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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Euronet Worldwide, Inc.    EEFT

EURONET WORLDWIDE, INC.

(EEFT)
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EURONET WORLDWIDE : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

11/02/2020 | 05:08pm EST

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;

• the effect of the COVID-19 pandemic on our business;

• trends affecting our business;

• the adequacy of capital to meet our capital requirements and expansion plans;

• the assumptions underlying our business plans;

• our ability to repay indebtedness;

• our estimated capital expenditures;

• the potential outcome of loss contingencies;

• our expectations regarding the closing of any pending acquisitions;

• business strategy;

• government regulatory action;

• the expected effects of changes in laws or accounting standards;

• technological advances; and

• projected costs and revenues.




Although we believe that the expectations reflected in these forward-looking
statements are reasonable, we can give no assurance that these expectations will
prove to be correct.
Investors are cautioned that any forward-looking statements are not guarantees
of future performance and involve risks and uncertainties. Actual results may
materially differ from those in the forward-looking statements as a result of
various factors, including, but not limited to, the effect of the COVID-19
pandemic on our business; conditions in world financial markets and general
economic conditions, including the effects in Europe of the negotiations related
to the United Kingdom's departure from the European Union (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; 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 or ATM access fees by the E.U.; our ability to comply with
increasingly stringent regulatory requirements, including anti-money laundering,
anti-terrorism, anti-bribery, consumer and data protection and the E.U.'s
General Data Privacy Regulation and the Services Payment Directive ("PSD2")
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; general economic, financial and market
conditions and the duration and extent of any economic downturns related to the
COVID-19 pandemic or future events; the cost of borrowing, availability of
credit and terms of and compliance with debt covenants; renewal of sources of
funding as they expire and the availability of replacement funding; the outlook
for markets we serve; 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, 2019 and Part II, Item 1A of our
Quarterly Report on Form 10-Q for the period ended June 30, 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.

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                                    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 ATM, POS, card outsourcing, card issuing and
merchant acquiring services, software solutions, electronic distribution of
prepaid mobile airtime and other electronic payment products, foreign currency
exchange services and global money transfer services. We operate in the
following three segments:

• The EFT Processing Segment, which processes transactions for a network

of 43,956 ATMs and approximately 324,000 POS terminals across Europe, the

Middle East, Asia Pacific, and the United States. We provide comprehensive

electronic payment solutions consisting of ATM cash withdrawal and deposit

services, ATM network participation, outsourced ATM and POS management

solutions, credit and debit card outsourcing, DCC, and other value added

services. Through this segment, we also offer a suite of integrated

electronic financial transaction software solutions for electronic payment

and transaction delivery systems.

• The epay Segment, which provides distribution, processing and collection

services for prepaid mobile airtime and other electronic content. We operate

a network of approximately 717,000 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 Money Express,

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 Money

Express 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

447,000 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 70% 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, 2019).

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 22% and 21% of total consolidated revenues for
the three and nine months ended September 30, 2020, respectively, are derived
from fees charged for transactions made by cardholders on our proprietary
network of ATMs, fixed management fees and transaction fees we charge to
customers for operating ATMs and processing debit and credit cards under
outsourcing and cross-border acquiring agreements, foreign currency exchange
margin on DCC transactions, domestic and international surcharge, foreign
currency dispensing and other value added services such as advertising, prepaid
telecommunication recharges, bill payment, and money transfers provided over
ATMs. Revenues in this segment are also derived from cardless payment, banknote
recycling, tax refund services, license fees, professional services and
maintenance fees for proprietary application software and sales of related
hardware.

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epay Segment - Revenues in the epay Segment, which represented
approximately 30% and 31% of total consolidated revenues for the three and nine
months ended September 30, 2020, respectively, 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 65% of epay Segment
revenues. Other electronic content offered by this segment includes digital
content such as music, games and software, as well as, other products including
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 49% and 48% of total consolidated revenues for
the three and nine months ended September 30, 2020, respectively, 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;



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• our entry into additional card acceptance and ATM management agreements

          with banks;


•         our ability to obtain required licenses in markets we intend to enter
          or expand services;

• our ability to enter into sponsorship agreements where our licenses are

not applicable;

• our ability to enter into and renew ATM network cash supply agreements

with financial institutions;

• the availability of financing for expansion;


•         our ability to efficiently install ATMs contracted under newly awarded
          outsourcing agreements;

• our ability to renew existing contracts at profitable rates;


•         our ability to maintain pricing at current levels or mitigate price
          reductions in certain markets;


•         the impact of changes in rules imposed by international card
          organizations such as Visa and Mastercard on card transactions on ATMs,
          including reductions in ATM interchange fees, restrictions on the
          ability to apply direct access fees, the ability to offer DCC
          transactions on ATMs, and increases in fees charged on DCC
          transactions;


•         the impact of changes in laws and regulations affecting the

profitability of our services, including regulation of DCC transactions

by the E.U.;

• the impact of overall market trends on ATM transactions in our current

          target markets;


•         our ability to expand and sign additional customers for the
          cross-border merchant processing and acquiring business;

• the continued development and implementation of our software products

and their ability to interact with other leading products; and

• the duration and severity of the COVID-19 pandemic may limit access to

ATM locations, create consumer fear regarding contracting the virus by

touching ATM screens, keyboards or cash, impact consumer cross-border

travel habits and reduce high margin cross-border transactions.




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 development of mobile phone networks in the markets in which we do

business and the increase in the number of mobile phone users;

• the overall pace of growth in the prepaid mobile phone and digital

content market, including consumer shifts between prepaid and postpaid

services;

• our market share of the retail distribution capacity;


•         the development of new technologies that may compete with POS
          distribution of prepaid mobile airtime and other products;



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• 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 duration and severity of the COVID-19 pandemic may limit access to

POS merchant locations, our ability to maintain and grow our

relationships with digital content providers that are experiencing

          increased demand due to the COVID-19 pandemic, and increase our credit
          risk as many of our merchants may be closed from time to time as
          nonessential services.



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.

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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 duration and severity of the COVID-19 pandemic impact on worker

migration and employment opportunities, the ability of our customers to

access agent network locations due to government ordered business

closures, and the potential for an increase in credit risk and customer

agent receivable defaults.




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.

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SEGMENT SUMMARY RESULTS OF OPERATIONS Revenues and operating income by segment for the three and nine months ended September 30, 2020 and 2019 are summarized in the tables below:

                          Revenues for the Three                                             Revenues for the Nine Months
                        Months Ended September 30,           Year-over-Year Change                Ended September 30,             Year-over-Year Change
                                                            Increase           Increase                                          Increase       Increase
(dollar amounts in                                         (Decrease)         (Decrease)                                        (Decrease)     (Decrease)
thousands)                  2020           2019              Amount             Percent           2020            2019            Amount        Percent
EFT Processing          $   144,062$ 316,188$     (172,126)             (54) %     $    368,375$   693,837$  (325,462)           (47) %
epay                        198,939       191,071               7,868                4 %          559,413         551,345            8,068              1 %
Money Transfer              323,092       280,837              42,255               15 %          852,189         814,201           37,988              5 %
Total                       666,093       788,096           (122,003)             (15) %        1,779,977       2,059,383        (279,406)           (14) %
Corporate services,
eliminations and
other                       (1,742)       (1,110)               (632)               57 %          (3,916)         (3,021)            (895)             30 %
Total                   $   664,351$ 786,986$     (122,635)             (16) %     $  1,776,061$ 2,056,362$  (280,301)           (14) %


                       Operating Income (Expense)                                          Operating Income (Expense) for
                       for the Three Months Ended                                              the Nine Months Ended
                             September 30,                  Year-over-Year Change                  September 30,                Year-over-Year Change
                                                           Increase           Increase                                         Increase       Increase
(dollar amounts in                                        (Decrease)         (Decrease)                                       (Decrease)     (Decrease)
thousands)                 2020           2019              Amount             Percent            2020           2019           Amount        Percent

EFT Processing $ 6,161$ 150,901$ (144,740)

      (96) %     $   (45,480)$  244,185$  (289,665)          (119) %
epay                        22,249        20,063               2,186               11 %           56,737         55,617            1,120              2 %
Money Transfer              47,626        35,648              11,978               34 %           14,707        101,768         (87,061)           (86) %
Total                       76,036       206,612           (130,576)             (63) %           25,964        401,570        (375,606)           (94) %
Corporate services,
eliminations and
other                      (9,964)      (12,622)               2,658             (21) %         (29,561)       (33,589)            4,028           (12) %
Total                 $     66,072$ 193,990$     (127,918)             (66) %     $    (3,597)$  367,981$  (371,578)          (101) %


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                       

Average Translation Rate

                             Three Months Ended                         

Nine Months Ended September

                                September 30,                                       30,
                                                          Increase                                       Increase
Currency (dollars per                                    (Decrease)                                     (Decrease)
foreign currency)            2020           2019          Percent            2020          2019          Percent
Australian dollar        $    0.7149$  0.6852            4 %        $   0.6768$  0.6993          (3) %
British pounds
sterling                 $    1.2916$  1.2326            5 %        $   1.2709$  1.2734          (0) %
euro                     $    1.1689$  1.1114            5 %        $   1.1241$  1.1235            0 %
Hungarian forint         $    0.0033$  0.0034          (3) %        $   0.0032$  0.0035          (9) %
Indian rupee             $    0.0135$  0.0142          (5) %        $   0.0135$  0.0143          (6) %
Malaysian ringgit        $    0.2382$  0.2403          (1) %        $   0.2364$  0.2420          (2) %
New Zealand dollar       $    0.6619$  0.6483            2 %        $   0.6383$  0.6640          (4) %
Polish zloty             $    0.2633$  0.2573            2 %        $   0.2544$  0.2613          (3) %


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COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2020 AND 2019
EFT PROCESSING SEGMENT
The following table summarizes the results of operations for our EFT Processing
Segment for the three and nine months ended September 30, 2020 and 2019:
                                  Three Months Ended                                             Nine Months Ended
                                    September 30,               Year-over-Year Change              September 30,               Year-over-Year Change
                                                              Increase         Increase                                      Increase         Increase
(dollar amounts in                                           (Decrease)       (Decrease)                                    (Decrease)       (Decrease)
thousands)                        2020          2019           Amount           Percent          2020          2019           Amount           Percent
Total revenues                $  144,062$ 316,188$   (172,126)

(54) % $ 368,375$ 693,837$ (325,462) (47) % Operating expenses: Direct operating costs

            82,626       111,116          (28,490)    

(26) % 232,627 300,460 (67,833) (23) % Salaries and benefits

             25,182        23,936             1,246            5 %          68,562        64,706             3,856             6 %
Selling, general and
administrative                     8,577        12,191           (3,614)         (30) %          29,033        32,022           (2,989)           (9) %
Goodwill and acquired
intangible assets
impairment                             -             -                 -          N/A            21,861             -            21,861           N/A
Depreciation and
amortization                      21,516        18,044             3,472           19 %          61,772        52,464             9,308            18 %

Total operating expenses 137,901 165,287 (27,386)

     (17) %         413,855       449,652          (35,797)           (8) %

Operating income (loss) $ 6,161$ 150,901$ (144,740)

(96) % $ (45,480)$ 244,185$ (289,665) (119) % Transactions processed (millions)

                           910           800               110           14 %           2,374         2,244               130             6 %
ATMs as of September 30,          43,956        47,209           (3,253)          (7) %          43,956        47,209           (3,253)           (7) %
Average ATMs                      44,259        47,086           (2,827)          (6) %          43,143        44,574           (1,431)           (3) %



Revenues
EFT Processing Segment total revenues for the three and nine months
ended September 30, 2020 were $144.1 million and $368.4 million, respectively, a
decrease of $172.1 million or 54% and $325.5 million or 47% compared to the same
periods in 2019, respectively. Total revenues for the three and nine months
ended September 30, 2020 decreased due to the impact of fewer active ATMs and
fewer high-margin cross-border transactions (DCC), related to COVID-19
pandemic-driven government-imposed border and business closures and
shelter-in-place orders. The government imposed border and business closures and
shelter-in-place orders were in effect for the majority of the three and nine
months ended September 30, 2020. These closures and orders resulted in a
decrease in revenues for the three and nine months ended September 30, 2020
compared to the three and nine months ended September 30, 2019. Foreign currency
movements increased total revenues by approximately $3.2 million and
$1.6 million for the three and nine months ended September 30, 2020,
respectively, compared to the same periods in 2019.
Average monthly revenues per ATM were $1,085 and $949 for the three and
nine months ended September 30, 2020, respectively, compared
to $2,238 and $1,730 for the three and nine months ended September 30, 2019,
respectively. Revenues per transaction were $0.16 for both the three and
nine months ended September 30, 2020, compared to $0.40 and $0.31 for the three
and nine months ended September 30, 2019, respectively. The decreases in average
monthly revenues per ATM were attributable to the decreases in DCC transactions,
which earn higher revenues per transaction than other ATM or card-based
services, and surcharges. The decrease in DCC transactions was due to the
decline in tourism throughout Europe driven by the border and business closures
during the three and nine months ended September 30, 2020.
Direct operating costs
EFT Processing Segment direct operating costs were $82.6 million and $232.6
million for the three and nine months ended September 30, 2020, respectively, a
decrease of $28.5 million or 26% and $67.8 million or 23% compared to the same
periods in 2019, respectively. Direct operating costs in the EFT Processing
Segment consist primarily of site rental fees, cash delivery costs, cash supply
costs, maintenance, insurance, telecommunications, payment scheme processing
fees, data center operations-related personnel, as well as the processing
centers' facility-related costs and other processing center-related expenses and
commissions paid to retail merchants, banks and card processors involved with
POS DCC transactions.
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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 winterized during COVID-19 imposed
restrictions. Foreign currency movements increased direct operating costs for
the three and nine months ended September 30, 2020 by
approximately $2.1 million and $0.5 million, respectively, compared to the same
periods in 2019.
Gross profit
Gross profit, which is calculated as revenues less direct operating costs,
was $61.4 million and $135.7 million for the three and nine months
ended September 30, 2020, respectively, compared to $205.1 million and $393.4
million for the three and nine months ended September 30, 2019,
respectively. Gross profit as a percentage of revenues ("gross margin")
was 42.6% and 36.9% for the three and nine months ended September 30, 2020,
respectively, compared to 64.9% and 56.7% for the three and nine months
ended September 30, 2019, respectively. The decrease in gross profit and gross
margin was attributable to the decrease in DCC transactions and domestic and
international surcharge.
Salaries and benefits
Salaries and benefits expense increased $1.2 million or 5% and $3.9 million or
6% for the three and nine months ended September 30, 2020, respectively,
compared to the same periods in 2019. The increase for the three and nine months
ended September 30, 2020 was primarily due to additional headcount to support
expansion in the United States and long-term growth strategy, partially offset
by a decrease in bonus expense. The border and business closures and
shelter-in-place orders that took effect in late February 2020 and March 2020 in
response to the COVID-19 pandemic reduced transaction volumes and revenues
through the end of the third quarter of 2020, but human resources to support
actual and planned growth were added throughout 2019 as well as the early part
of the first quarter of 2020 before the COVID-19 pandemic took effect, which led
to lower high-margin cross-border transactions and revenues for the three and
nine months ended September 30, 2020. As a percentage of revenues, these costs
increased to 17.5% and 18.6% for the three and nine months ended September 30,
2020, respectively, compared to 7.6% and 9.3% and for the three and nine months
ended September 30, 2019, respectively. The Company made a decision to retain
its employees during the pandemic.
Selling, general and administrative
Selling, general and administrative expenses for the three and nine months
ended September 30, 2020 were $8.6 million and $29.0 million, respectively, a
decrease of $3.6 million and $3.0 million compared to the three and nine months
ended September 30, 2019, respectively. The decrease for the three months ended
September 30, 2020 compared to the same period in 2019 was primarily due to a
decrease in travel related expenses and a decrease in bad debt expense. The
decrease for the nine months ended September 30, 2020 compared to the same
period in 2019 was primarily due to a decrease in travel related expenses,
partially offset by an increase in bad debt expense. As a percentage of
revenues, selling, general and administrative expenses were 6.0% and 7.9% for
the three and nine months ended September 30, 2020, respectively, compared
to 3.9% and 4.6% for the three and nine months ended September 30, 2019,
respectively.
Goodwill and acquired intangible assets impairment
Due to the economic impacts of the COVID-19 pandemic, the Company recorded a
$21.9 million non-cash goodwill impairment charge related to two reporting units
during the second quarter of 2020. A $14.0 million non-cash goodwill impairment
charge was recorded for Innova as a result of the decline in VAT refund activity
directly related to the decline in international tourism within the European
Union, and a $7.9 million non-cash goodwill impairment charge was recorded for
Pure Commerce related to the decline in international tourism in Asia Pacific.
Depreciation and amortization
Depreciation and amortization expense increased $3.5 million and $9.3
million for the three and nine months ended September 30, 2020, respectively,
compared to the same periods in 2019. The increase was primarily due to the
deployment of additional ATMs and software assets. As a percentage of revenues,
depreciation and amortization expense was 14.9% and 16.8% for three and nine
months ended September 30, 2020, respectively, compared to 5.7% and 7.6% for the
same periods in 2019, respectively.
Operating income (loss)
EFT Processing Segment had operating income for the three months ended September
30, 2020 of $6.2 million and an operating loss for the nine months ended
September 30, 2020 of $45.5 million, a decrease of $144.7
million or 96% and $289.7 million or 119% compared to the operating income in
the same periods in 2019. Operating income as a percentage of revenues
("operating margin") was 4.3% for the three months ended September 30, 2020 and
operating loss as a percentage of revenues was (12.3)% for the nine months ended
September 30, 2020, compared to operating margin of 47.7% and 35.2% for the same
periods in 2019. For the three months ended September 30, 2020, the decreases in
operating income and operating margin were primarily due to the decrease in
revenues compared to the same period in 2019, and for the nine months ended
September 30, 2020, the decreases in operating income and operating margin were
primarily due to the non-cash goodwill impairment and decrease in revenues
compared to the same period in 2019. Beginning in late February 2020 and
throughout September 2020, high margin cross-border transactions (DCC) decreased
throughout Europe due to the COVID-19 pandemic driven government imposed border
and business closures and shelter-in-place orders. Operating income per
transaction was $0.01 and operating loss per transaction was $0.02 for the three
and nine months ended September 30, 2020, respectively, compared to operating
income per transaction of $0.19 and $0.11 for the same periods in 2019,
respectively.
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EPAY SEGMENT The following table presents the results of operations for the three and nine months ended September 30, 2020 and 2019 for our epay Segment:

                             Three Months Ended                                                 Nine Months Ended
                               September 30,                 Year-over-Year Change                September 30,                  Year-over-Year Change
                                                                              Increase                                                              Increase
(dollar amounts in                                         Increase          (Decrease)                                   Increase (Decrease)      (Decrease)
thousands)                   2020          2019       (Decrease) Amount       Percent           2020          2019              Amount              

Percent

Total revenues           $  198,939$ 191,071     $          7,868            4 %       $  559,413$ 551,345      $         8,068               1 %
Operating expenses:
Direct operating costs      149,993       145,410                4,583            3 %          424,123       419,362                4,761               1 %
Salaries and benefits        16,108        15,188                  920            6 %           46,996        44,939                2,057               5 %
Selling, general and
administrative                8,455         8,838                (383)          (4) %           25,928        26,314                (386)             (1) %
Depreciation and
amortization                  2,134         1,572                  562           36 %            5,629         5,113                  516              10 %
Total operating
expenses                    176,690       171,008                5,682            3 %          502,676       495,728                6,948               1 %
Operating income         $   22,249$  20,063     $          2,186           11 %       $   56,737$  55,617      $         1,120               2 %
Transactions processed
(millions)                      661           398                  263           66 %            1,692         1,105                  587              53 %


Revenues
epay Segment total revenues for the three and nine months ended September 30,
2020 were $198.9 million and $559.4 million, respectively, an increase of $7.9
million or 4% and $8.1 million or 1% compared to the same periods in 2019,
respectively. The increase in total 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 third
quarter of 2020. Foreign currency movements increased total revenues by
approximately $2.8 million and decreased total revenues by approximately $0.4
million for the three and nine months ended September 30, 2020, respectively,
compared to the same periods in 2019. The epay segment was impacted by COVID-19
pandemic-driven government-imposed shelter-in-place orders and business
closures, primarily at retail outlets, which were partially offset by increases
in digital media offerings in Asia.
Revenues per transaction were $0.30 and $0.33 for the three and nine months
ended September 30, 2020, respectively, compared to $0.48 and $0.50 for the same
periods in 2019, respectively. 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 $150.0 million and $424.1 million for
the three and nine months ended September 30, 2020, respectively, an increase
of $4.6 million or 3% and $4.8 million or 1% compared to the same periods
in 2019, respectively. Direct operating costs in the epay Segment include 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 increases in
transaction volumes for the large volume of low-value mobile top-up
transactions and by the U.S. dollar weakening against key foreign currencies in
the third quarter of 2020. Foreign currency movements increased direct operating
costs by approximately $1.9 million and decreased direct operating costs by
approximately $0.3 million for the three and nine months ended September 30,
2020, respectively, compared to the same periods in 2019.
Gross profit
Gross profit was $48.9 million and $135.3 million for the three and nine months
ended September 30, 2020, respectively, compared to $45.7 million and $132.0
million for the three and nine months ended September 30, 2019, respectively.
Gross margin increased to 24.6% and 24.2% for the three and nine months ended
September 30, 2020, respectively, compared to 23.9% for both the three
and nine months ended September 30, 2019.

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Salaries and benefits
Salaries and benefits expense increased $0.9 million or 6% and $2.1 million or
5% for the three and nine months ended September 30, 2020, respectively,
compared to the same periods in 2019. As a percentage of revenues, salaries and
benefits were 8.1% and 8.4% for the three and nine months ended September 30,
2020, respectively, compared to 7.9% and 8.2% for the same periods in 2019,
respectively. The increases in salaries and benefits were driven by an increase
in headcount to support the growth of the business.
Selling, general and administrative
Selling, general and administrative expenses were $8.5 million and $25.9
million for the three and nine months ended September 30, 2020, respectively, a
decrease of 4% and 1% compared to the same periods in 2019, respectively. As a
percentage of revenues, selling, general and administrative expenses
were 4.3% and 4.6% for the three and nine months ended September 30, 2020,
respectively, compared to 4.6% and 4.8% for the same periods in 2019,
respectively.
Depreciation and amortization
Depreciation and amortization expense primarily represents depreciation of POS
terminals we install in retail stores and amortization of acquired intangible
assets. Depreciation and amortization expense was $2.1 million and $5.6
million for the three and nine months ended September 30, 2020, respectively, an
increase of 36% and 10% compared to the same periods in 2019, respectively. As a
percentage of revenues, depreciation and amortization expense was 1.1% and
1.0% for the three and nine months ended September 30, 2020,
respectively, compared to 0.8% and 0.9% for the three and nine months
ended September 30, 2019, respectively.
Operating income
epay Segment operating income for the three and nine months ended September 30,
2020 was $22.2 million and $56.7 million, respectively, an increase of $2.2
million or 11% and $1.1 million or 2% compared to the same periods in 2019,
respectively. Operating margin was 11.2% and 10.1% for the three and nine months
ended September 30, 2020, respectively, compared to 10.5% and 10.1% for the same
periods in 2019, respectively. Operating income per transaction decreased
to $0.03 for both the three and nine months ended September 30,
2020 from $0.05 for the same periods in 2019, driven by transactions processed
in a region where we generally earn lower revenues per transaction. The
increases in operating income and operating margin for the three months ended
September 30, 2020 compared to the same period in 2019 were primarily due to an
increase in the portion of higher-margin digital media transactions. The
increase in operating income for the nine months ended September 30, 2020
compared to the same period in 2019 was primarily due to the increase in
transaction volume.

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MONEY TRANSFER SEGMENT
The following table presents the results of operations for the three and
nine months ended September 30, 2020 and 2019 for the Money Transfer Segment:
                           Three Months Ended                                            Nine Months Ended
                             September 30,              Year-over-Year Change              September 30,              Year-over-Year Change
                                                      Increase         Increase                                      Increase        Increase
(dollar amounts in                                   (Decrease)       (Decrease)                                    (Decrease)      (Decrease)
thousands)                 2020          2019          Amount          Percent           2020          2019           Amount          Percent
Total revenues         $  323,092$ 280,837$    42,255           15 %       $  852,189$ 814,201$    37,988            5 %
Operating expenses:
Direct operating
costs                     176,718       149,663          27,055           18 %          464,216       435,901           28,315            6 %
Salaries and
benefits                   52,035        51,555             480            1 %          154,958       155,424            (466)          (0) %
Selling, general and
administrative             36,601        35,820             781            2 %          108,355        96,660           11,695           12 %
Goodwill and
acquired intangible
assets impairment           1,467             -           1,467          N/A             84,160             -           84,160          N/A
Depreciation and
amortization                8,645         8,151             494            6 %           25,793        24,448            1,345            6 %
Total operating
expenses                  275,466       245,189          30,277           12 %          837,482       712,433          125,049           18 %
Operating income       $   47,626$  35,648$    11,978           34 %       $   14,707$ 101,768$  (87,061)         (86) %
Transactions
processed (millions)         30.9          29.3             1.6            5 %             84.1          84.8            (0.7)          (1) %


Revenues
Money Transfer Segment total revenues for the three and nine months
ended September 30, 2020 were $323.1 million and $852.2 million, respectively,
an increase of $42.3 million or 15% and $38.0 million or 5% compared to the same
periods in 2019, respectively. The increase in revenues for the three and nine
months ended September 30, 2020 compared to the same periods in 2019 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 $10.46 and $10.13 for the three and nine months
ended September 30, 2020, respectively, from $9.58 and $9.60 for the same
periods in 2019, respectively. Foreign currency movements increased total
revenues by approximately $5.7 million and $1.2 million for the three and
nine months ended September 30, 2020, respectively, compared to the same periods
in 2019.
Direct operating costs
Money Transfer Segment direct operating costs were $176.7 million and $464.2
million for the three and nine months ended September 30, 2020, respectively, an
increase of $27.1 million or 18% and $28.3 million or 6% compared to the same
periods in 2019, respectively. Direct operating costs in the Money Transfer
Segment primarily consist of commissions paid to agents who originate money
transfers on our behalf and correspondent agents who disburse funds to the
customers' destination beneficiaries, together with less significant costs, such
as bank depository fees. The increase in direct operating costs for the three
and nine months ended September 30, 2020 was primarily due 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 for
the three and nine months ended September 30, 2020 by approximately $3.1 million
and $0.7 million, respectively, compared to the same periods in 2019.
Gross profit
Gross profit was $146.4 million and $388.0 million for the three and nine months
ended September 30, 2020, respectively, compared to $131.2 million and $378.3
million for the three and nine months ended September 30, 2019, respectively.
The increase in gross profit for the three and nine months ended September 30,
2020 compared to the same periods in 2019 was primarily due to increases in U.S.
outbound and international-originated money transfers. Gross margin decreased to
45.3% and 45.5% for the three and nine months ended September 30, 2020,
respectively, compared to 46.7% and 46.5% for the same periods in 2019,
respectively.
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Salaries and benefits
Salaries and benefits expense increased $0.5 million or 1% and decreased $0.5
million for the three and nine months ended September 30, 2020, respectively,
compared to the same periods in 2019. As a percentage of revenues, salaries and
benefits were 16.1% and 18.2% for the three and nine months ended September 30,
2020, respectively, compared to 18.4% and 19.1% for the same periods in 2019,
respectively. The increase in salaries and benefits for the three months ended
September 30, 2020 compared to the same period in 2019 was primarily driven by
an increase in headcount to support the growth of the business, partially offset
by a decrease in bonus expense. The decrease in salaries and benefits for the
nine months ended September 30, 2020 compared to the same period in 2019 was
primarily driven by a decrease in bonus expense, partially offset by an increase
in headcount to support the growth of the business.
Selling, general and administrative
Selling, general and administrative expenses were $36.6 million and $108.4
million for the three and nine months ended September 30, 2020, respectively, an
increase of 2% and 12% compared to the same periods in 2019, respectively. The
increase was primarily due to expenses incurred to support the growth of our
money transfer services, the expansion of new products in both the U.S. and
foreign markets, and an increase in additional charges taken to cover
anticipated agent receivable defaults as a result of government ordered business
closures required to manage the COVID-19 pandemic. As a percentage of revenues,
selling, general and administrative expenses were 11.3% and 12.7% for the three
and nine months ended September 30, 2020, respectively, compared to 12.8% and
11.9% for the same periods in 2019, respectively.
Goodwill and acquired intangible assets impairment
Due to the economic impacts of the COVID-19 pandemic, the Company recorded an
$82.7 million non-cash goodwill impairment charge related to the xe reporting
unit during the second quarter of 2020. The non-cash goodwill impairment charge
was recorded for xe as a result of declines in the international payments
business stemming from economic uncertainty. During the third quarter of 2020, a
$1.5 million non-cash acquired intangible asset impairment charge was recorded
for xe on previously acquired customer relationship intangible assets due to the
discontinuation of trading with certain customers during the quarter.
Depreciation and amortization
Depreciation and amortization expense increased $0.5 million or 6% and $1.3
million or 6% for the three and nine months ended September 30, 2020,
respectively, compared to the same periods in 2019. Depreciation and
amortization primarily represent amortization of acquired intangible assets and
depreciation of money transfer terminals, computers and software, leasehold
improvements and office equipment. As a percentage of revenues, depreciation and
amortization expense was 2.7% and 3.0% for the three and nine months ended
September 30, 2020, respectively, compared to 2.9% and 3.0% for the same periods
in 2019, respectively.
Operating income
Money Transfer Segment operating income for the three and nine months
ended September 30, 2020 was $47.6 million and $14.7 million, respectively, an
increase of $12.0 million or 34% and a decrease of $87.1 million or 86% compared
to the operating income in the same periods of 2019, respectively. As a
percentage of revenues, operating income was 14.7% and 1.7% for the three and
nine months ended September 30, 2020, respectively, compared
to 12.7% and 12.5% for the same periods in 2019, respectively. The increases in
operating income and operating margin for the three months ended September 30,
2020 compared to the same period in 2019 were primarily driven by the increase
in transaction volume, specifically the higher margin transactions for U.S.
outbound and international-originated money transfers, partially offset by a
non-cash acquired intangible asset impairment charge. The decreases in operating
income and operating margin for the nine months ended September 30, 2020
compared to the same period in 2019 were primarily driven by the non-cash
goodwill impairment charge and the increase in selling, general and
administrative expenses incurred to support the expansion of new products and
markets and COVID-19 pandemic related anticipated agent receivables default
charges, partially offset by increases in higher margin transactions for U.S.
outbound and international-originated money transfers during the third quarter
of 2020. Operating income per transaction was $1.54 and $0.17 for the three and
nine months ended September 30, 2020, respectively, compared to
$1.22 and $1.20 for the same periods in 2019, respectively.
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CORPORATE SERVICES
The following table presents the operating expenses for the three and
nine months ended September 30, 2020 and 2019 for Corporate Services:
                            Three Months Ended                                              Nine Months Ended
                              September 30,                Year-over-Year Change              September 30,              Year-over-Year Change
                                                         Increase         Increase                                     Increase        Increase
(dollar amounts in                                      (Decrease)       (Decrease)                                   (Decrease)      (Decrease)
thousands)                  2020            2019          Amount           Percent           2020          2019         Amount          Percent
Salaries and
benefits               $    8,252$ 10,675$    (2,423)         (23) %      $    23,253$ 27,630$  (4,377)         (16) %
Selling, general and
administrative              1,595           1,868             (273)         (15) %            6,032        5,731             301            5 %
Depreciation and
amortization                  117              79                38           48 %              276          228              48           21 %
Total operating
expenses               $    9,964$ 12,622$    (2,658)         (21) %      $    29,561$ 33,589$  (4,028)         (12) %


Corporate operating expenses
Overall, operating expenses for Corporate Services decreased 21% and 12% for
the three and nine months ended September 30, 2020 compared to the same periods
in 2019, respectively. The decrease is primarily due to the decrease in salaries
and benefits driven by decreases in bonus expense and share based compensation.
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OTHER INCOME (EXPENSE), NET

                             Three Months Ended                                                  Nine Months Ended
                                September 30,                Year-over-Year Change                 September 30,              Year-over-Year Change
                                                                              Increase                                      Increase        Increase
(dollar amounts in                                          Increase         (Decrease)                                    (Decrease)      (Decrease)
thousands)                   2020           2019       (Decrease) Amount       Percent          2020           2019          Amount          Percent
Interest income          $      139$      568      $         (429)         (76) %      $      867$    1,424$    (557)         (39) %
Interest expense            (9,477)        (9,093)                (384)    
       4 %        (27,594)       (27,321)           (273)            1 %
Foreign currency
exchange loss, net          (1,368)       (10,967)                9,599         (88) %        (17,679)        (7,880)         (9,799)          124 %
Loss on early
extinguishment of debt            -              -                    -          N/A                 -        (9,831)           9,831          N/A
Other gains (losses)              -              -                    -          N/A               728            (4)             732          n/m

Other expense, net $ (10,706)$ (19,492) $ 8,786

    (45) %      $ (43,678)$ (43,612)$     (66)            0 %


________________
n/m - Not meaningful
Interest income
Interest income decreased $0.4 million and $0.6 million for the three and
nine months ended September 30, 2020, respectively, compared to the same periods
in 2019.
Interest expense
Interest expense increased $0.4 million and $0.3 million for the three and
nine months ended September 30, 2020, respectively, compared to the same periods
in 2019.
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 a net foreign currency exchange loss of $1.4
million and $17.7 million for the three and nine months ended September 30,
2020, respectively compared to $11.0 million and $7.9 million for the same
periods in 2019, 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
The Company's effective income tax rate was 27.2% and (55.9)% for the three and
nine months ended September 30, 2020, respectively, compared
to 21.2% and 26.0% for the three and nine months ended September 30, 2019,
respectively. The Company's effective income tax rate for the three and
nine months ended September 30, 2020 was higher than the applicable statutory
income tax rate of 21% primarily due to the non-deductible goodwill impairment
charge during the second quarter of 2020 and as a result of an increase in the
valuation allowance in certain jurisdictions relating to the reversal of tax
benefits recognized in the first and second quarter of 2020 for net operating
losses in those jurisdictions which have a limited history of profitable
earnings. The Company's effective income tax rate for the three and nine months
ended September 30, 2019 was higher than the applicable statutory income tax
rate of 21% largely because of the application to the Company of the global
intangible low-taxed income ("GILTI") tax provision and certain foreign earnings
of the Company being subject to higher local statutory income tax rates.

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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 income attributable to Euronet was $40.2 million for the three months ended
September 30, 2020 and the net loss attributable to Euronet was $73.6
million for the nine months ended September 30, 2020, a decrease of $97.4
million and $313.9 million, respectively, compared to the net income in the same
periods in 2019. The decrease in net income for the three months ended September
30, 2020 compared to the same period in 2019 was primarily attributable to the
$122.6 million decrease in revenues, partially offset by a decrease in net
foreign currency exchange losses of $9.6 million and a decrease in income tax
expense of $21.9 million. The increase in net loss for the nine months ended
September 30, 2020 compared to the net income for the same period in 2019 was
primarily attributable to the $280.3 million decrease in revenues, $106.0
million non-cash goodwill and acquired intangible assets impairment charges, and
$9.8 million increase in net foreign currency exchange losses, partially offset
by a $9.8 million decrease in loss on early retirement of debt and a decrease in
income tax expense of $57.8 million.
LIQUIDITY AND CAPITAL RESOURCES
Working capital
As of September 30, 2020, we had working capital of $1,216.8 million, which is
calculated as the difference between total current assets and total current
liabilities, compared to working capital of $1,284.8 million as of December 31,
2019. The decrease in working capital is primarily due to $239.8 million of
share repurchases during the first quarter of 2020, partially offset by
operating results for the nine months ended September 30, 2020. Our ratio of
current assets to current liabilities was 1.85 and 1.79 at September 30,
2020 and December 31, 2019, respectively.
We require substantial working capital to finance operations. The Money Transfer
Segment funds the payout of the majority of our consumer-to-consumer money
transfer services before receiving the benefit of amounts collected from
customers by agents. Working capital needs increase due to weekends and banking
holidays. As a result, we may report more or less working capital for the Money
Transfer Segment based solely upon the day on which the reporting period ends.
The epay Segment produces positive working capital, 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 September 30, 2020, we had $409.7 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
$256.0 million from $665.6 million as of December 31, 2019 to $409.7 million as
of September 30, 2020 as a result of the reduction in number of active ATMs as
of September 30, 2020 compared to December 31, 2019.
The Company has $1,008.2 million of unrestricted cash as of September 30, 2020
compared to $786.1 million as of December 31, 2019. The increase in cash is
primarily due to the transfer of ATM cash to unrestricted cash and cash
generated from operations, partially offset by $239.8 million in share
repurchases during the first quarter of 2020. Including the $409.7 million of
cash in ATMs at September 30, 2020, the Company has access to $1,417.9 million
in available cash, and $953.1 million available under the credit facility with
no significant long-term debt principal payments until March 2025.
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The following table identifies cash and cash equivalents provided by/(used in) our operating, investing and financing activities for the nine months ended September 30, 2020 and 2019 (in thousands):

                                                                  Nine Months Ended
                                                                    September 30,
Liquidity                                                        2020           2019
Cash and cash equivalents and restricted cash provided by
(used in):
Operating activities                                         $  220,416$  364,379
Investing activities                                           (77,073)       (104,401 )
Financing activities                                          (244,069)        461,632

Effect of foreign currency exchange rate changes on cash and cash equivalents and restricted cash

                             32,042     

(57,807)

(Decrease) increase in cash and cash equivalents and
restricted cash                                              $ (68,684)$  663,803



Operating activity cash flow
Cash flows provided by operating activities were $220.4 million for the nine
months ended September 30, 2020 compared to $364.4 million for the same period
in 2019. The decrease in operating cash flows was primarily due to the decrease
in net income, partially offset by fluctuations in working capital mainly
associated with the timing of the settlement processes with content providers in
the epay Segment, with correspondents in the Money Transfer Segment, and with
card organizations and banks in the EFT Processing Segment.
Investing activity cash flow
Cash flows used in investing activities were $77.1 million for nine months ended
September 30, 2020 compared to $104.4 million for the same period in 2019. We
used $71.4 million for purchases of property and equipment for the nine months
ended September 30, 2020 compared to $100.4 million for the same period
in 2019. 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 $5.7 million and $4.0 million
for the nine months ended September 30, 2020 and 2019, respectively.
Financing activity cash flow
Cash flows used in financing activities were $244.1 million for the nine months
ended September 30, 2020 compared to cash flows provided by financing activities
of $461.6 million for the same period in 2019. Our borrowing activities for the
nine months ended September 30, 2020 consisted of cash outflows of $5.0 million
compared to net borrowings of $514.2 million for the same period in 2019. The
decrease in net borrowings for the nine months ended September 30, 2020 compared
to the same period in 2019 was the result of the issuance of $1,194.9 million of
Convertible Notes and Senior Notes during the nine months ended September 30,
2019 which were used to fund the operating cash of our IAD networks, repay
revolving credit facility borrowings and repurchase a portion of existing
convertible notes. We repurchased $240.8 million and $37.3 million of our common
stock during the nine months ended September 30, 2020 and 2019, respectively. Of
the $240.8 million repurchased shares, $239.8 million of Euronet Common Stock
was repurchased under our repurchase program. We received proceeds of $6.6
million and $8.3 million during the nine months ended September 30,
2020 and 2019, respectively, for the issuance of stock in connection with our
Stock Incentive Plan.
Other sources of capital
Credit Facility - On October 17, 2018, the Company entered into a $1.0 billion
unsecured credit agreement (the "Credit Facility") that expires on October 17,
2023. The Credit Facility allows for borrowings in Australian dollars, British
pounds sterling, Canadian dollars, Czech koruna, Danish krone, euro, Hungarian
forints, Japanese yen, New Zealand dollars, Norwegian krone, Polish zlotys,
Swedish krona, Swiss francs, and U.S. dollars. The Credit Facility contains a
$200 million sublimit for the issuance of letters of credit, a $50 million
sublimit for U.S. Dollar swingline loans, and a $90 million sublimit for certain
foreign currencies swingline loans.
As of September 30, 2020, fees and interest on borrowings are based upon the
Company's corporate credit rating (as defined in the credit agreement) and are
based, in the case of letter of credit fees, on a margin, and in the case of
interest, on a margin over the London InterBank Offered Rate ("LIBOR") or a
margin over the base rate, as selected by us, with the applicable margin ranging
from 1.125% to 2.0% (or 0.175% to 1.0% for base rate loans).
As of September 30, 2020, we had no borrowings and $46.9 million of stand-by
letters of credit outstanding under the Credit Facility. The
remaining $953.1 million under the Credit Facility was available for borrowing.
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Uncommitted Line of Credit - On September 4, 2019, the Company entered into an
Uncommitted Loan Agreement with Bank of America which provided Euronet up
to $100.0 million under an uncommitted line of credit. Interest on borrowings
was equal to LIBOR plus 0.65% and the agreement was set to expire September 4,
2020. During the three months ended June 30, 2020, the Company and Bank of
America mutually agreed to terminate the Uncommitted Loan Agreement.
Convertible debt - On March 18, 2019, 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 the Company and U.S. Bank National
Association, as trustee. The Convertible Notes have an interest rate of 0.75%
per annum payable semi-annually in March and September, and are convertible into
shares of Euronet common stock at a conversion price of approximately $188.73
per share if certain conditions are met (relating to the closing prices of
Euronet common stock exceeding certain thresholds for specified periods).
Holders of the Convertible Notes have the option to require the Company to
repurchase for cash all or part of their Convertible Notes on each of March 15,
2025, 2029, 2034, 2039 and 2044 at a repurchase price equal to 100% of the
principal amount of the Convertible Notes to be repurchased, plus accrued and
unpaid interest to, but excluding, the relevant repurchase date. In connection
with the issuance of the Convertible Notes, we recorded $12.8 million in debt
issuance costs, which are being amortized through March 1, 2025.
For the Retired Convertible Notes, in accordance with ASC 470, the Company
recognized a loss of $9.8 million on the conversion and redemption of the debt
during the first half of 2019, representing the difference between the fair
value of the Retired Convertible Notes converted and the carrying value of the
bonds at the time of conversion.
Senior Notes - On May 22, 2019, the Company completed the sale of €600 million
($669.9 million) aggregate principal amount of Senior Notes that expire on May
2026 (the "Senior Notes"). The Senior Notes accrue interest at a rate of 1.375%
per year, payable annually in arrears commencing May 22, 2020, until maturity or
earlier redemption. As of September 30, 2020, the Company has outstanding €600
million ($703.2 million) principal amount of the Senior Notes. In addition, the
Company may redeem some or all of these notes on or after February 22, 2026 at
their principal amount plus any accrued and unpaid interest.
Other debt obligations - Certain of our subsidiaries have available credit lines
and overdraft facilities to generally supplement short-term working capital
requirements, when necessary. There were $0.9 million and $6.2 million
outstanding under these other obligation arrangements as of September 30,
2020 and December 31, 2019, respectively.
Other uses of capital
Capital expenditures and needs - Total capital expenditures for the nine months
ended September 30, 2020 were $71.4 million. These capital expenditures were
primarily for the purchase of ATMs to expand our IAD network in Europe, the
purchase and installation of ATMs in key under-penetrated markets, the purchase
of POS terminals for the epay and Money Transfer Segments, and office, data
center and company store computer equipment and software. Total capital
expenditures for 2020 are currently estimated to range from approximately $100
million to $105 million. The Company has reduced estimated capital expenditures
for 2020 due to the COVID-19 pandemic.
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.
Share repurchase plan
The Company's Board of Directors had authorized a stock repurchase program
allowing Euronet to repurchase up to $375 million in value or 10.0 million
shares of stock through March 31, 2020. The Company has repurchased all $375
million of stock under this program. On March 11, 2019, in connection with the
issuance of the Convertible Notes, the Board of Directors authorized an
additional repurchase program of $120 million in value of the Company's common
stock through March 11, 2021. The Company has repurchased $110.6 million of
stock under this program. On February 26, 2020, the Company put a repurchase
program in place to repurchase up to $250 million in value, but not more than
5.0 million shares of common stock through February 28, 2022. For
the nine months ended September 30, 2020, the Company repurchased 2.1
million shares under the repurchase programs at a weighted average purchase
price of $114.41 for a total value of $239.8 million. Repurchases under either
of the current programs may take place in the open market or in privately
negotiated transactions, including derivative transactions, and may be made
under a Rule 10b5-1 plan.
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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 September 30, 2020, there
were no material changes from the disclosure in our Annual Report on Form 10-K
for the year ended December 31, 2019. 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 September 30, 2020. See also Note 13,
Commitments, to the unaudited consolidated financial statements included
elsewhere in this report.
CONTRACTUAL OBLIGATIONS
As of September 30, 2020, 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, 2019, other than those resulting from changes in the amount
of debt outstanding discussed in the Liquidity and Capital Resources section.

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