, 2021, there have been no material changes outside the ordinary course of business in our future contractual obligations from the amounts reported within our Annual Report on Form 10-K for the year ended December 31, 2020. 



Interest rate risk

As of March 31, 2021, our total debt outstanding, excluding unamortized debt issuance costs, was $1,160.7 million. Of this amount, $456.2 million, net of debt discounts, or 39% 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 March 31, 2021, the fair value of our fixed rate Convertible Notes was $631.4 million, compared to a carrying value of $456.2 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 March 31, 2021 we had no borrowings under our Credit Facility. Additionally, $703.7 million, or 61% 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 amount per annum. Based on quoted market prices, as of March 31, 2021, the fair value of our fixed rate Senior Notes was $712.0 million, compared to a carrying value of $703.7 million. The remaining $0.8 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.

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 three months ended March 31, 2021, approximately 72% and of our revenues were generated in non-U.S. dollar countries and 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 March 31, 2021, 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 $45 million to $50 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. and our Senior Notes. We estimate that a 10% fluctuation in foreign currency exchange rates would have a non-cash impact on total comprehensive income of approximately $152 million to $157 million as a result of the change in value of these items during translation to the U.S. dollar. For the fluctuations described above, a strengthening U.S. dollar produces a financial loss, while a weakening U.S. dollar produces a financial gain.

We believe this quantitative measure has inherent limitations and does not take into account any governmental actions or changes in either customer purchasing patterns or our financing or operating strategies. Because a majority of our revenues and expenses are incurred in the functional currencies of our international operating entities, the profits we earn in foreign currencies are positively impacted by a weakening of the U.S. dollar and negatively impacted by a strengthening of the U.S. dollar. Additionally, a significant portion of our debt obligations are 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 March 31, 2021, we had foreign currency derivative contracts outstanding with a notional value of $120 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 March 31, 2021, we held foreign currency derivative contracts outstanding with a notional value of $1.4 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 March 31, 2021, the Company had foreign currency forward contracts outstanding with a notional value of $593 million, primarily in euros.

See Note 10, Derivative Instruments and Hedging Activities, to our unaudited consolidated financial statements for additional information.

ITEM 4. 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 March 31, 2021. 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.

Change in Internal Controls

There has been no change in our internal control over financial reporting during the first quarter of 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 1. 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 contingencies in Part I, Item 1 — Financial Statements (unaudited), Note 15, Litigation and Contingencies, to the unaudited consolidated financial statements 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 on the Company's consolidated financial condition or results of operations. In accordance with 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.



Except as otherwise described herein, there were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, 
as filed with the SEC.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information with respect to shares of the Company's common stock that were purchased by the Company during the three months ended March 31, 2021.
Period 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)
January 1 - January 31, 2021
 
 $
 
 $259,362
February 1 - February 28, 2021
 
 
 
 
259,362
March 1 - March 31, 2021 
 
 
 $250,000
Total 
 $
 
  
(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 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 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.


Exhibit Description
   
31.1* 
31.2* 
32.1** 
32.2** 
101* 
The following materials from Euronet Worldwide, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at March 31, 2021 (unaudited) and December 31, 2020, (ii) Consolidated Statements of Income (unaudited) for the three months ended March 31, 2021 and 2020, (iii) Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2021 and 2020, (iv) Consolidated Statements of Changes in Equity (unaudited) for the three months ended March 31, 2021 and 2020 (v) Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2021 and 2020, and (vi) Notes to the Unaudited Consolidated Financial Statements.
104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
_________________________
* Filed herewith.
** Pursuant to Item 601(b)(32) of Regulation S-K, this Exhibit is furnished rather than filed with this Form 10-Q.

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 our 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 us or our business or operations on the date hereof.



Pursuant to the requirements 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.
May 4, 2021
Euronet Worldwide, Inc.
By:/s/ MICHAEL J. BROWN 
 Michael J. Brown  
 Chief Executive Officer  
   
   
By:/s/ RICK L. WELLER 
 Rick L. Weller  
 Chief Financial Officer  

43